[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69889-69892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24281]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79027; File No. SR-CHX-2016-19]


Self Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Rules To Describe Changes Necessary To Implement the Tick Size 
Pilot Program

October 3, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on September 30, 2016, the Chicago Stock Exchange, Inc. (``CHX'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CHX proposes to amend the Rules of the Exchange (``CHX Rules'') to 
describe changes to CHX Matching System \3\ functionality necessary to 
implement the quoting and trading provisions of the Regulation NMS Plan 
to Implement a Tick Size Pilot Program (``Plan'' or ``Pilot'').\4\
---------------------------------------------------------------------------

    \3\ The Matching System is an automated order execution system, 
which is a part of the Exchange's ``Trading Facilities,'' as defined 
under CHX Article 1, Rule 1(z).
    \4\ See Securities Exchange Act Release No. 74892 (May 6, 2015), 
80 FR 27513 (May 13, 2015) (``Approval Order'').
---------------------------------------------------------------------------

    The Exchange has designated this proposal as ``non-controversial'' 
and provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The text of this proposed rule change is available on the 
Exchange's Web site at (www.chx.com) and in 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 CHX included statements 
concerning the purpose of and basis for the proposed rule changes and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The CHX has prepared summaries, set forth in sections A, 
B and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

1. Purpose
    On August 25, 2014, NYSE Group, Inc., on behalf of the Exchange, 
Bats BZX Exchange, Inc. f/k/a BATS Z-Exchange, Inc., Bats BYX Exchange, 
Inc. f/k/a BATS Y-Exchange, Inc., Bats EDGA Exchange, Inc. f/k/a EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc. f/k/a EDGX Exchange, Inc., 
Financial Industry Regulatory Authority, Inc. (``FINRA''), NASDAQ OMX 
BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, New York 
Stock Exchange LLC (``NYSE''), NYSE MKT LLC, and NYSE Arca, Inc. 
(collectively ``Plan Participants''),\6\ filed with the Commission, 
pursuant to Section 11A of the Act \7\ and Rule 608 of Regulation NMS 
\8\ thereunder, the Plan.\9\ The Plan Participants filed the Plan to 
comply with an order issued by the Commission on June 24, 2014.\10\ The 
Plan \11\ was published for comment in the Federal Register on November 
7, 2014, and approved by the Commission, as modified, on May 6, 
2015.\12\
---------------------------------------------------------------------------

    \6\ A ``Participant'' is a ``member'' of the Exchange for 
purposes of the Act. See CHX Article 1, Rule 1(s). For clarity, the 
Exchange proposes to utilize the term ``CHX Participant'' when 
referring to members of the Exchange and the term ``Plan 
Participant'' when referring to Participants of the Plan.
    \7\ 15 U.S.C. 78k-1.
    \8\ 17 CFR 242.608.
    \9\ See Letter from Brendon J. Weiss, Vice President, 
Intercontinental Exchange, Inc., to Secretary, Commission, dated 
August 25, 2014.
    \10\ See Securities Exchange Act Release No. 72460 (June 24, 
2014), 79 FR 36840 (June 30, 2014).
    \11\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth in the Plan.
    \12\ See Securities Exchange Act Release No. 74892 (May 6, 
2015), 80 FR 27514 (May 13, 2015) (``Approval Order'').
---------------------------------------------------------------------------

