[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Notices]
[Pages 43297-43301]
[FR Doc No: 2016-15718]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78181; File No. SR-NYSEArca-2016-44]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1, and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Add a New
Discretionary Pegged Order

June 28, 2016.

I. Introduction

    On March 11, 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
amend NYSE Arca Equities Rule 7.31P(h) to add a new Discretionary
Pegged Order. The proposed rule change was published for comment in the
Federal Register on March 30, 2016.\3\ The Commission received two
comment letters on the proposed rule change \4\ and a response letter
from the Exchange.\5\ On May 12, 2016, pursuant to Section 19(b)(2) of
the Act,\6\ 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.\7\ On June 23, 2016, the Exchange filed Amendment
No. 1 to the proposed rule change.\8\ The Commission is publishing

this notice to solicit comments on Amendment No. 1 from interested
persons, and is approving the proposed rule change, as modified by
Amendment No. 1, on an accelerated basis.
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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. 77441 (March 24,
2016), 81 FR 17749 (``Notice'').
    \4\ See Letter from Sophia Lee, General Counsel, IEX Group, Inc.
(``IEX''), to Brent J. Fields, Secretary, Commission, dated April
15, 2016 (``IEX Letter''); Letter from John C. Nagel, Esq., Managing
Director and Sr. Deputy General Counsel, Citadel LLC (``Citadel''),
to Brent J. Fields, Secretary, Commission, dated April 20, 2016
(``Citadel Letter'').
    \5\ See Letter from Elizabeth K. King, General Counsel and
Corporate Secretary, New York Stock Exchange, to Brent J. Fields,
Secretary, Commission, dated April 27, 2016 (``Response Letter'').
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ See Securities Exchange Act Release No. 77820, 81 FR 31272
(May 18, 2016). The Commission designated June 28, 2016, as the date
by which it should approve, disapprove, or institute proceedings to
determine whether to disapprove the proposed rule change.
    \8\ In Amendment No. 1, the Exchange: (1) Added subsection (E)
to proposed Rule 7.31P(h)(3), which would provide that if the PBBO
(as defined below) is locked or crossed, both an arriving and
resting Discretionary Pegged Order would wait for a PBBO that is not
locked or crossed before the working price (as defined below) is
adjusted and the order becomes eligible to trade; (2) provided
additional responses to the comment letters; and (3) provided more
information regarding the implementation date for the proposed rule
change. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2016-44/nysearca201644-4.pdf.
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equites Rule 7.31P(h) to
add a new Discretionary Pegged Order for its Pillar trading platform.
According to the Exchange, the proposed Discretionary Pegged Order is
based on the Discretionary Peg Order (``D-Peg Order'') proposed by IEX
in its Form 1 application seeking registration as a national securities
exchange.\9\
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    \9\ See Notice, supra note 3, at 17749. On June 17, 2016, the
Commission granted IEX's application for registration as a national
securities exchange. See Securities Exchange Act Release No. 78101
(June 17, 2016), 81 FR 41142 (June 23, 2016) (``IEX Order''). In its
proposal, the Exchange identifies the substantive differences
between the proposed Discretionary Pegged Order and IEX's D-Peg
Order. First, the proposed Discretionary Pegged Order must have a
limit price, whereas IEX's D-Peg Order is not required to have a
limit price. See Notice, supra note 3, at 17749. Second, the
proposed Discretionary Pegged Order must be Day time-in-force,
whereas IEX's D-Peg order is also permitted to have certain other
times-in-force. See id. Third, if the PBBO is locked or crossed,
both an arriving and resting Discretionary Pegged Order would wait
for a PBBO that is not locked or crossed before the working price is
adjusted and the order becomes eligible to trade, whereas IEX's D-
Peg Order can be priced and traded if the market is locked or
crossed. See Amendment No. 1 at 3-4. In the proposal, the Exchange
also states that, unlike IEX's D-Peg Order, the proposed
Discretionary Pegged Order would be based on the PBBO rather than
the NBBO. See Notice, supra note 3, at 17749. According to the
Exchange, the PBBO is the reference price that it uses for its
Pegged Orders under Rule 7.31P(h). The Commission notes that, in an
amendment to IEX's exchange application, IEX clarified that its D-
Peg Order is based on the Protected NBBO. See Investors' Exchange
LLC--Form 1 Application and Exhibits, Addendum B-1 Comparison to
Amendment No. 1, available at https://www.sec.gov/rules/other/2016/iex/iex-form-1-addendum-b-1-amendments-redline.pdf.
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    Proposed Rule 7.31P(h)(3) would provide that a Discretionary Pegged
Order would be a Pegged Order \10\ to buy (sell) that upon entry to the
NYSE Arca Marketplace \11\ would be assigned a working price \12\ equal
