[Federal Register Volume 82, Number 50 (Thursday, March 16, 2017)]
[Notices]
[Pages 14068-14070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05226]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80203; File No. 4-631]


Joint Industry Plan; Notice of Filing of the Thirteenth Amendment 
to the National Market System Plan To Address Extraordinary Market 
Volatility by Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats 
EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, 
Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange 
LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq Stock Market LLC, 
NYSE National, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and 
NYSE Arca, Inc.

March 10, 2017.

I. Introduction

    On February 13, 2017, NYSE Group, Inc., on behalf of the following 
parties to the National Market System Plan to Address Extraordinary 
Market Volatility (``the Plan''): \1\ Bats BZX Exchange, Inc., Bats BYX 
Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., 
Chicago Stock Exchange, Inc., the Financial Industry Regulatory 
Authority, Inc. (``FINRA''), Investors Exchange LLC, NASDAQ BX, 
Inc.,\2\ NASDAQ PHLX LLC,\3\ The NASDAQ Stock Market LLC (``Nasdaq''), 
New York Stock Exchange LLC (``NYSE''), NYSE Arca, Inc., NYSE MKT LLC, 
and NYSE National Inc.\4\ (collectively, the ``Participants'') filed 
with the Securities and Exchange Commission (``Commission'') pursuant 
to Section 11A(a)(3) of the Securities Exchange Act of 1934 (``Exchange 
Act'') \5\ and Rule 608 thereunder,\6\ a proposal to amend the Plan 
(``Thirteenth Amendment'').\7\ The proposal reflects changes 
unanimously approved by the Participants. The Thirteenth Amendment 
proposes to extend the pilot period of the Plan for one year and to 
authorize the Processor to disseminate information provided by the 
Primary Listing Exchange in connection with a reopening after a Trading 
Pause,\8\ as discussed below. A copy of the Plan, as proposed to be 
amended is attached as Exhibit A hereto. The Commission is publishing 
this notice to solicit comments from interested persons on the 
Thirteenth Amendment.\9\
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    \1\ On May 31, 2012, the Commission approved the Plan, as 
modified by Amendment No. 1. See Securities Exchange Act Release No. 
67091, 77 FR 33498 (June 6, 2012) (File No. 4-631). On February 20, 
2013, the Commission noticed for immediate effectiveness the Second 
Amendment to the Plan. See Securities Exchange Act Release No. 
68953, 78 FR 13113 (February 26, 2013). On April 3, 2013, the 
Commission approved the Third Amendment to the Plan. See Securities 
Exchange Act Release No. 69287, 78 FR 21483 (April 10, 2013). On 
August 27, 2013, the Commission noticed for immediate effectiveness 
the Fourth Amendment to the Plan. See Securities Exchange Act 
Release No. 70273, 78 FR 54321 (September 3, 2013). On September 26, 
2013, the Commission approved the Fifth Amendment to the Plan. See 
Securities Exchange Act Release No. 70530, 78 FR 60937 (October 2, 
2013). On January 7, 2014, the Commission noticed for immediate 
effectiveness the Sixth Amendment to the Plan. See Securities 
Exchange Act Release No. 71247, 79 FR 2204 (January 13, 2014). On 
April 3, 2014, the Commission approved the Seventh Amendment to the 
Plan. See Securities Exchange Act Release No. 71851, 79 FR 19687 
(April 9, 2014). On February 19, 2015, the Commission approved the 
Eight Amendment to the Plan. See Securities Exchange Act Release No. 
74323, 80 FR 10169 (February 25, 2015). On October 22, 2015, the 
Commission approved the Ninth Amendment to the Plan. See Securities 
Exchange Act Release No. 76244, 80 FR 66099 (October 28, 2015). On 
April 21, 2016, the Commission approved the Tenth Amendment to the 
Plan. See Securities Exchange Act Release No. 77679, 81 FR 24908 
(April 27, 2016). On August 26, 2016, the Commission noticed for 
immediate effectiveness the Eleventh Amendment to the Plan. See 
Securities Exchange Act Release No. 78703, 81 FR 60397 (September 1, 
2016). On January 19, 2017, the Commission approved the Twelfth 
Amendment to the Plan. See Securities Exchange Act Release No. 
79845, 82 FR 8551 (January 26, 2017).
    \2\ See note 7 infra.
    \3\ See note 7 infra.
    \4\ See note 7 infra.
    \5\ 15 U.S.C. 78k-1(a)(3).
    \6\ 17 CFR 242.608.
    \7\ See Letter from Elizabeth King, General Counsel and 
Corporate Secretary, NYSE, to Brent Fields, Secretary, Commission, 
dated February 10, 2017. (``Transmittal Letter''). In the 
Transmittal Letter, the Participants also propose to amend the Plan 
to reflect name changes of certain Participants. See Transmittal 
Letter, notes 1 and 2.
    \8\ Unless otherwise specified, the terms used herein have the 
same meaning as set forth in the Plan.
    \9\ 17 CFR 242.608. The Commission notes that staff from the 
Division of Economic and Risk Analysis has published a paper related 
to several operational features of the Plan. See Claudia E. Moise 
and Paca Flaherty, Division of Economic and Risk Analysis, 
Commission, ``Limit Up-Limit Down'' Pilot Plan and Associated 
Events, March 2017, available at https://www.sec.gov/dera/staff-papers/white-papers/dera-luld-white-paper.pdf.
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II. Description of the Plan

