[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Notices]
[Pages 1766-1767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-32037]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79714; File No. SR-NYSEArca-2016-136]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1, Amending NYSE 
Arca Equities Rule 7.35 To Provide for Widened Auction Collars for the 
Core Open Auction on Volatile Trading Days

December 30, 2016.

I. Introduction

    On September 28, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to widen Auction Collars for the Core Open Auction 
on volatile trading days. The proposed rule change was published for 
comment in the Federal Register on October 14, 2016.\3\ On November 23, 
2016, the Commission designated a longer period within which to approve 
the proposed rule change, disapprove the proposed rule change, or 
institute proceedings to determine whether to disapprove the proposed 
rule change.\4\ On December 12, 2016, the Exchange filed Amendment No. 
1 to its proposed rule change.\5\ The Commission received no comment 
letters on the proposed rule change. This order approves the proposed 
rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 79068 (October 7, 
2016), 81 FR 71127 (``Notice'').
    \4\ See Securities Exchange Act Release No. 79388, 81 FR 86368 
(November 30, 2016). The Commission designated January 12, 2017, as 
the date by which it shall approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
    \5\ In Amendment No. 1, the Exchange replaced all references in 
the filing to Rule 7.35P with Rule 7.35, as the Exchange recently 
amended its rules to eliminate the ``P'' modifier. See Securities 
Exchange Act Release No. 79078 (October 11, 2016), 81 FR 71559 
(October 17, 2016) (SR-NYSEArca-2016-135). The Exchange also 
corrected a typographical error in the proposed text in Rule 
7.35(a)(10)(A). Finally, the Exchange provided additional details 
regarding its authority under the proposal to widen Auction Collars 
when it determines that it is necessary or appropriate for the 
maintenance of a fair and orderly market, and represented that if it 
were to widen Auction Collars under this authority, it would 
announce by Trader Update such widened collars before the Core Open 
Auction. Because Amendment No. 1 does not materially alter the 
substance of the proposed rule change or raise unique or novel 
regulatory issues, Amendment No. 1 is not subject to notice and 
comment (Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2016-136/nysearca2016136-1.pdf).
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.35 to 
widen Auction Collars \6\ for the Core Open Auction on volatile trading 
days. Currently, Rule 7.35(a)(10)(A) provides that the price collar 
threshold for the Core Open Auction is 10% for securities with an 
Auction Reference Price \7\ of $25.00 or less, 5% for securities with 
an Auction Reference Price greater than $25.00 but less than or equal 
to $50.00, and 3% for securities with an Auction Reference Price 
greater than $50.00.
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    \6\ See NYSE Arca Equities Rule 7.35(a)(10) (defining ``Auction 
Collar'' to mean the price collar thresholds for the Indicative 
Match Price for the Core Open Auction, Trading Halt Auction, or 
Closing Auction).
    \7\ See NYSE Arca Equities Rule 7.35(a)(8)(A) (defining 
``Auction Reference Price'' for the Core Open Auction to mean the 
midpoint of the Auction NBBO or, if the Auction NBBO is locked, the 
locked price, and if there is no Auction NBBO, the prior trading 
day's Official Closing Price).
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    Under the proposal, if as of 9:00 a.m. Eastern Time, the E-mini S&P 
500 Futures are +/- 2% from the prior day's closing price of the E-mini 
S&P 500 Futures, or if the Exchange determines that it is necessary or 
appropriate for the maintenance of a fair and orderly market, the 
Auction Collar for the Core Open Auction would be 10%, regardless of 
the Auction Reference Price. If the Exchange determines to widen 
Auction Collars under the ``fair and orderly'' provision, the Exchange 
would announce by Trader Update the widened collars before the Core 
Open Auction.\8\
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    \8\ See Amendment No. 1, supra note 5.
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III. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\9\ In particular, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act,\10\ which requires, among other things, that the 
rules of a national securities exchange be 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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    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that, according to the Exchange, the proposed 
Auction Collars would allow for additional price movement during 
periods of market-wide volatility, and at the same time continue to 
prevent auctions from occurring at prices significantly away from the 
Auction Reference Price.\11\ The Exchange also states its belief that 
widening the Auction Collars could reduce the possibility of securities 
triggering multiple trading pauses under

[[Page 1767]]

the Regulation NMS Plan to Address Extraordinary Market Volatility.\12\
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    \11\ See Notice, supra note 3, at 71127.
    \12\ See id. at 71128.
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    Moreover, according to the Exchange, the proposal would permit it 
to widen Auction Collars under the ``fair and orderly'' provision when 
the E-Mini S&P 500 Futures are not +/-2% from the prior day's closing 
price as of 9:00 a.m. Eastern Time, but widening the Auction Collars 
would otherwise be warranted.\13\ The Exchange also states that the 
``fair and orderly'' provision would be invoked for unusual 
circumstances.\14\ According to the Exchange, using 2016 as an example, 
if the proposed rule had been in place, the Exchange would have widened 
Auction Collars on only two days (i.e., June 24, 2016, the day after 
the ``Brexit'' vote, and November 9, 2016, the day after the U.S. 
Presidential election).\15\ Of these two days, the Exchange would have 
invoked the ``fair and orderly'' provision only for November 9 because, 
by 9:00 a.m., the futures markets had returned to within 2% of the 
prior day's closing price.\16\ However, because of the overall volume 
of trading and uncertainty in the market that day, the Exchange 
believed it was appropriate to widen the Auction Collars.\17\
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    \13\ See Amendment No. 1, supra note 5.
    \14\ See id.
    \15\ See id. The Exchange filed proposed rule changes to 
temporarily widen Auction Collars for the Core Open Auction on these 
two days. See Securities Exchange Act Release Nos. 78152 (June 24, 
2016), 81 FR 42781 (June 30, 2016) (SR-NYSEArca-2016-90) and 79275 
(November 9, 2016), 81 FR 80703 (November 16, 2016) (SR-NYSEArca-
2016-146).
    \16\ See Amendment No. 1, supra note 5.
    \17\ See id.
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    Based on the Exchange's representations, the Commission believes 
that the proposed rule change, as modified by Amendment No. 1, would 
help to promote orderly and efficient Core Open Auctions on volatile 
days and would provide transparency on such days regarding the Core 
Open Auction parameters. Based on the foregoing, the Commission finds 
that the proposed rule change, as modified by Amendment No. 1, is 
consistent with Section 6(b)(5) of the Act \18\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \18\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NYSEArca-2016-136), as 
modified by Amendment No. 1, be, and hereby is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).
    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-32037 Filed 1-5-17; 8:45 am]
 BILLING CODE 8011-01-P