REVISIONS TO 8 HR OZONE NAAQS IMPLEMENTATION RULE PHASE 2 ADDRESSING OMB COMMENTS TO LYDIA WEGMAN COMPARISON TO 2/ 6/ 05 VERSION * * * * * I. SECTION ON LONG RANGE TRANSPORT ( ADDRESSING FINAL CAIR)

  FROM SUMMARY SECTION:

B. How will we address long range transport of ground level ozone and its precursors when implementing the 8 hour ozone standard? We are addressing the long range transport of ozone and its precursors through a separate rulemaking. Based on a reassessment ofEPA has issued two major rules to address interstate transport for the 8 hour standard, we proposed the " Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone," now known as the proposedof ozone pollution. On May 12, 2005, EPA published the Clean Air Interstate Rule ( CAIR) on January 30, 2004 ( 69 FR 4566). This action proposed statewiderule in the Federal Register ( 70 FR 25162). It establishes statewide SO2 and NOx emissions budgets for upwind States that significantly contribute to nonattainmen or interfere with maintenance of the fine particle or 8 hour ozone air quality standards in downwind States. For ozone, this action established summertime NOx budgets for 25 States and the District of Columbia. These budgets are based on a proposed determination that emissions from these 26 jurisdictions are significantly contributing to 8 hour ozone ( and fine particulate matter) problems in downwind States. On June 10, 2004 ( 69 FR 32684), we issued a supplemental proposal for the CAIR, which included a proposed model cap and trade program that States could use to meet the NOx budgets and 25 States in the eastern half of the country, with reductions to be achieved by 2009 and 2015. The 1998 NOx SIP Call Rule already is achieving significant reductions in NOx emissions that contribute to interstate ozone pollution in the eastern U. S. Nineteen States were required to achieve reductions by May 2004, and additional reductions are required by May 2007. CAIR goes beyond the SIP call by requiring reductions from additional States and by requiring further emissions reductions in SIP call States.

* * * * *

  FROM MAIN LONG RANGE TRANSPORT SECTION:

B. How will we address long range transport of ground level ozone and its precursors when implementing the 8 hour ozone standard?  2 [ Section VI. F. of June 2, 2003 proposed rule ( 68 FR 32827); no draft or final regulatory text.] 1. Background Interstate transport can make it difficult or impossible for some States to meet their attainment deadlines for areas within their boundaries solely by regulating sources within their ownState boundaries. Section 110( a)( 2)( D) of the ActCAA provides an important tool for addressing the problem of interstate transport. It provides that a State must include adequate provisions in its SIP to prohibit sources within the State from emitting air pollutants in amounts that contribute significantly to nonattainment, or interfere with maintenance, in one or more downwind States. Section 110( k)( 5) of the ActCAA authorizes EPA to find that a SIP is substantially inadequate to meet any CAA requirement, including the requirements of section 110( a)( 2)( D) of the ActCAA. If we make such a finding, we must require the State to submit, within a specified period, a SIP revision to correct the inadequacy. The CAA further addresses interstate transport of pollution in section 126, which authorizes any State to petition EPA for a finding designed to protect the State from transport of emissions from significant upwind sources of air pollutants from other States. In 1998, we issuedin other States. In addition to requiring states to control interstate air pollution under section 110( a)( 2)( D), the Clean Air Act requires states with nonattainment areas to develop state plans under Part D that provide for meeting the NAAQS as expeditiously as practicable, and for maintaining healthy air quality in those areas over time. Together, the section 110( a)( 2)( D) and Part D provisions provide for upwind state and in state controls to ensure that national health based air quality standards are met and maintained. Current approach On May 12, 2005, EPA published the Clean Air Interstate Rule in the Federal Register ( Vol. 70. No. 91, p. 25162). EPA determined that 28 states and the District of Columbia contribute significantly to downwind nonattainment, or interfere with maintenance, of the PM2.5 and 8 hour ozone NAAQS in other states. The rule requires these states to submit SIP revisions to reduce SO2 and/ or NOx emissions. To reduce interstate ozone transport, the rule established statewide ozone season NOx budgets for 25 States and the District of Columbia. The budgets are based on the level of emissions that can be achieved through highly cost effective controls that EPA determined are available from electrical generating units; however, states have flexibility to choose the measures they will use to achieve the necessary emissions reductions. Due to feasibility constraints, EPA is requiring the CAIR budgets to be 1The CAIR first phase also provides an annual NOx budget, which also starts in 2009.

2CAIR requires summertime NOx reductions in the following states not covered by the NOx SIP call: Arkansas, Florida, Iowa, Louisiana, Mississippi, and Wisconsin. The NOx SIP call has requirements for two states not covered by CAIR ozone requirements: Rhode Island and Georgia. EPA has proposed a stay of applicability of the NOx SIP Call to Georgia as an initial response to a petition for reconsideration on whether Georgia should be covered. ( 70 FR 9897, March 1, 2005)