to the lower (higher) of the midpoint of the PBBO \13\ (``Midpoint
Price'') or the limit price of the order. Any untraded shares of such
order would be assigned a working price equal to the lower (higher) of
the PBB (PBO) or the order's limit price and would automatically be
adjusted in response to changes to the PBB (PBO) for buy (sell) orders
up (down) to the order's limit price. In order to trade with contra-
side orders on the NYSE Arca Book, a Discretionary Pegged Order to buy
(sell) would exercise the least amount of price discretion necessary
from its working price to its discretionary price (defined as the lower
(higher) of the Midpoint Price or the Discretionary Pegged Order's
limit price), except during periods of quote instability, as defined in
proposed Rule 7.31P(h)(3)(D).
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    \10\ The term ``Pegged Order'' is defined in Exchange Rule
7.31P(h) as a Limit Order that does not route with a working price
that is pegged to a dynamic reference price. If the designated
reference price is higher (lower) than the limit price of a Pegged
Order to buy (sell), the working price will be the limit price of
the order.
    \11\ The term ``NYSE Arca Marketplace'' is defined in Exchange
Rule 1.1(e) as the electronic securities communications and trading
facility designated by the Board of Directors through which orders
of Users are consolidated for execution and/or display.
    \12\ The term ``working price'' is defined in Exchange Rule
7.36P(a)(3) as the price at which an order is eligible to trade at
any given time, which may be different from the limit price or
display price of the order. The term ``limit price'' is defined in
Exchange Rule 7.36P(a)(2) as the highest (lowest) specified price at
which a Limit Order to buy (sell) is eligible to trade.
    \13\ The term ``PBBO'' is defined in Exchange Rule 1.1(dd) as
the highest Protected Bid and the lowest Protected Offer.
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    Proposed Rule 7.31P(h)(3)(A) would provide that Discretionary
Pegged Orders would not be displayed, must be designated Day, and would
be eligible to be designated for the Core Trading Session only.
Discretionary Pegged Orders that include a designation for the Early
Trading Session or Late Trading Session would be rejected.
    Proposed Rule 7.31P(h)(3)(B) would provide that when exercising
discretion, Discretionary Pegged Orders would maintain their time
priority at their working price as Priority 3--Non-Display Orders and
would be prioritized behind Priority 3--Non-Display Orders with a
working price equal to the discretionary price of a Discretionary
Pegged Order at the time of execution. If multiple Discretionary Pegged
Orders are exercising price discretion during the same book processing
action, they would maintain their relative time priority at the
discretionary price.
    Proposed Rule 7.31P(h)(3)(C) would provide that a Discretionary
Pegged Order would be eligible to exercise price discretion to its
discretionary price, except during periods of quote instability. If the
Corporation \14\ determines the PBB for a particular security to be an
unstable quote, it would restrict buy Discretionary Pegged Orders in
that security from exercising price discretion to trade against
interest above the PBB. If the Corporation determines the PBO for a
particular security to be an unstable quote, it would restrict sell
Discretionary Pegged Orders in that security from exercising price
discretion to trade against interest below the PBO.
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    \14\ The term ``Corporation'' is defined in Exchange Rule 1.1(k)
to mean NYSE Arca Equities, Inc., as described in NYSE Arca
Equities, Inc.'s Certificate of Incorporation and Bylaws.
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    Proposed Rule 7.31P(h)(3)(D) would set forth how the Exchange would
determine the quote instability factor (i.e., the probability of an
imminent change of the current PBB to a lower price or the current PBO
to a higher price). When the quoting activity meets predefined criteria
and the quote instability factor is greater than a defined threshold
(``quote instability threshold''), the Corporation would treat the
quote as not stable (``quote instability'' or ``crumbling quote'').
When the Corporation determines either the PBB or the PBO is unstable,
the determination would remain in effect at that price level for ten
milliseconds. The Corporation would only treat one side of the PBBO as
unstable in a particular security at any given time.
    The Corporation would determine that there is quote instability or
a crumbling quote when the following occur: The PBB and PBO are the
same as the PBB and PBO one millisecond ago; and the PBBO spread is
less than or equal to the thirty-day median PBBO spread during the Core
Trading Session; and there are more protected quotations on the far
side; and the quote instability factor is greater than the defined
quote instability threshold.
    The quote stability calculation used to determine the current quote
instability factor would be defined by the following formula:

1/(1 + e [supcaret] -(C0 + C1 * N + C2 * F + C3 * N-1 + C4 * F-1)).

    The Exchange proposes to use the following quote stability
coefficients: C0 = -2.39515; C1 = -0.76504; C2 = 0.07599; C3 = 0.38374;
and C4 = 0.14466. The Exchange proposes to use the following quote
stability variables: N = the number of protected quotations on the near
side of the market; F = the number of protected quotations on the far
side of the market; N-1 = the number of protected quotations on the
near side of the market one millisecond ago; and F-1 = the number of
protected quotations on the far side of the market one millisecond ago.
The Exchange proposes to use a quote instability threshold of 0.32.
    Pursuant to proposed Rule 7.31P(h)(3)(D)(i)(D)(3), the Exchange
reserves the right to modify the quote stability coefficients or quote
instability

threshold at any time, subject to the filing of a proposed rule change
with the Commission.
    Proposed Rule 7.31P(h)(3)(E) would provide that if the PBBO is
locked or crossed, both an arriving and a resting Discretionary Pegged
Order would wait for a PBBO that is not locked or crossed before the
working price is adjusted and the order becomes eligible to trade.
    The Exchange anticipates that it will announce the implementation
date of the proposed rule change by the fourth quarter of 2016.\15\
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    \15\ See Amendment No. 1 at 5.
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III. Summary of Comments and Response to Comments