    The Plan is designed to allow the Commission, market participants, 
and the public to study and assess the impact of increment conventions 
on the liquidity and trading of the common stocks of small-
capitalization companies. Each Plan Participant is required to comply 
with, and to enforce compliance by its member organizations, as 
applicable, with the provisions of the Plan.
    The Pilot will include stocks of companies with $3 billion or less 
in market capitalization, an average daily trading volume of one 
million shares or less, and a volume weighted average price of at least 
$2.00 for every trading day. The Pilot will consist of a control group 
of approximately 1400 Pilot Securities and three test groups (``Test 
Groups'') with 400 Pilot Securities in each selected by a stratified 
sampling.\13\ During the Pilot, Pilot Securities in the control group 
will be quoted and traded at the currently permissible increments. 
Pilot Securities in the first test group (``Test Group One'') will be 
quoted in $0.05 minimum increments but will continue to trade at any 
price increment that is currently permitted.\14\ Pilot Securities in 
the second test group (``Test Group Two'') will be quoted in $0.05 
minimum increments and will trade at $0.05 minimum increments subject 
to a midpoint exception, a retail investor order exception, and a 
negotiated trade exception.\15\ Pilot Securities in the third test 
group (``Test Group Three'') will be subject to the same restrictions 
as Test Group Two and also will be subject to the ``trade-at'' 
requirement to prevent price matching by a market participant that is 
not displaying at a price of a trading center's \16\ best protected bid 
or best protected offer (``Trade-at Prohibition''), unless an 
enumerated exception applies.\17\ In addition to the exceptions 
provided under Test Group Two, an exception for Block Size orders and 
exceptions that mirror those under Rule

[[Page 69890]]

611 of Regulation NMS \18\ will apply to the Trade-at Prohibition.
---------------------------------------------------------------------------

    \13\ See Section V of the Plan for identification of Pilot 
Securities, including criteria for selection and grouping.
    \14\ See Section VI(B) of the Plan.
    \15\ See Section VI(C) of the Plan.
    \16\ The Plan incorporates the definition of ``trading center'' 
from Rule 600(b)(78) of Regulation NMS. Regulation NMS defines a 
``trading center'' as ``a national securities exchange or national 
securities association that operates an SRO trading facility, an 
alternative trading system, an exchange market maker, an OTC market 
maker, or any other broker or dealer that executes orders internally 
by trading as principal or crossing orders as agent.''
    \17\ See Section VI(D) of the Plan.
    \18\ 17 CFR 242.611.
---------------------------------------------------------------------------

    The Plan requires the Exchange to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to comply 
with applicable quoting and trading requirements specified in the Plan. 
Accordingly, the Exchange adopted Article 20, Rule 13(a) to require CHX 
Participants to comply with the quoting and trading provisions of the 
Plan.\19\ The Exchange also adopted Article 20, Rule 13(b) to require 
CHX Participants to comply with the data collection provisions under 
Appendix B and C of the Plan.\20\
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release No. 78146 (June 23, 
2016), 81 FR 42380 (June 29, 2016) (SR-CHX-2016-09).
    \20\ See Exchange Act Release No. 78812 (September 12, 2016) 
(SR-CHX-2016-17); see also Exchange Act Release No. 77469 (March 29, 
2016), 81 FR 19275 (April 4, 2016) (SR-CHX-2016-03).
---------------------------------------------------------------------------

Proposed Operation of Certain Order Types and Modifiers for Pilot 
Securities
    Current Article 20, Rule 13(a)(2) provides that the Matching System 
will not display, quote or trade in violation of the applicable quoting 
and trading requirements for a Pilot Security specified in the Plan and 
Article 20, Rule 13, unless such quotation or transaction is 
specifically exempted under the Plan. The Exchange now proposes to 
adopt Article 20, Rule 13(c) (Operation of Certain Order Types and 
Modifiers for Pilot Securities) to describe specific changes to 
existing Matching System functionality necessary to implement the 
applicable quoting and trading requirements of the Plan or to clarify 
the operation of certain functionality in light of the Plan.\21\
---------------------------------------------------------------------------

    \21\ The Exchange notes that, in connection with this proposed 
rule change, the Exchange intends to file an exemptive request 
seeking relief from certain of the Plan's trading and quoting 
requirements.
---------------------------------------------------------------------------

    Initially, the Exchange proposes to amend current CHX Article 20, 
Rule 13(a)(2) to adopt an additional sentence that provides that ``The 
operation of certain order types and modifiers applicable to the Pilot 
Securities are set forth under paragraph (c) below.''
CHX Only \22\
---------------------------------------------------------------------------

    \22\ See CHX Article 1, Rule 2(b)(1)(C).
---------------------------------------------------------------------------