 3 achieved in two phases. For summertime NOx, the first phase starts in 2009 ( covering 2009 2014) 1; the second phase starts in 2015 ( covering 2015 and thereafter). The 25 states that are required to meet a summertime NOx cap for ozone purposes, along with the District of Columbia, are Alabama, Arkansas, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin. CAIR is geographically broader and more stringent than EPA's previous ozone interstate transport rule, the NOx SIP Call, adopted in 1998.2 CAIR's ozone requirements are based on updated analyses of the impacts of pollution transported across state borders, and of highly cost effective control opportunities for NOx. In the NOx SIP Call Rule, whichEPA found the SIPs for certain States in the eastern U. S. to be substantially inadequate to address emissions transported to downwind States and required those States to select and adopt control measures to meet statewide ozone season NOx emissions budgets based on highly cost effective NOx emissions reductions ( 63 FR 57356, October 27, 1998.) In that rule, we determined that the same level of emissions reductions was needed to address transport for both the 1 hour and 8 hour standards. The NOx SIP Call Rule is achieving substantial emissions reductions and air quality improvement well in advance of the attainment dates of 8 hour nonattainment areas. In the eastern United States, monitoring data shows a 10 percent improvement between 2002 and 2004 in the seasonal ( May September) average of daily maximum 8 hour ozone concentrations, after adjustment for meteorological differences. EPA believes that the NOx reductions achieved as a result of the NOx SIP Call are an important factor in this improvement. The compliance date for achieving the required NOx reductions under phase I of the NOx SIP Call was May 31, 2004. All of the 19 affected States and the District of  4 Columbia submitted complete and approvable Phase I SIPs in response to the NOx SIP Call and are implementing their NOx control programs. State programs to implement the rule have focused on reducing emissions from electric power generators and large industrial emitters. In the NOx SIP Call, we made determinations of whether emissions from sources in upwind States are significantly contributing to downwind nonattainment problems under both the 1 hour and/ orThe phase II SIP call rule, which responds to court decisions on issues from the original SIP call rule involving certain types of sources and geographic coverage, requires additional emissions reductions by May 1, 2007. EPA's modeling for the CAIR indicates that ozone levels across the eastern half of the country will improve substantially by 2010 because of existing requirements   including the NOx SIP call, federal motor vehicle and nonroad engine regulations, and other existing state and federal rules. Last year, EPA designated more than 100 areas in that region as having ozone levels not meeting the 8 hour ozone standards. In the final SIP Call rule, we determined that the same level of reductions was needed to address transport for both the 1 hour andstandard, based on 2002 2004 data. Air quality improvements due to existing requirements ( i. e., without state measures required for areas designated nonattainment for the 8 hour standards. The compliance date for achieving the required NOx reductions under the NOx SIP Call was May 31, 2004. All of the affected States submitted approvable SIPs in response to the NOx SIP Call and are implementing their NOx control programs. The NOx SIP Call is ensuring substantialstandard) are projected to leave only 16 of these areas in nonattainment in 2010. This estimate is derived from base case CAIR modeling results shown in the final notice for CAIR ( 70 FR 25254, Table VI   12). As detailed in the final CAIR notice, the CAIR rule will further reduce ozone transport to assist states in their efforts to bring ozone nonattainment areas into attainment or  in the case of downwind receptor areas that attain prior to some or all CAIR reductions  maintain air quality meeting the 8 hour ozone NAAQS. In the CAIR rulemaking, EPA projected that 39 counties in the 16 nonattainment areas referenced above would have ozone levels exceeding the standard in 2010 in the absence of further control requirements ( i. e., the base case without CAIR). Most of these counties were projected to be within a few ppb of the standard. For the 39 counties, the average reduction in ozone levels estimated from 2009 CAIR NOx controls is 0.4 ppb, and the maximum improvement is 1.4 ppb. ( 70 FR 25254, Table VI   12.) The 2009 CAIR NOx requirements will achieve reductions prior to the maximum attainment date for downwind 8 hour ozone areas classified as moderate. 3For the 22 counties projected to be in nonattainment in 2015 in the absence of further control requirements ( i. e., the CAIR base case), the average ozone reduction in 2015 from CAIR is 1.1 ppb, and the maximum improvement is 1.6 ppb. ( 70 FR 25254 25455, Table VI   13.)

 5 We believe that states will be able to demonstrate timely attainment for most 8 hour ozone nonattainment areas with the help of emissions reductions from sources in upwind States, and thesefederal rules. However, we also believe that a limited number of downwind areas, while showing improvement, are likely to remain in nonattainment after 2009. This is due to the severity of projected ozone levels in certain areas, uncertainties about the levels of emissions reductions that will actually occur, and persistence of historical difficulties with attaining the 1 hour ozone standard. EPA determined in the CAIR rule that even if all downwind receptor areas attained on time, many areas will remain close enough to the standard to be at risk of falling back into nonattainment. EPA concluded that the 2015 summertime NOx reductions will significantly improve the boundary conditions that downwind States must consider as they work to identify how areas within the State will attain and maintain the NAAQS. By reducing the level of transported emissions at the boundaries of the States, there will be less burden to achieve additional emission reductions from areas within the State. In the proposed rule, we said that unlike in the past, States affected by transport can develop their local ozone implementation plans with the knowledge that the issue of interstate transport has already been addressed " up front." However, in the 8 hour implementation proposal, we also indicated that we intended to investigate the extent, severity, and sources of interstate ozone transport that will exist after implementation of the NOx SIP Call. 2. Current Approach. Since the 8 hour implementation proposal, we have conducted a reassessment of interstate transport forassist attainment and maintenance of the 8 hour standard. Based on these analyses, on January 30, 2004 ( 69 FR 4566), we proposed the " Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone," now known as the proposed Clean Air Interstate Rule ( CAIR). This action proposed statewide NOx budgets for 25 States and the District of Columbia. These budgets are based on a proposed determination that emissions from these 26 jurisdictions3 In addition to controlling interstate air pollution under section 110( a)( 2)( D), EPA and state rules for controlling local source of emissions are significantly contributingreducing, and in the future will further reduce, the amount of pollution transported to 8 hour ozone ( and fine particulate matter) 4Many types of sources contribute to ozone transport. CAIR reduction requirements were developed based solely upon potential reductions from EGUs; EPA did not find other source types highly cost effective to control.