    Set forth in this Section II is the statement of the purpose and 
summary of the Thirteenth Amendment, along with the information 
required by Rule 608(a)(4) and (5) under the Exchange Act,\10\ prepared 
and submitted by the Participants to the Commission.\11\
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    \10\ See 17 CFR 242.608(a)(4) and (a)(5).
    \11\ See Transmittal Letter, supra note7.
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A. Statement of Purpose and Summary of the Plan Amendment

    The Participants filed the Plan on April 5, 2011, to create a 
market-wide limit up-limit down mechanism intended to address 
extraordinary market volatility in NMS Stocks, as defined in Rule 
600(b)(47) of Regulation NMS under the Exchange Act. The Plan sets 
forth procedures that provide for market-wide limit up-limit down 
requirements that would prevent trades in individual NMS Stocks from 
occurring outside of the specified price bands. These limit up-limit 
down requirements are coupled with Trading Pauses, as defined in 
Section I(Y) of the Plan, to accommodate more fundamental price moves. 
In particular, the Participants adopted this Plan to address the type 
of sudden price movements that the market experienced on the afternoon 
of May 6, 2010.
    As set forth in more detail in the Plan, all trading centers in NMS 
Stocks, including both those operated by Participants and those 
operated by members of Participants, shall establish, maintain, and 
enforce written policies and procedures that are reasonably designed to 
comply with the limit up-limit down requirements specified in the Plan. 
More specifically, the single plan processor responsible for 
consolidation of information for an NMS Stock pursuant to Rule 603(b) 
of Regulation NMS under the Exchange Act will be responsible for 
calculating and disseminating a lower price band and upper price band, 
as provided for in Section V of the Plan. Section VI of the Plan sets 
forth the limit up-limit down requirements of the Plan, and in 
particular, that all trading centers in

[[Page 14069]]