    The CHX Only modifier is a limit order modifier that instructs the 
Exchange to reprice the CHX Only order pursuant to the CHX Only Price 
Sliding Processes \23\ under certain circumstances, including for Rule 
610(d) of Regulation NMS \24\ (NMS Price Sliding \25\) and Rule 201 of 
Regulation SHO \26\ (Short Sale Price Sliding \27\) compliance 
purposes.\28\ Pursuant to NMS Price Sliding, a CHX Only order that, at 
the time of entry, would lock or cross a protected quotation of an 
external market in violation of Rule 610(d) would be repriced to be 
executable at the locking price in the Matching System and, if not 
marked Do Not Display,\29\ displayable at one minimum price variation 
below the current NBO (for bids) or at one minimum price variation 
above the current NBB (for offers).\30\ CHX Only orders subject to the 
CHX Only Price Sliding Processes may be price slid once or multiple 
times depending on changes to the prevailing NBBO.\31\
---------------------------------------------------------------------------

    \23\ See id.
    \24\ 17 CFR 242.610(d).
    \25\ See CHX Article 1, Rule 2(b)(1)(C)(i).
    \26\ See 17 CFR 242.201.
    \27\ See CHX Article 1, Rule 2(b)(1)(C)(ii).
    \28\ See CHX Article 1, Rule 2(b)(1)(C).
    \29\ See CHX Article 1, Rule 2(c)(2). Price slid undisplayed CHX 
Only orders (i.e., CHX Only orders marked Do Not Display) would only 
be executable at the locking price and not displayable at any price.
    \30\ See CHX Article 1, Rule 2(b)(1)(C).
    \31\ See CHX Article 1, Rule 2(b)(1)(D).
---------------------------------------------------------------------------

    Assuming no changes to the CHX Only modifier, the Trade-at 
Prohibition would result in CHX Only price slid orders in Test Group 3 
securities to only be executable at the locking price pursuant to an 
exception or exemption to the Trade-at Prohibition. In order to avoid 
the order cancellations that could result from CHX Only price slid 
orders being ranked at the locking price, the Exchange now proposes to 
adopt proposed paragraph (c)(1) to adopt a modification to the current 
CHX Only Price Sliding processes for Test Group Three securities 
(``Trade-at price sliding'') which provides as follows:


    In Test Group Three, an incoming CHX Only buy order priced at or 
through the current NBO shall be price slid to be executable and 
displayable at one minimum price variation below the current NBO and 
an incoming CHX Only sell order priced at or through the current NBB 
shall be price slid to be executable and displayable at one minimum 
price variation above the current NBB. Thereafter, in Test Group 
Three, a price slid CHX Only order shall continue to be price slid 
and executable at its displayed price pursuant to Article 1, Rule 
2(b)(1)(C)(i)(b) or Rule 2(b)(1)(C)(ii)(b), as applicable.

    The result of Trade-at price sliding is that the executable and 
displayable price of a CHX Only order that is price slid upon initial 
receipt and continually thereafter will always be the same.\32\ CHX 
Only orders in non-Test Group Three securities that would lock or cross 
a protected quotation of an external market in violation of Rule 610(d) 
would continue to be repriced pursuant to Article 1, Rule 2(b)(1)(C), 
as described above.
---------------------------------------------------------------------------

    \32\ CHX Only sell orders subject to Short Sale Price Sliding 
are similarly repriced to one minimum price variation above the 
current NBB. See CHX Article 1, Rule 2(b)(1)(C)(ii).
---------------------------------------------------------------------------

Cross Orders \33\
---------------------------------------------------------------------------

    \33\ See CHX Article 1, Rule 2(a)(2) defining ``cross order.''
---------------------------------------------------------------------------

    The Exchange proposes the following amendments regarding the 
operation of cross orders in certain Pilot Securities.
Block Size Exception for Cross Orders Only
    Section VI(D)(2) of the Plan provides that trading centers will be 
permitted to execute Block Size \34\ orders for a Pilot Security at a 
price equal to a protected bid or protected offer (``Block Size 
exception''). The Exchange now proposes to adopt paragraph (c)(2), 
which provides that only cross orders received by the Matching System 
shall be eligible for the Block Size exception to the Trade-at 
Prohibition.\35\ Thus, limit \36\ and market \37\ orders for Test Group 
Three securities shall not be eligible for the Block Size exception at 
CHX. In the event the Exchange receives a limit or market order of 
Block Size that is subject to the Trade-at Prohibition, the Exchange 
will either (1) price slide the order if it is marked CHX Only, as 
described above, or (2) cancel the order.
---------------------------------------------------------------------------