 6 problems in downwind States. On June 10, 2004 ( 69 FR 32684), we issued a supplemental proposal for the CAIR, which included a proposed model cap and trade program that States could use to meet the NOx budgets. nonattainment areas in downwind states. Downwind states, in devising their attainment and maintenance plans, will be able to take required upwind reductions into account. Depending on the particular area, the upwind reductions will help to hasten attainment of the NAAQS, make attainment and maintenance of the NAAQS less difficult and costly, or both. EPA notes that interstate pollution transport will be further reduced through cost effective measures that individual states adopt for purposes of bringing their ozone nonattainment areas into attainment. 4 Given the potential for measures adopted by one state to improve air quality downwind, EPA is supportive of multi state cooperation on strategies for attaining the 8 hour standard. 3. Comments and Rresponses This section addresses more significant comments received; the response to comment document addresses other comments also. Comment: Several commenters thought the June 2, 2003, 8 hour implementation proposal failed to adequately address transport and disagreed with our statement that 8 hour transport has been addressed up front by the NOx SIP Call. Some added that this puts northeastern States located in the Ozone Transport Region ( OTR) in a situation where their citizens and businesses are bearing a disproportionate burden of health and economic impacts compared to upwind States that have fewer control requirements than OTR States. Some OTR State commenters said that the rule should address this inequity. One said we cannot assume that transport has been addressed until after the NOx SIP Call is implemented and has been evaluated. Response: The 8 hour ozone implementation rule is not intended as a rule to address interstate transport of pollution and to achieve emissions reductions from upwind sources. Rather, its purpose is to explain how the provisions ofinterpret nonattainment area requirements ( in subparts 1 and 2 of part D of title I of the CAA apply) for purposes ofstate plans to implement the 8 hour NAAQS. We continue to believe that the NOx SIP call provides substantial benefit for areas that are affected by the significanthave addressed the section 110( a)( 2)( D) obligation through the NOx SIP Call and CAIR, which provide substantial air quality benefit for downwind areas significantly affected by  7 transport of pollution from other States and will ease the planning burden for those areas. Under the CAIR, we have proposed to find that there is a need for NOx reductions beyond those required by the NOx SIP Call to further reduce the interstate transport of ozone and the precursor NOx for purposes of addressing significant contribution for the 8 hour ozone standard. Comment: Two commenters recommended a regional approach among States to address transport. One commenter thought that Clear Skies is the best way to address transport, but absent that, would support a regional approach. Some commenters thought the 8 hour ozone implementation proposal ignored the issue that ozone is a regional problem that can only be solved through regional planning. These commenters added that instead of incentives for regional planning there were disincentives. Another commenter thought that EPA unrealistically expects States to be able to resolve all potential conflicts between the States by working together in a collaborative process to identify and adopt appropriate controls that provide for attainment. The commenter suggested that EPA oversight may be necessary in these situations. One commenter thought the development of multiple ozone transport regionsOTRs for regional planning and coordination may be highly desirable to bring States with a common problem together to coordinate efforts with the strength of several States rather than to go it alone. Another suggested some criteria for EPA to use if we were to choose to establish OTRs. Response: We believe that addressing interstate transport requires regional cooperation. Theapproaches and regional cooperation. EPA has ensured regional action to reduce interstate ozone transport through the NOx SIP Call is providing significant benefit to areas affected by transported pollutionRule and CAIR. In addition, we have proposed to require additional NOx emissions reductions from a number of States covered by the NOx SIP call and to required several other States to reduce NOx emissions. We note that groups of States have worked effectively together in the past to address regional ozone problems. For example, the Lake Michigan Air Directors Consortium ( LADCO) was established in 1990 by the States of Illinois, Indiana, Michigan, and Wisconsin. The main purpose of LADCO is to provide technical assessments for and assistance to its member States on problems of ozone air quality and to provide a forum for its member States to discuss air quality issues. We will continue to encourage these multi State efforts to assess and address ozone nonattainment and will work with these States as needed to provide support and ensure progress.  8 We believe these federal rules in conjunction with voluntary cooperation between States will be effective in addressing the 8 hour ozone problem. At this time, agree with other commenters that States should work together in the SIP development process to ensure localized transport is addressed. States that share an interstate nonattainment area are expected to work together in developing the nonattainment SIP for that area and in reducing emissions that contribute to local scale interstate transport problems. We would also encourage collaborative efforts even in cases where there is not a multi State nonattainment area but where significant emissions sources in one State might affect air quality in a nonattainment area in an adjacent State. In response to comments suggesting that EPA establish additional transport regions, at this time we do not anticipate formalizing any additional transport regions. Thus, it would not only be premature but would also be an inefficient use of resources to develop criteria that we would apply in establishing additionalWe believe that the NOx SIP Call and CAIR rules go far to effectively address the kind of transport that establishment of a transport regions. Comment: Many commenters supported our intention to investigate the extent, severity, and sources of interstate transport that will exist after the NOx SIP Call is implemented in 2004. Two commenters said this investigation should be preceded by rigorous, peer reviewed modeling and observation analyses in an open public process. One commenter thought we should conduct modeling similar to the NOx SIP Call modeling and assignregion would be intended to address, without the costs of setting up a commission to oversee the transport responsibility to States. Another recommended that the States be involved from the beginning. Several urged us to issue a transport rule as soon as possible. Several State commenters claimed that the air coming into their States is often at or above the level of the 8 hour standard and thus it would not be possible to solve nonattainment within their boundaries without reducing the amount of ozone and its precursors being transported into the State. Others said our preliminary modeling indicates that ozone concentrations in air being transported to the Northeast will be at levels near or above the 8 hour standard, even after the implementation of the NOx SIP Call. One commenter said upwind States are not reducing emissions sufficiently to ensure a downwind State can meet its legal obligations. Several commenters thought upwind areas should be held accountable for their impacts by implementing controls similar to those required in the downwind areas they impact. One commenter believes that the same type of control measures already in place throughout the OTR should be applied in  9 upwind areas affecting the air quality in the OTR. One suggested that as a starting point upwind areas should be required to implement requirements such as RACT, I/ M, and NSR. Several commenters stated that all types of industrial facilities should be controlled to prevent transport. Another urged us to do our part to adopt national controls on fuels and mobile sources. One commenter said that we have not demonstrated that the existing and anticipated control programs in upwind States will solve the transport problem for northeastern States despite our assertion that interstate transport has already been addressed. Response: In certain cases, for the States to be successful in developing local plans demonstrating attainment of the 8 hour standard, we agree that upwind sources of emissions must be effectively and efficiently controlled. These emission reductions may be achieved through federal rules ( such as those regulating engines and vehicles) or through rules requiring upwind States to address the interstate transport of pollutants through SIP revisions. However, in any rule issued by EPA under sections 110( a)( 2)( D) and ( k)( 3), EPA cannot mandate the specific controls the State must adopt   such as RACT, I/ M and NSR   as suggested by the commenters. We may identify the level of contribution that needs to be addressed, but the State has the responsibility to identify the controls to achieve those reductions. For the proposed CAIR, we conducted new analyses of the degree of transport that will remain after implementation of the NOx SIP Call. In assessing whether emissions from upwind States significantly contribute to 8 hour ozone nonattainment in downwind States, we followed the general approach used in the NOx SIP Call. However, we used an updated model and updated inputs that reflect current requirements ( including the NOx SIP Call itself). We proposed to conclude that certain States and the District of Columbia are significantly contributing to 8 hour ozone problems in downwind States and proposed statewide NOx budgets for these jurisdictions. In the rulemaking process, we have made all of the transport analyses available for public comment and review. Comment: Two commenters thought that we should not evaluate what actions are needed to address transport beyond the existing NOx SIP Call until after States have had a chance to address the new standard with SIPs. The commenters pointed out that the SIP Call reductions will just be implemented in 2004. One pointed out that the NOx SIP Call was designed to address both 1 hour and 8 hour transport. Several commenters thought that because the existing NOx SIP Call eliminates significant contribution from other States, under that rule there is no basis for any further requirements to reduce NOx