NMS Stocks, including both those operated by Participants and those 
operated by members of Participants, shall establish, maintain, and 
enforce written policies and procedures that are reasonably designed to 
prevent trades at prices that are below the lower price band or above 
the upper price band for an NMS Stock, consistent with the Plan.
    The Plan was initially approved for a one-year pilot period, which 
began on April 8, 2013.\12\ Accordingly, the pilot period was scheduled 
to end on April 8, 2014. As initially contemplated, the Plan would have 
been fully implemented across all NMS Stocks within six months of 
initial Plan operations, which meant there would have been full 
implementation of the Plan for six months before the end of the pilot 
period. However, pursuant to the fourth amendment to the Plan,\13\ the 
Participants modified the implementation schedule of Phase II of the 
Plan to extend the time period as to when the Plan would fully apply to 
all NMS Stocks. Accordingly, the Plan was not implemented across all 
NMS Stocks until December 8, 2013. Pursuant to the sixth amendment to 
the Plan,\14\ which further modified the implementation schedule of 
Phase II of the Plan, the date for full implementation of the Plan was 
moved to February 24, 2014. Pursuant to the seventh, ninth, and tenth 
amendments to the Plan,\15\ the pilot period was extended from April 8, 
2014 to February 20, 2015, from February 20, 2015 to April 22, 2016, 
and April 22, 2016 to April 17, 2017.
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    \12\ See Section VIII of the Plan.
    \13\ See supra note 1.
    \14\ See id.
    \15\ See id.
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    The Participants propose to amend Section VIII(C) of the Plan to 
extend the pilot period through April 16, 2018, to allow the 
Participants time to implement and assess the changes to the Plan as 
described in both the tenth amendment to the Plan,\16\ which was 
implemented on July 18, 2016, and the twelfth amendment to the 
Plan,\17\ which is scheduled for implementation in the third quarter of 
2017. In the twelfth amendment, the Participants amended the Plan to 
provide that a Trading Pause will continue until the Primary Listing 
Exchange has reopened trading using its established reopening 
procedures and reports a Reopening Price. The Plan was further amended 
to eliminate the current allowance for a trading center to resume 
trading in an NMS Stock following a Trading Pause if the Primary 
Listing Exchange has not reported a Reopening Price within ten minutes 
after the declaration of a Trading Pause and has not declared a 
Regulatory Halt. In addition, to preclude potential scenarios when 
trading may resume without Price Bands, the Plan was amended to provide 
that a trading center may not resume trading in an NMS Stock following 
a Trading Pause without Price Bands in such NMS Stock. To address 
potential scenarios in which there is no Reopening Price from the 
Primary Listing Exchange to use to calculate Price Bands, the Plan was 
amended to address when trading may resume if the Primary Listing 
Exchange is unable to reopen due to a systems or technology issue and 
how the Reference Price would be determined in such a scenario or if 
the Primary Listing Exchange reopens trading on a zero bid or zero 
offer, or both.
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    \16\ See id.
    \17\ See id.
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    In conjunction with amending the Plan, the Primary Listing 
Exchanges filed proposed rule changes with the Commission under Section 
19(b) of the Exchange Act to amend their rules for automated reopenings 
following a Trading Pause consistent with a standardized approach 
agreed to by Participants that would allow for extensions of a Trading 
Pause if equilibrium cannot be met for a Reopening Price within 
specified parameters.\18\ The Primary Listing Exchanges anticipate 
implementing the changes to their automated reopenings in the third 
quarter of 2017.
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    \18\ See Securities Exchange Act Release Nos. 79846 (January 19, 
2017), 82 FR 8548 (January 26, 2017) (SR-NYSEArca-2016-130) 
(Approval Order); 79884 (January 26, 2017), 82 FR 8968 (February 1, 
2017) (SR-BatsBZX-2016-61) (Approval Order); 79876 (January 25, 
2017), 82 FR 8888 (January 31, 2017) (SR-Nasdaq-2016-131) (Approval 
Order).
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    Because the planned implementation date for both the twelfth 
amendment to the Plan and the Primary Listing Exchange's amended 
reopening procedures are scheduled for a time after the current pilot 
end date, the Participants propose to extend the current Pilot an 
additional year to April 16, 2018. The Participants believe that this 
additional time will be beneficial in that it allows ``the public, the 
Participants, and the Commission to assess the operation of the Plan 
and whether the Plan should be modified prior to approval on a 
permanent basis.'' \19\ The Participants further believe that extending 
the Pilot another year would provide additional time for the 
Participants, the Commission, and the public to consider other 
potential modifications to the Plan that are currently under 
consideration. These include consideration of changes to how NMS Stocks 
are tiered under the Plan, and the applicable percentage parameters 
associated with such tiers, consideration of the elimination of double-
wide Price Bands at the open and close of trading, and consideration of 
recommendations made by the Equity Market Structure Advisory Committee 
with respect to Plan operations.\20\ The Participants believe that the 
Plan should continue to operate as a Pilot uninterrupted to provide 
time to consider whether to make any such further modifications to the 
Plan.
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    \19\ See supra note 1, 77 FR 33498 at 33508.
    \20\ See U.S. Securities and Exchange Commission Equity Market 
Structure Advisory Committee, Recommendations for Rulemaking on 
Issues of Market Quality, dated November 29, 2016, available at 
https://www.sec.gov/spotlight/emsac/emsac-recommendations-rulemaking-market-quality.pdf.
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    The Participants also propose to amend Section VII(B)(1) of the 
Plan to specify that the Processor would publish the following 
information that the Primary Listing Exchange would provide to the 
Processor in connection with reopening an NMS Stock after a Trading 
Pause: Auction reference price; auction collars; and number of 
extensions to the reopening auction. The Participants believe that the 
proposed amendment is consistent with the goal of the twelfth amendment 
to the Plan, which is to reduce the potential for sequential Trading 
Pauses in an NMS Stock by centralizing the reopening process through 
the Primary Listing Exchange. Because only one exchange would be 
facilitating the reopening of an NMS Stock, the Participants believe 
that having the Processors disseminate the additional enumerated 
information that a Primary Listing Exchange would provide to the 
Processor regarding such reopening would promote transparency regarding 
the reopening of an NMS Stock following a Trading Pause. Specifically, 
the Participants believe that the information that the Processor would 
publish, as described above, is related to Plan operations in that such 
information would provide greater transparency regarding whether an NMS 
Stock would reopen at the end of the scheduled Trading Pause, or if 
such Trading Pause has been extended beyond the five-minute period 
contemplated in the Plan. The proposed amendment would therefore 
protect investors and the public interest and is appropriate to the 
maintenance of fair and orderly markets.\21\
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    \21\ In the context of other national market system plans under 
Rule 608 of Regulation NMS, the Participants are considering whether 
the SIPs should disseminate additional information regarding 
auctions, such as imbalance information and indicative match price.