    The Commission received two comment letters opposing the proposed
rule change and a response letter and an amendment from the
Exchange.\16\
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    \16\ See supra notes 4, 5, and 8.
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    One commenter points out that, as noted by the Exchange, the
proposed Discretionary Pegged Order is a copy of the D-Peg Order that
the commenter created, which has been offered since November 2014 by
the IEX Alternative Trading System.\17\ This commenter states its
belief that the D-Peg Order is a useful order type that can protect
investors, if implemented properly.\18\ However, this commenter
questions the effectiveness of the proposed Discretionary Pegged Order,
and states that it should not be approved unless the Exchange amends
the proposal and provides additional justifications to show that the
order type would work as purported.\19\ Specifically, this commenter
states that the Exchange would not be in a position to deliver the
benefits as claimed if it continues to offer co-location and microwave
services to fast market participants because the Exchange would not be
able to effectively update the order during a crumbling quote faster
than the market participant trying to pick off the order.\20\ This
commenter also questions whether the Exchange understands the use of
the proposed order type and expresses concern that the implementation
of order types that are not well thought-through can increase systemic
risk and may have adverse impacts on investor protection.\21\ According
to the commenter, the D-Peg formula was calculated based on the
location of its systems in Weehawken, NJ, and its unique latency
profile, and it makes little sense to apply the same formula to orders
on the Exchange located in Mahwah, NJ.\22\ Finally, this commenter
argues that the Exchange should adopt a different name for the proposed
order type to avoid confusion and misrepresentation regarding the
nature of the order type.\23\
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    \17\ See IEX Letter at 1.
    \18\ See id.
    \19\ See id., at 1-3.
    \20\ See id., at 2.
    \21\ See id., at 2-3.
    \22\ See id., at 2.
    \23\ See id., at 3. In its letter, the commenter also responds
to the Exchange's comments on the D-Peg Order, which were set forth
in the Notice. See id., at 2. As noted above, the Commission granted
IEX's application for registration as a national securities
exchange, which included the D-Peg Order. See supra note 9. This
order does not address comments and responses related to IEX's D-Peg
Order.
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    Another commenter also opposes the proposed rule change. According
to this commenter, Commission approval of exchanges' use of predictive
order types such as the proposed Discretionary Pegged Order would
result in rapidly increasing order type complexity, which would reduce
market resilience and make markets more opaque for all investors.\24\
The commenter states its belief that the utility of these order types
is marginal and does not outweigh the additional complexity that these
order types would impose on the market.\25\ This commenter also
expresses concerns regarding how the Commission could or would
effectively review and police additional predictive order types as they
emerge and evolve, and whether the Commission would propose guidance or
limitations on how predictive order types may operate.\26\ Finally,
this commenter states that predictive order types encroach on the
traditional role of broker-dealers by using inherent competitive
advantages that exchanges have over broker-dealers.\27\
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    \24\ See Citadel Letter at 1. This commenter notes that the
proposed Discretionary Pegged Order is virtually identical to IEX's
D-Peg Order. See id. The commenter notes that it explained its
concerns in more detail in its comment letter on IEX's exchange
application. See Letter from John C. Nagel, Esq., Managing Director
and Sr. Deputy General Counsel, Citadel LLC, to Brent J. Fields,
Secretary, Commission, dated April 14, 2016.
    \25\ See Citadel Letter at 2.
    \26\ See id.
    \27\ See id. In the context of IEX's D-Peg Order and the
proposed Discretionary Pegged Order, the Exchange also requests that
the Commission articulate the boundaries of when an exchange may or
may not offer services that are otherwise performed by broker-
dealers and when it would be appropriate for an exchange to monitor
the quality of the prices in a market to determine how to price an
order, and raises the issue of whether these order types are
consistent with the Commission's previous disapproval of Nasdaq's
benchmark orders. See Response Letter at 2-4. See also Notice, supra
note 3, at 17751.
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    In response to comments, the Exchange indicates that the proposed
Discretionary Pegged Order is a competitive response to IEX's D-Peg
Order.\28\ The Exchange states that the proposed calculation to
determine whether a quote is unstable is a straightforward
determination that does not require inbound order flow to be
intentionally delayed to be effective.\29\ According to the Exchange,
while an intentionally-delayed market may prevent arriving interest
from interacting with pegged orders immediately, it does not believe
that processing market data updates and inbound orders out of phase (as
with IEX) or simultaneously (as proposed by the Exchange) would
materially alter the effectiveness of the proposed functionality.\30\
The Exchange also states its belief that the benefits of the proposed
functionality would be the same regardless of the relative speed.\31\
Moreover, according to the Exchange, the proposed Discretionary Pegged
Order would be an optional order type, and if market participants do
not believe that the quote instability formula appropriately predicts
market movement, they do not have to use the order type.\32\ The
Exchange states that, over time and based on client feedback, it would
consider changes to the specific formula used to assess the quality of
the market or would consider offering additional types of Discretionary
Pegged Orders to serve the trading needs of different market
participants, subject to filing separate proposed rule changes with the
Commission.\33\ Finally, the Exchange states that it does not
anticipate that the proposed order type would have any disruptive
effects on the overall market.\34\
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    \28\ See Response Letter at 3-4.
    \29\ See Amendment No. 1 at 4.
    \30\ See id.
    \31\ See id.
    \32\ See Response Letter at 4-5 and Amendment No. 1 at 4. The
Exchange states its belief that the effectiveness of a particular
order type in serving the trading needs of market participants
should be market-driven. See Response Letter at 4.
    \33\ See Response Letter at 4. In its response letter, the
Exchange also provides additional comments on IEX's exchange
application. As noted above, the Commission granted IEX's exchange
application, and this order does not address comments and responses
related to IEX's D-Peg Order. See supra note 9.
    \34\ See Amendment No. 1 at 4.
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IV. Commission Findings