for the purpose of addressing long range transport issues. Another stated that any changes to the NOx SIP Call should be limited to expanding the geographic  10 coverage of the requirements. The commenter said we should not, and have not, justified modifying the NOx SIP call for States that have fully controlled under the NOx SIP Call. Response: As discussed above, we are addressing the issue of transport in CAIR, and the sufficiency of the analysis in that rule or the legal authority of such action is not an issue for this rulemaking. We agree that States should work together in the SIP development process to ensure localized transport is addressed. States that share an interstate nonattainment area are expected to work together in developing the nonattainment SIP for that area and in reducing emissions that contribute to local scale interstate transport problems. We would also encourage collaborative efforts even in cases where there is not a multi State nonattainment area but where significant emissions sources in one State might affect air quality in a nonattainment area in an adjacent State. Comment: One commenter said that in order for areas to attain the 8 hour standard by the applicable attainment date, a regional strategy with deeper and quicker ( i. e., by the end of this decade) reductions than has been offered to date is needed. The commenter urged us to reconsider the options submitted in April 2002, through the Ozone Transport Commission, regarding transport and ozone implementation. Another commenter agreed that significant regional or national reductions that coincide with attainment dates are essential. The commenter pointed out that Clear Skies and Tier IV nonroad engine standards are not yet in place and in any event would not bring timely relief from transport. One State commenter urged us to quickly promulgate a transport rule to address 8 hour ozone problems in a time frame to help areas attain the standards. Several commenters thought that any results from EPA's investigation of interstate transport that will exist after the NOx SIP Call will likely come too late to help downwind 8 hour areas meet their attainment dates. Response: As noted above, the issues raised by these commenters are being considered separately in the CAIR and are not part of this rulemaking. In both the January 2004 proposal and the June 2004 supplemental proposal for the CAIR, we solicited comment on the proposed compliance deadlines for Phase I ( 2010) and Phase II ( 2015) reductions. In that rulemaking, we are evaluating the balance between the need for near term reductions to attain the 8 hour ozone and PM2.5 standards, the ability of States to develop firm plans for achieving the required reductions, and the ability of affected emissions sources to install pollution controls in a fashion that is least disruptive to the economy. We are currently reviewing the comments we have received and will make final decisions on the timing for compliance with the CAIR after we have carefully considered all relevant policy issues. xxx may need to be  11 revised and updated based on what we say in the CAIR] Comment: Two commenters expressed concern that if upwind emissions are not controlled, downwind local areas will be driven to adopt more costly ( and less cost effective) measures. One added that this would exacerbate the existing inequity between upwind sources and the OTR States. Another thought that areas affected by transport should not be required to achieve all reductions from local controls even if local control would achieve attainment, since local measures may be extremely expensive when compared either to control measures that could be implemented in upwind areas or compared to regional measures. Two commenters stated that the cost and benefit of controls to address transported emissions should be carefully evaluated and compared to the cost and benefits of downwind local control measures. Response: We agree that upwind States have the responsibility to control emissions that are significantly contributing to downwind nonattainment problems. Although numerous areas will attain the 8 hour ozone standard in the near term with existing controls, we believe that other areas will need further emissions reductions ( in some cases, large reductions) to attain the 8 hour standard. Many of these areas have already adopted significant local control measures to reduce 1 hour ozone levels. As discussed in the proposed CAIR, we conducted an analysis to evaluate the effect of local measures on 8 hour ozone attainment. In this analysis, hypothetical total NOx and VOC emissions reductions of 25 percent were applied in all projected nonattainment areas east of the continental divide in 2010. Despite these substantial reductions, approximately eight areas were projected to have ozone levels exceeding the 8 hour standard in 2010. We believe that this hypothetical local control scenario is an indication that attaining the 8 hour standard will entail substantial cost in a number of areas, and that further regional reductions are warranted. The NOx reductions proposed under the CAIR would greatly assist the downwind 8 hour ozone nonattainment areas in achieving the 8 hour NAAQS. Moreover, as we stated in the proposed CAIR, addressing upwind emissions would help ensure that attainment would be achieved in a more equitable, cost effective manner than if each nonattainment area attempted to achieve attainment by implementing local emissions reductions without the benefit of these upwind emission reductions. [ xxx NEED TO CONTINUE TO CONSIDER THIS RESPONSE IN LIGHT OF HOW WE ULTIMATELY ADDRESS THE NPRA & API PETITIONS FOR RECONSIDERATION. MAYBE MOVE THIS COMMENT/ RESPONSE TO RTC DOC?] Comment: Three commenters thought the NOx SIP Call was not designed to address the 8 hour standard. One said that the NOx SIP Call was based largely on the work of the Ozone Transport Assessment Group ( OTAG), which was established to address transport under the 1 hour standard. Two  12 stated that even with the NOx SIP Call's significant emission reductions, our preliminary modeling indicates that air being transported to the Northeast will be at levels above the 8 hour health standard. Response: Although the NOx SIP Call relies in part on the OTAG analyses, we conducted additional analyses of interstate transport with respect to both the 1 hour and 8 hour standards and promulgated the NOx SIP Call to address transport for both standards ( see 62 FR 60318; November 7, 1997 and 63 FR 57356; October 27, 1998). Several years have passed since promulgation of the NOx SIP Call and updated data are available. Therefore, we are reassessing the degree to which ozone transport will remain a problem under the 8 hour NAAQS after full implementation of the NOx SIP Call. Based on new analyses, we proposed in CAIR to conclude that additional reductions are needed to address the significant transport of emissions and to ensure progress toward attainment in downwind areas affected by those transported emissions. Therefore, we proposed the CAIR, which would require additional NOx emissions reductions requirements for 25 States and the District of Columbia to address the interstate transport problem. We are continuing to evaluate the issue of transport and plan to take final action on the CAIR no later than xxx [ date??]. region. Comment: Some commenters stated that we should not rely on the proposed Clear Skies legislation to reduce emissions transport because there is no guarantee that the legislation will be enacted. Several State commenters added that Clear Skies would not provide adequate or timely emissions reductions. Another commenter suggested that we work with Congress to enact legislation to allow for the development and use of a transport argument in attainment demonstrations. Response: While we still hope that Congress will adopt the Administration's Clear Skies multi pollutant legislation, we acknowledge that the outcome of that process is uncertain. Therefore, relying onTo ensure that regional transport is addressed in a timely manner, EPA finalized the CAIR in May 2005 based on our existing regulatory authorities, we proposed the CAIR, which would require upwind States to address any transported NOx emissions reductions as expeditiously as possible. Commentauthority. Comment: One commenter proposed that rather than addressing transport through national measures, we could include transport as one of the criteria for determining the adequacy of a SIP. This commenter supported the multi State collaborative effort mentioned in the proposed rule, so that areas work together to address transport as their SIPs are being developed. The commenter asserted that our proposed early, top down approach could significantly hinder SIP planning for local areas considering the complex chemistry of ozone and PM2.5 formation. Response: We believe that the ActNOx SIP call and CAIR help, rather than hinder, SIP planning for nonattainment areas. We agree that the CAA does allow the States to work together in a collaborative fashion to assess regional or sub national transport. The EPA worked with a State led effort in the mid  to late  1990' s ( the OTAG process) to perform such an assessment, which documented the magnitude and extent of long range transport of ozone and its precursors. At that time, EPA concluded that without some certainty of what levels of emission controls would be required in the larger region, it was impossible for States to assume realisticfaced great uncertainty regarding the amounts of ozone and precursor concentrations being transported into the modeling domain of the nonattainment area for which they were required to develop their attainment demonstrations. Therefore, EPA issued the NOx SIP cCall that required affected States to cap NOx emissions   and more recently, CAIR  to establish the emission reduction responsibilities of upwind states under section 110( a)( 2)( D). In this way, eastern US States could then have a fair degree of certainty regarding required upwind reductions and the amount of transporttransported emissions to be assumed in their 1 hour ozone attainment demonstrations for individual nonattainment areas. Based on thisthe OTAG experience, we believe it would likely taked that there was high risk that States working together in a collaborative fashion towould not agree on a regional control strategy much morewithin the time than the ActCAA provides for States to develop 8 hour attainment demonstrations. Therefore, we believe the commenter is incorrect that the " top down" approach wouldwill significantly hinder SIP planning for the individual areas, and on the contrary, if done expeditiously, wouldwill provide the certainty needed to complete the attainment demonstrations in a timely manner.