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[[Page 14070]]

B. Governing or Constituent Documents

    The governing documents of the Processor, as defined in Section 
I(P) of the Plan, will not be affected by the Plan, but once the Plan 
is implemented, the Processor's obligations will change, as set forth 
in detail in the Plan.

C. Implementation of Plan

    The initial date of the Plan operations was April 8, 2013.

D. Development and Implementation Phases

    The Plan was initially implemented as a one-year pilot program in 
two Phases, consistent with Section VIII of the Plan: Phase I of Plan 
implementation began on April 8, 2013 and was completed on May 3, 2013. 
Implementation of Phase II of the Plan began on August 5, 2013 and was 
completed on February 24, 2014. The tenth amendment to the Plan was 
implemented on July 18, 2016 and the twelfth amendment to the Plan must 
be implemented no later than July 19, 2017.\22\ Pursuant to this 
proposed amendment, the Participants propose to extend the pilot period 
until April 16, 2018.
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    \22\ See supra note 1, 82 FR 8551 at 8553 n.22.
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E. Analysis of Impact on Competition

    The proposed Plan does not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the 
Exchange Act. The Participants do not believe that the proposed Plan 
introduces terms that are unreasonably discriminatory for the purposes 
of Section 11A(c)(1)(D) of the Exchange Act.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    The Participants have no written understandings or agreements 
relating to interpretation of the Plan. Section II(C) of the Plan sets 
forth how any entity registered as a national securities exchange or 
national securities association may become a Participant.

G. Approval of Amendment of the Plan

    Each of the Plan's Participants has executed a written amended 
Plan.

H. Terms and Conditions of Access

    Section II(C) of the Plan provides that any entity registered as a 
national securities exchange or national securities association under 
the Exchange Act may become a Participant by: (1) Becoming a 
participant in the applicable Market Data Plans, as defined in Section 
I(F) of the Plan; (2) executing a copy of the Plan, as then in effect; 
(3) providing each then-current Participant with a copy of such 
executed Plan; and (4) effecting an amendment to the Plan as specified 
in Section III(B) of the Plan.

I. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    Not applicable.

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    Section III(C) of the Plan provides that each Participant shall 
designate an individual to represent the Participant as a member of an 
Operating Committee. No later than the initial date of the Plan, the 
Operating Committee shall designate one member of the Operating 
Committee to act as the Chair of the Operating Committee. Any 
recommendation for an amendment to the Plan from the Operating 
Committee that receives an affirmative vote of at least two-thirds of 
the Participants, but is less than unanimous, shall be submitted to the 
Commission as a request for an amendment to the Plan initiated by the 
Commission under Rule 608.
    On February 8, 2017, the Operating Committee, duly constituted and 
chaired by Mr. Robert Books of Bats, met and voted unanimously to amend 
the Plan as set forth herein in accordance with Section III(C) of the 
Plan. The Plan Advisory Committee was notified in connection with the 
Thirteenth Amendment and was in favor.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amendment is 
consistent with the Exchange Act and the rules thereunder. 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 4-631 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 4-631. 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 plan amendment that are filed 
with the Commission, and all written communications relating to the 
amendment 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 such filing also will be available for inspection 
and copying at the Participants' offices. 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 4-631 and should be submitted on or before 
April 6, 2017.

    By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05226 Filed 3-15-17; 8:45 am]
 BILLING CODE 8011-01-P