    \34\ ``Block Size'' is defined in the Plan as an order (1) of at 
least 5,000 shares or (2) with a market value of at least $100,000.
    \35\ Given that cross orders are always handled IOC, cross 
orders can never be routed away and can never be ranked on the CHX 
book. Moreover, cross orders can only execute as a clean cross and 
cannot execute against resting orders on the CHX book. See id.
    \36\ See CHX Article 1, Rule 2(a)(1) defining ``limit orders.''
    \37\ See CHX Article 1, Rule 2(a)(3) defining ``market orders.''
---------------------------------------------------------------------------

Cross Order Exemption From Minimum Increment Requirement
    Section VI(B) of the Plan prohibits the Exchange from, among other 
things, accepting orders in any Pilot Security in Test Group One in 
price increments other than $0.05 (``$0.05 minimum order increment 
requirement''); provided that orders priced to execute at the midpoint 
and orders entered in a Plan Participant-operated retail liquidity 
program may be ranked and accepted in increments of less than $0.05. 
The $0.05 minimum order increment requirement and related exceptions 
also apply to Pilot Securities in Test Group Two and Test Group 
Three.\38\
---------------------------------------------------------------------------

    \38\ Section VI(C) of the Plan provides that Pilot Securities in 
Test Group Two will be subject to the same quoting requirements as 
Test Group One. Moreover, Section VI(D) of the Plan provides that 
Pilot Securities in Test Group Three will be subject to the same 
quoting and trading requirements as Test Group Two, along with the 
applicable quoting and trading exceptions.

---------------------------------------------------------------------------

[[Page 69891]]

    Following the adoption of Rule 612 of Regulation NMS,\39\ the 
Commission granted the national securities exchanges a limited 
exemption from Rule 612 to permit the exchanges to accept cross orders 
priced in sub-penny increments if (1) the orders are immediately 
executed against each other and (2) the cross transaction is effected 
in accordance with exchange rules approved or established pursuant to 
Section 19(b) of the Exchange Act \40\ (``cross order exemption'').\41\ 
This exception is not set forth in the Plan, and thus does not 
currently apply to cross orders for securities in the Test Groups 
(``Test Groups securities''). The Exchange has determined that it is 
appropriate to incorporate the cross order exemption to the $0.05 
minimum order increment requirement, as this exemption is equally 
applicable to cross orders for Test Groups securities. Accordingly, the 
Exchange is proposing to adopt CHX Article 20, Rule 13(c)(4), which 
provides as follows:
---------------------------------------------------------------------------

    \39\ 17 CFR 242.612.
    \40\ 15 U.S.C. 78s(b)(1).
    \41\ Currently, the Exchange permits any type of cross order in 
any security, whether the order is priced less than or at or above 
$1.00, to be submitted in an increment as small as $0.000001. See 
CHX Article 20, Rule 4(a)(7)(B). This rule is based on exemptive 
relief from Rule 612 granted by the Commission to the national 
securities exchanges in 2006. See Securities Exchange Act Release 
No. 54714 (November 6, 2006), 71 FR 66352 (November 14, 2006) 
(``Rule 612 Exemptive Relief Order'').

    In Test Group One, the Exchange shall accept cross orders in 
increments less than $0.05, subject to Article 20, Rule 
4(a)(7)(B).\42\ In Test Groups Two and Three, the Exchange shall 
accept cross orders in increments less than $0.05 only if the cross 
orders would qualify as Negotiated Trades, subject to Article 20, 
---------------------------------------------------------------------------
Rule 4(a)(7)(B).