[Federal Register Volume 81, Number 205 (Monday, October 24, 2016)]
[Notices]
[Pages 73159-73166]
[FR Doc No: 2016-25572]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79107; File No. SR-NYSEArca-2016-130]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Amending NYSE Arca Equities Rules 7.35
(Auctions), 7.10 (Clearly Erroneous Executions), 7.31 (Orders and
Modifiers), and 7.11 (Limit Up--Limit Down Plan and Trading Pauses in
Individual Securities Due to Extraordinary Market Volatility)

October 18, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on October 4, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.35
(Auctions) to enhance the information available before an auction and
revise its procedures for Trading Halt Auctions, NYSE Arca Equities
Rule 7.10 (Clearly Erroneous Executions) to exclude Trading Halt
Auctions from being reviewed as clearly erroneous, NYSE Arca Equities
Rule 7.31 (Orders and Modifiers) to add a new Imbalance Only Order, and
NYSE Arca Equities Rule 7.11.
    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 NYSE Arca Equities Rule 7.35
(Auctions) (``Rule 7.35'') to enhance the information available before
an auction and revise its procedures for Trading Halt Auctions, NYSE
Arca Equities Rule 7.10 (``Rule 7.10'') to exclude Trading Halt
Auctions from being reviewed as a clearly erroneous execution, NYSE
Arca Equities Rule 7.31 (Orders and Modifiers) (``Rule 7.31'') to add a
new Imbalance Only Order, and NYSE Arca Equities Rule 7.11 (Limit Up--
Limit Down Plan and Trading Pauses in Individual Securities Due to
Extraordinary Market Volatility) (``Rule 7.11'') to conform the rule to
proposed changes to the Regulation NMS Plan to Address Extraordinary
Market Volatility (``Plan'').\4\
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    \4\ See Securities Exchange Act Release No. 77679 (April 21,
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631) (Order
approving 10th Amendment to the LULD Plan).
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Overview
    The Operating Committee for the Plan with input from the Advisory
Committee to the Plan and staff of the Securities and Exchange
Commission (``SEC'' or ``Commission''), has identified a number of
enhancements to the reopening process following a Trading Pause that
will be addressed in a combination of a proposed amendment to the Plan
and amendments to the rules of the Primary Listing Exchanges.\5\ The
Exchange is a Participant of the Plan and a member of the Operating
Committee.
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    \5\ Unless otherwise specified, capitalized terms used herein
have the same meaning as set forth in the Plan or in Exchange rules.
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    With respect to the Plan, the Participants submitted a proposal to
amend the Plan to provide that a Trading Pause will continue until the
Primary Listing Exchange reopens trading using its established
reopening procedures and reports a Reopening Price.\6\ The Participants
further proposed 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 close any gaps of potential
scenarios when trading may resume without Price Bands, the Participants
proposed to amend the Plan 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 of when there
may not be a Reopening Price from the Primary Listing Exchange from
which to calculate Price Bands, the Participants proposed to make
related amendments to the Plan 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 either
under such circumstances or if the Primary Listing Exchange reopens
trading on a zero bid or zero quote, or both.
---------------------------------------------------------------------------

