Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”) and Rule 19b-4 thereunder, 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.
15 U.S.C. 78a.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 130 to specify that, unless otherwise required by rule, all transactions effected on the Exchange would be processed anonymously. 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 130 to specify that, except as otherwise required by the Exchange's rules, all transactions effected on the Exchange and all reports associated with such transaction would be processed anonymously and would not reveal contra-party identities.
For example, face-to-face transactions on the Trading Floor, including Crowd trades executed verbally between two Floor brokers and between a Floor broker and a Designated Market Maker (“DMM”), would continue to require submission of certain contra side information, as required by Rules 123, 132, and 134. Exchange systems and the executing brokers would continue not to have access to any information about the ultimate customer (i.e., the name of the member or member organization's customer) in an order or transaction.
Rule 130 currently provides that “[n]otwithstanding any other rule to the contrary, each transaction effected on the Exchange shall be compared or otherwise closed out by the close of business on the Exchange on the business day following the day of the contract.” The Exchange proposes to replace “notwithstanding any other rule to the contrary” with “unless otherwise specified by rule” and add a clause to Rule 130 providing that all transactions effected on the Exchange would be processed anonymously and that transaction reports will indicate the details of the transaction, but will not reveal contra party identities.
Additionally, the Exchange proposes to add new subsection (b) to Rule 130 that provides that the Exchange would reveal contra-party identities in the following circumstances: (1) For regulatory purposes or to comply with an order of a court or arbitrator; (2) when a Qualified Clearing Agency ceases to act for a member organization or the member organization's clearing firm, and determines not to guarantee the settlement of the member organization's trades; or (3) if both parties to the transaction consent. The proposed changes are intended to clarify and reflect the Exchange's current practice as it relates to electronic transactions and align with the rules of other national securities exchange that preserve anonymity through the settlement process.
The Exchange proposes non-substantive, technical amendments to re-number the remaining paragraphs of Rule 130 accordingly.
See NYSE Arca Equities, Inc. (“NYSE Arca Equities”) Rule 7.41, BATS BZX Exchange, Inc. (“BATS”) Rule 11.15, and NASDAQ Stock Market LLC (“Nasdaq”) Rule 4760.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”), in general, and furthers the objectives of Section 6(b)(5), 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. The Exchange believes that the proposed rule change removes impediments to and perfects the mechanism of a free and open market by furthering the important goal of post-trade anonymity. Similarly, the proposal promotes just and equitable principles of trade and removes impediments to and perfects the mechanism of a free and open market by providing transparency to the Exchange's existing process to process trades anonymously, which is consistent with that of other national securities exchanges. The Exchange believes that post-trade anonymity benefits investors because preserving anonymity through settlement limits the potential market impact that disclosing contra-party identities could have, which might include the ability to detect trading patterns and make assumptions about the potential direction of the market based on the identified contra party's presumed client-base. The Exchange further believes it is appropriate to carve out Floor-based face-to-face trades from the anonymity requirement because such trades are, by definition, not anonymous.
See note 6, supra.
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 rather intended to align the Exchange's practice with the rules of other national stock exchanges.
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)(iii) of the Act and Rule 19b-4(f)(6) thereunder. 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.
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.
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) of the Act 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.shtm l); or
- Send an email to rule-comments@sec.gov. Please include File Number SR-NYSE-2016-38 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-2016-38. 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-2016-38 and should be submitted on or before June 23, 2016.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-12877 Filed 6-1-16; 8:45 am]
BILLING CODE 8011-01-P