    After careful review, 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.\35\ 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,\36\
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 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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    \35\ 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).
    \36\ 15 U.S.C. 78f(b)(5).
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    As noted above, the proposed Discretionary Pegged Order is based on
IEX's D-Peg Order, although there are some differences between the two
orders.\37\ First, unlike IEX's D-Peg Order, the proposed Discretionary
Pegged Order must have a limit price.\38\ The Commission notes that
this is not a novel aspect for this type of order because IEX's D-Peg
Order is also permitted to have a limit price, although it is not
required to have one.\39\ Second, unlike IEX's D-Peg Order, the
proposed Discretionary Pegged Order must have a Day time-in-force.\40\
The Commission similarly notes that this is not a novel aspect for this
type of order because IEX's D-Peg Order is also permitted to have the
Day time-in-force, although it is permitted to have certain other
times-in-force as well.\41\ Third, if the PBBO is locked or crossed, an
arriving or resting Discretionary Pegged Order would wait for a PBBO
that is not locked or crossed before the working price is adjusted and
the order becomes eligible to trade,\42\ whereas IEX's D-Peg Order can
be priced and traded if the market is locked or crossed.\43\ The
Commission notes that the proposed treatment of Discretionary Pegged
Orders when the market is locked or crossed is consistent with Exchange
Rule 7.31P(h)(1)(B), which governs the treatment of other non-displayed
pegged orders on the Exchange (i.e., Market Pegged Orders) when the
market is locked or crossed.
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    \37\ See supra note 9.
    \38\ See Notice, supra note 3, at 17749.
    \39\ See IEX Rule 11.190(b)(10)(E).
    \40\ See Notice, supra note 3, at 17749.
    \41\ See IEX Rule 11.190(b)(10)(B).
    \42\ See Amendment No. 1 at 3-4.
    \43\ See IEX Rule 11.190(h)(3).
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    The Commission notes that, according to the Exchange, the proposed
Discretionary Pegged Order would assist ETP Holders in obtaining best
execution for their customers by limiting executions at the Midpoint
Price when the PBBO is not stable, and by reducing the potential to
execute at a stale price.\44\ Moreover, the Commission notes that, in
response to the comments, the Exchange acknowledges that an
intentionally-delayed market may prevent arriving interest from
interacting with pegged orders immediately, but states its belief that
the proposed Discretionary Pegged Order would be effective,
notwithstanding the differences in speed between the Exchange and
IEX.\45\
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    \44\ See Notice, supra note 3, at 17751.
    \45\ See supra notes 29-34 and accompanying text (discussing in
more detail the Exchange's response to comments).
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    With respect to questions regarding whether the proposed
Discretionary Pegged Order would perform a function that is typically
performed by broker-dealers, and whether approval of the proposed
Discretionary Pegged Order would be inconsistent with the Commission's
prior disapproval of Nasdaq's ``benchmark orders,'' the Commission
notes that, as with IEX's rules governing the D-Peg Order, proposed
Rule 7.31P(h)(3) would delineate the specific conditions under which a
Discretionary Pegged Order would or would not be eligible to execute up
(down) to the Midpoint Price by setting forth the formula that the
Exchange would use to determine quote stability. Also, as with IEX's D-
Peg Order, the Exchange would encode in its rule the totality of the
discretionary feature of the proposed Discretionary Pegged Order. As
the Exchange notes in the proposal, the manner by which it would
monitor the quality of the quotes would be objective and transparent,
as set forth in the proposed rule.\46\ As with IEX's D-Peg Order, the
Commission does not believe that the hardcoded conditionality of the
proposed order type would provide the Exchange with actual discretion
or the ability to exercise individualized judgment when executing an
order. The Commission also notes that the Exchange would be required to
submit a proposed rule change pursuant to Section 19(b) of the Act
prior to implementing any changes to the proposed order. Moreover, as
with IEX's D-Peg Order, the Commission believes that the proposed
Discretionary Pegged Order is distinguishable from Nasdaq's benchmark
orders and does not implicate the same issues.\47\
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    \46\ See Notice, supra note 3, at 17751.
    \47\ See IEX Order, supra note 9, at 41153 (discussing in more
detail the differences between IEX's D-Peg Order and Nasdaq's
benchmark orders).
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    With respect to a commenter's concern that approval of the proposed
Discretionary Pegged Order would lead to the proliferation of complex
predictive order types, the Commission notes that new exchange proposed
order types are subject to the rule filing process of Section 19(b) of
the Act and Rule 19b-4 under the Act, and the standards in Section 6(b)
of the Act, among other provisions.\48\
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    \48\ See also Form 19b-4, General Instructions.
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    With respect to a commenter's request that the Exchange use a
different name for the proposed order in order to avoid confusion and
misrepresentation regarding the nature of the order,\49\ the Commission
notes that the functionality of the proposed Discretionary Pegged Order
is specifically delineated in proposed Rule 7.31P(h)(3). Moreover, the
Commission notes that, currently, order types on different exchanges
with nearly identical names may function differently.\50\ As a result,
the Commission does not believe the Exchange's use of the name
``Discretionary Pegged Order'' raises regulatory concerns.
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    \49\ In its comment letter, this commenter references its
``Patent-Pending `DYNAMIC PEG ORDERS IN AN ELECTRONIC TRADING
SYSTEM' in the U.S. patent application number 14/799,975, priority
to August 22, 2014.'' However, this commenter states that its
comment letter ``speaks to deficiencies in NYSE's application in
light of current market structure and is not intended to address,
comment on or waive our property rights in the D-peg invention or
related subject matter.'' See IEX Letter at note 2. In issuing this
order, the Commission expresses no view with respect to these
matters.
    \50\ See, e.g., Exchange Rule 7.31P(h)(2) (describing the
Exchange's ``Primary Pegged Order'') and IEX Rules 11.190(a)(3) and
(b)(8) (describing IEX's ``primary peg order'').
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    Finally, the Commission notes that existing exchanges offer both
discretion and pegging functionalities, including the combination of
both of those functionalities in a single order type.\51\ As with IEX's
D-Peg Order, the proposed discretion functionality would be turned
``on'' or ``off'' depending on the Exchange's quote stability
determination. Because the Exchange has encoded in its rule the
totality of the discretionary feature of the proposed Discretionary
Pegged Order, the Commission believes the proposed order type is a
close variant of the discretion and pegging functionality that
currently exist on other exchanges.
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    \51\ See, e.g., Nasdaq Rule 4703(g).
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    Based on the foregoing and the Exchange's representations, the
Commission believes that the proposed rule change, as modified by
Amendment No. 1, is consistent with the Act.

V. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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_ADDRESS>Please include
File Number SR-NYSEArca-2016-44 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-2016-44. 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-2016-44 and should
be submitted on or before July 22, 2016.

VI. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 1

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the 30th day after the
date of publication of notice of Amendment No. 1 in the Federal
Register. In Amendment No. 1, the Exchange added subsection (E) to
proposed Rule 7.31P(h)(3), which would provide that if the PBBO is
locked or crossed, both an arriving and resting Discretionary Pegged
Order would wait for a PBBO that is not locked or crossed before the
working price is adjusted and the order becomes eligible to trade. As
noted above, this aspect of the proposed Discretionary Pegged Order is
consistent with Exchange Rule 7.31P(h)(1)(B), which governs the
treatment of other non-displayed pegged orders on the Exchange (i.e.,
Market Pegged Orders) when the market is locked or crossed. In
Amendment No. 1, the Exchange also provided additional responses to the
comment letters and provided more information regarding the
implementation date for the proposed rule change. These two changes do
not alter the substance of the proposed rule change. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\52\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
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    \52\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\53\ that the proposed rule change (SR-NYSEArca-2016-44), as
modified by Amendment No. 1, be, and it hereby is, approved on an
accelerated basis.
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    \53\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\54\
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    \54\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15718 Filed 6-30-16; 8:45 am]
 BILLING CODE 8011-01-P