    \6\ On September 19, 2016, the Participants filed with the
Commission the twelfth amendment to the Plan.
---------------------------------------------------------------------------

    In connection with the proposed Plan amendments, the Participants
have agreed on a standardized approach for how the Primary Listing
Exchanges should conduct certain aspects of an automated reopening
following a Trading Pause. Specifically, because trading centers would
not be permitted to resume trading in an NMS Stock until there is a
Reopening Price, the Participants believe it is appropriate for the
Primary Listing Exchanges to adopt uniform standards for determining
whether and when to conduct such automated reopenings, including what
price collar thresholds would be applicable to such automated
reopenings and how to provide for extensions of when a reopening
auction would be conducted. The goal of such changes would be to ensure
that all Market Order interest could be satisfied in an automated
reopening auction.
    More specifically, the Participants have agreed that if there is an
imbalance of market orders, or if the Reopening Price would be outside
of specified price collar thresholds, the Trading Pause would be
extended an additional five minutes in order to provide additional time
to attract offsetting liquidity. If at the end of such extension,
Market Orders still cannot be satisfied within price collar thresholds
or if the reopening auction would be priced outside of the applicable
price collar thresholds, the Primary Listing Exchange would extend the
Trading Pause an additional five minutes. With each such extension, the
Participants have agreed that it would be appropriate to widen the
price collar threshold on the side of the market on which there is
buying or selling pressure.

    With respect to price collar thresholds, the Participants have
agreed that the reference price for calculating price collar thresholds
would be the price of the limit state that preceded the Trading Pause,
i.e., either the Lower or Upper Price Band price. For NMS Stocks priced
more than $3.00,
     If there is selling pressure, the lower collar for the
auction would be the Lower Price Band minus five percent and the upper
collar would be the Upper Price Band;
     if there is buying pressure, the upper collar for the
auction would be the Upper Price Band plus five percent and the lower
collar would be the Lower Price Band.
    For each extension, the collars would be widened an additional five
percent, but only on the side of the imbalance.\7\ The Participants
believe that widening collars only in the direction of the imbalance
would address issues relating to the concept of mean reversion.
---------------------------------------------------------------------------

    \7\ For NMS Stocks that are priced $3.00 and under, the price
collar threshold would be $0.15.
---------------------------------------------------------------------------