    \42\ See id.
---------------------------------------------------------------------------

    In connection with this proposed amendment, the Exchange is seeking 
exemptive relief from complying with the $0.05 minimum order increment 
requirement as currently set forth in the Plan, which does not contain 
this exception.43 44
---------------------------------------------------------------------------

    \43\ See supra note 21.
    \44\ The Exchange notes that cross orders in Test Group Two and 
Three securities would continue to be subject to the $0.05 minimum 
trading increment requirement set forth under Section VI(C) of the 
Plan.
---------------------------------------------------------------------------

Special Handling of Certain Intermarket Sweep Orders (``ISOs'') \45\
---------------------------------------------------------------------------

    \45\ See 17 CFR 242.600(b)(30); see also CHX Article 1, Rule 
2(b)(3)(B) defining ``ISO.'' The Exchange recently amended the 
operation of the Exchange's various ISO modifiers and thus changes 
to CHX Article 1, Rule 2(b)(3)(B) are currently effective, but not 
yet operative. See Securities Exchange Act Release No. 78684 (August 
25, 2016), 81 FR 60034 (August 31, 2016) (SR-CHX-2016-15). Changes 
effected pursuant to SR-CHX-2016-15 will be operative upon, or prior 
to, the commencement of the Pilot Period.
---------------------------------------------------------------------------

    The Exchange proposes to clarify how it will handle certain ISOs 
received by the Exchange in Test Group Three securities. Specifically, 
in Test Group Three, the Exchange proposes to handle an ISO with a 
Time-In-Force of Day \46\ or GTD \47\ (``Day ISO'') as a Trade-at 
ISO,\48\ as an order sender that submits a Day ISO to the Exchange 
would be representing that it has swept protected quotations priced 
better than or equal to the limit price of the Day ISO,\49\ which would 
be the same representation made by an order sender submitting a Trade-
at ISO to the Exchange.\50\ However, an ISO with a Time-In-Force of IOC 
\51\ (``IOC ISO'') would not be handled as a Trade-at ISO (i.e., the 
Exchange will not ignore protected quotations priced at the limit price 
of the IOC ISO when processing the IOC ISO), as the sender of an IOC 
ISO would only be representing that it has swept protected quotations 
priced better than the limit price of the IOC ISO.
---------------------------------------------------------------------------

    \46\ See CHX Article 1, Rule 2(d)(1) defining ``Day.''
    \47\ See CHX Article 1, Rule 2(d)(3) defining ``GTD.''
    \48\ CHX Article 20, Rule 13(a)(7)(A)(i) defines ``Trade-at 
Intermarket Sweep Order'' as follows:
    (i) '' Trade-at Intermarket Sweep Order'' means a limit order 
for a Pilot Security that meets the following requirements: (1) When 
routed to a Trading Center, the limit order is identified as a 
Trade-at Intermarket Sweep Order; and (2) Simultaneously with the 
routing of the limit order identified as a Trade-at Intermarket 
Sweep Order, one or more additional limit orders, as necessary, are 
routed to execute against the full size of any Protected Bid, in the 
case of a limit order to sell, or the full displayed size of any 
Protected Offer, in the case of a limit order to buy, for the Pilot 
Security with a price that is better than or equal to the limit 
price of the limit order identified as a Trade-at Intermarket Sweep 
Order. These additional routed orders also must be marked as Trade-
at Intermarket Sweep Orders.
    \49\ See CHX Article 20, Rule 6(c)(3); see also Question 5.02 of 
``Division of Trading and Markets: Responses to Frequency Asked 
Questions Concerning Rule 611 and Rule 610 of Regulation NMS.'' U.S. 
Securities and Exchange Commission, 4 April 2008. Web. 21 May 2015. 
http://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm
    \50\ See id.; see also CHX Article 20, Rule 6(c)(3).
    \51\ See CHX Article 1, Rule 2 (d)(4) defining ``IOC.''
---------------------------------------------------------------------------