    Finally, the Participants have agreed that the proposed new
procedures for reopening trading following a Trading Pause reduces the
potential that an order or orders entered by one or more ETP Holders
caused such execution to be clearly erroneous. Specifically, the
Participants believe that the proposed standardized procedures for
reopening trading following a Trading Pause incorporates a methodology
that allows for widened collars, which may result in a reopening price
away from prior trading prices, but which reopening price would be a
result of a measured and transparent process that eliminates the
potential that such trade would be considered erroneous.
    As a Primary Listing Exchange, the Exchange proposes to amend Rule
7.35 to implement the proposed uniform trading practices with respect
to reopening a security following a Trading Pause, as described above.
In addition, the Exchange proposes to implement changes for automated
reopenings following a market-wide circuit breaker under Rule 7.12 and
any regulatory halts triggered in an Exchange-listed security. The
Exchange further proposes to amend Rule 7.10 to preclude ETP Holders
from requesting a review of a Trading Halt Auction as a clearly
erroneous execution. Finally, in connection with these proposed
changes, the Exchange proposes additional enhancements to its auction
processes, including adding a new Imbalance Only Order, an Auction
Freeze period before a Trading Halt Auction, and enhanced information
to be disseminated before an auction.
Uniform Primary Listing Exchange Proposed Rule Changes
    To effect the proposed enhancements that would be implemented by
all Primary Listing Exchanges, the Exchange proposes to add new sub-
paragraphs (5)-(10) to Rule 7.35(e), which governs Trading Halt
Auctions, re-number current Rule 7.35(e)(5) as new Rule 7.35(e)(11),
and amend Rule 7.35(e)(2). The Exchange proposes to implement these
changes for all Trading Halt Auctions. The proposed standardized
trading practices agreed upon by the Operating Committee are intended
for Trading Halt Auctions following a trading pause under Rule 7.11.
However, the Exchange believes that these proposed procedures would be
beneficial following all halts, including regulatory halts and halts
due to extraordinary market volatility.
    Rule 7.35(e)(2) currently provides that after trading in a security
has been halted or paused, the NYSE Arca Marketplace will disseminate
the estimated time at which trading in that security will re-open
(``Re-Opening Time''). The Exchange proposes to add to this rule that
the initial Re-Opening Time for a Trading Halt Auction following a
trading pause under Rule 7.11 (``Trading Pause'') or trading halt due
to extraordinary market volatility under Rule 7.12 (``MWCB Halt'') will
be at the scheduled end of the Trading Pause or MWCB Halt. This
proposed rule text clarifies that for Trading Pauses and MWCB Halts,
the length of the initial pause or halt period is as specified in those
rules. As specified in the LULD Plan, the scheduled end of the Trading
Pause is five minutes after a Trading Pause has been declared. As
specified in Rule 7.12(b), the scheduled end of a Level 1 or Level 2
Market Decline is 15 minutes. If there is a Level 3 Market Decline, the
Exchange will not re-open.
    Proposed Rule 7.35(e)(5) would provide that a Trading Halt Auction
would not be conducted if the Indicative Match Price, before being
adjusted based on Auction Collars, is below (above) the Lower (Upper)
Auction Collar or if there is a sell (buy) Market Imbalance, either of
which would be defined as an ``Impermissible Price.'' \8\ This proposed
rule text would implement the proposed standardized enhancement that
the Exchange would not conduct a Trading Halt Auction if there are
either unsatisfied Market Orders, or if the Indicative Match Price
would be outside the applicable Auction Collars.
---------------------------------------------------------------------------

    \8\ The term ``Indicative Match Price'' is defined in Rule
7.35(a)(8) to mean the best price at which the maximum volume of
shares, including the non-displayed quantity of Reserve Orders, is
tradable in the applicable auction, subject to Auction Collars. For
purposes of proposed Rule 7.35(e)(5), the Indicative Match Price
would not be calculated subject to Auction Collars. The term
``Auction Collars'' is defined in Rule 7.35(a)(10) to mean the price
collar thresholds for the Indicative Match Price for the Core Open
Auction, Trading Halt Auction, or Closing Auction. The term ``Market
Imbalance'' is defined in Rule 7.35(a)(7)(B) means the imbalance of
any buy (sell) Market Orders that are not matched for trading in the
applicable auction.
---------------------------------------------------------------------------

    Extensions: Proposed Rule 7.35(e)(6) would specify the
circumstances when the Exchange would extend the Re-Opening Time for a
Trading Halt Auction, as follows:
     Proposed Rule 7.35(e)(6)(A) would provide that, if there
is an Impermissible Price at the initial Re-Opening Time, the pause or
halt would be extended an additional five minutes and a new Re-Opening
Time would be disseminated, which would be referred to as the ``First
Extension.'' The proposed rule would further provide that the Exchange
would not conduct a Trading Halt Auction before the Re-Opening Time for
the First Extension. As such, if the Exchange disseminates a First
Extension, consistent with the current Plan, which provides that if the
Primary Listing Exchange does not reopen, trading centers may not
resume trading until ten minutes after the beginning of the Trading
Pause, the Trading Pause would continue for ten minutes and trading
would not resume before that ten-minute marker.
     Proposed Rule 7.35(e)(6)(B) would provide that if there is
an Impermissible Price at the end of the First Extension, the pause or
halt would be extended an additional five minutes and a new Re-Opening
Time would be disseminated (``Subsequent Extension''). As further
proposed, the Exchange would conduct a Trading Halt Auction before the
Re-Opening Time for a Subsequent Extension if the Indicative Match
Price, before being adjusted based on Auction Collars, would be within
the applicable Auction Collars and there is no Market Imbalance. This
proposed change would implement the Participant's proposal that for
Subsequent Extensions, if equilibrium of prices is reached, the
Exchange would conduct the Trading Halt Auction immediately and would
not extend the Trading Pause any further.
     Proposed Rule 7.35(e)(6)(C) would provide that the trading
pause or halt would continue to be extended if there is an
Impermissible Price at the Re-