    Thus, proposed paragraph (c)(3) provides that in Test Group Three, 
an Intermarket Sweep Order with a Time-In-Force of Day or GTD shall be 
treated as a Trade-at Intermarket Sweep Order. Moreover, as the Trade-
at Prohibition does not apply to non-Test Group Three securities, 
proposed paragraph (c)(3) also provides that in non-Test Group Three 
securities, a Trade-at Intermarket Sweep Order shall be treated as an 
Intermarket Sweep Order.
Proposed CHX Routing Services Changes
    Currently, the Exchange routes away Routable Orders \52\ received 
by the Exchange that trigger a Routing Event, which are listed and 
described under Article 19, Rule 3(a). For example, Article 19, Rule 
3(a)(1) (``Routing Event #1'') provides that the Exchange will route 
away orders to the extent necessary to permit the display and/or 
execution of an incoming Routable Order on the Exchange in compliance 
with Rules 610(d) and 611.
---------------------------------------------------------------------------

    \52\ See CHX Article 1, Rule 1(oo) defining ``Routable Order.''
---------------------------------------------------------------------------

    In light of the Trade-at Prohibition, the Exchange proposes to 
amend Article 19, Rule 3(a)(1) to provide that that the Exchange will 
route away orders to the extent necessary to permit the display and/or 
execution of an incoming Routable Order on the Exchange in compliance 
with Rules 610(d) and 611 and, for the duration of the pilot period to 
coincide with the pilot period for the Plan, the Trade-at Prohibition 
described under the Plan. The Exchange will continue to route orders 
pursuant to amended Routing Event #1 as IOC ISOs.
    For example, assume that the NBBO for security XYZ, a Test Group 
Three security, is 20.00--20.05. Assume that the CHX has one 
undisplayed buy order for 100 shares of security XYZ priced at 20.00. 
Assume that two away markets are displaying protected bids for security 
XYZ at the NBB, each for 100 shares. Assume then that the Exchange 
receives a Routable Order to sell 300 shares of security XYZ at 20.00/
share. Pursuant to amended Routing Event #1, the Exchange would route 
away two IOC ISOs, each for 100 shares of security XYZ priced at 20.00, 
to satisfy the full displayed size of the two protected bids at the 
NBB. The Exchange would then fully execute the remaining 100 shares of 
the incoming sell order against the resting undisplayed order at 20.00/
share.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \53\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \54\

[[Page 69892]]

in particular, in that it is designed 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.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78f(b).
    \54\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets, and clarifies the provisions of the 
Plan and CHX Rules, and is designed to assist the Exchange and CHX 
Participants in meeting regulatory obligations pursuant to the Plan. In 
approving the Plan, the SEC noted that the Pilot was an appropriate, 
data-driven test that was designed to evaluate the impact of a wider 
tick size on trading, liquidity, and the market quality of securities 
of smaller capitalization companies, and was therefore in furtherance 
of the purposes of the Act. To the extent that this proposal 
implements, interprets, and clarifies the Plan and applies specific 
requirements to CHX Participants, the Exchange believes that this 
proposal is in furtherance of the objectives of the Plan, as identified 
by the SEC, and is therefore consistent with the Act.

B. Self-Regulatory Organization's Statement of Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that the proposed rule change implements the provisions of the 
Plan, and is designed to assist the Exchange in meeting its regulatory 
obligations pursuant to the Plan. The Exchange also notes that the 
quoting and trading requirements of the Plan will apply equally to all 
CHX Participants that trade Pilot Securities.

C. Self-Regulatory Organization's Statement on Comments Regarding the 
Proposed Rule Changes Received From Members, Participants or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Changes and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \55\ of the Act and Rule 19b-4(f)(6) \56\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, become operative for 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.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(3)(A).
    \56\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \57\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\58\ 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 so that the 
proposed rule change can become operative on September 30, 2016.
---------------------------------------------------------------------------

    \57\ 17 CFR 240.19b-4(f)(6).
    \58\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the Exchange to implement the proposed rules 
immediately thereby preventing delays in the implementation of the 
Plan. The Commission notes that the Plan is scheduled to start on 
October 3, 2016. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change to be operative 
upon filing with the Commission.\59\
---------------------------------------------------------------------------

    \59\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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 No. SR-CHX-2016-19 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 No. SR-CHX-2016-19. 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 changes 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 CHX. 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 No. SR-CHX-2016-19 and should be 
submitted on or before October 28, 2016.
---------------------------------------------------------------------------

    \60\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\60\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24281 Filed 10-6-16; 8:45 am]
 BILLING CODE 8011-01-P