Opening Time for a Subsequent Extension. This proposed rule text makes
clear that a halt or pause would continue to be extended until a
Trading Halt Auction can be conducted, as provided for in proposed Rule
7.35(e)(5).
    Auction Collars: Proposed Rule 7.35(e)(7) would describe how
Auction Collars would function for Trading Halt Auctions. As provided
for in Rule 7.35(a)(10), Auction Collars mean the price collar
thresholds for the Indicative Match Price for the Core Open Auction,
Trading Halt Auction, or Closing Auction. Currently, the price collar
thresholds for the Trading Halt Auction are 10% for securities with an
Auction Reference Price of $25.00 or less, 5% for securities with an
Auction Reference Price of greater than $25.00 and less than or equal
to $50.00, or 3% for securities with an Auction Reference Price greater
than $50.00. These price collar thresholds are based on the percentage
parameters for determining a clearly erroneous execution under Rule
7.10(c) and are in effect until January 31, 2017.
    The Exchange proposes that the price collar threshold for Auction
Collars for securities with an Auction Reference Price above $3.00
would be the Auction Reference Price multiplied by five percent. The
price collar threshold for securities with an Auction Reference Price
$3.00 and below would be $0.15. This value would be defined as the
``Price Collar Threshold.'' For securities priced above $3.00, once
calculated, the Price Collar Threshold would be applicable for each
Subsequent Extension, described below. For securities with an Auction
Reference Price of $3.00 and under, the Price Collar Threshold would be
a static $0.15 for each Subsequent Extension. The Exchange believes
that using a 5 percent multiplier for stocks priced $3.00 or less would
result in too narrow of an Auction Collar. Similar to the LULD Plan,
which provides for wider percentage parameters for stocks priced $3.00
or less, the Exchange proposes a wider Price Collar Threshold for
stocks with an Auction Reference Price of $3.00 or less.
    The Exchange believes that the proposed Price Collar Thresholds are
designed to align the Auction Collars with the existing percentage
parameters as specified in the LULD Plan. The Exchange proposes to use
the single 5% threshold for all securities priced above $3.00 and $0.15
for all securities priced $3.00 or less, and not apply separate a [sic]
percentage parameter based on the tiers specified in the LULD Plan,
because the Exchange believes it would be simpler and more transparent.
Moreover, the Exchange believes that because the proposed rule changes
would provide for the widening of collars, and would prevent trades at
an Impermissible Price, the specific size of the Price Collar Threshold
becomes less meaningful. For example, if the Market Imbalance is so
large that the proposed five percent price collar threshold is too
narrow to permit a Trading Halt Auction, the proposed extensions and
widening of Auction Collars, as described below, would provide for a
measured manner by which the collars would be widened either to permit
a trade at a permissible price or to attract additional offsetting
interest. If, at a later date, the LULD Plan is amended and the
applicable tiers and percentage parameters are adjusted, the Exchange
will reevaluate the Price Collar Thresholds for Trading Halt Auctions
and if they should be changed, will file a separate proposed rule
change.
    Because the Price Collar Thresholds for Auction Collars applicable
to a Trading Halt Auction would be specified in proposed Rule
7.35(e)(7), the Exchange proposes to amend Rule 7.35(a)(10)(A) to
delete the reference to Trading Halt Auctions. The Exchange further
proposes to delete the following text: ``* The price collar thresholds
specified in this paragraph applicable to Trading Halt Auctions are in
effect until January 31, 2017.'' The Exchange believes that proposed
Rule 7.35(e)(7) obviates the current price collar thresholds specified
for Trading Halt Auctions, which were adopted on an interim basis
pending the outcome of the review that resulted in the proposed
amendments to the Plan and standardized trading practices among the
Primary Listing Exchange for how to resume trading following a Trading
Pause.
    Trading Halt Auction Reference Price: Proposed Rule 7.35(e)(7)(A)
would specify the Auction Reference Price that would be used for a
Trading Halt Auction following a Trading Pause. As provided for in Rule
7.35(a)(8)(A), the Auction Reference Price for the Trading Halt Auction
is the last consolidated round-lot price of that trade day, and if
none, the prior day's Official Closing Price. As proposed, the Auction
Reference Price for a Trading Halt Auction following a Trading Pause
would be determined as follows: if the Limit State that preceded the
Trading Pause was at the Lower (Upper) Price Band, the Auction
Reference Price would be the Lower (Upper) Price Band. This proposed
change implements the standardized enhancement to use the Limit State
price as the Auction Reference Price for a Trading Halt Auction
following a Trading Pause.
    The Exchange proposes to make a related change to Rule
7.35(a)(8)(A) to amend the chart that specifies Auction Reference
Prices for the Trading Halt Auction. As proposed, the Exchange would
add the clause ``except as provided for in Rule 7.35(e)(7)(A)'' to
specify that the Auction Reference Price would be determined under that
subparagraph of the rule instead of the Auction Reference Price
specified in Rule 7.35(a)(8)(A). For a Trading Halt Auction following a
MWCB Halt or regulatory halt, the Auction Reference Price would
continue to be as specified in Rule 7.35(a)(8)(A).
    Initial Auction Collars: Proposed Rule 7.35(e)(7)(B) would specify
the Auction Collars if a Trading Halt Auction is conducted at the
initial Re-Opening Time. Currently, as provided for in Rule
7.35(a)(10)(A), the upper (lower) boundary of Auction Collars is the
Auction Reference Price increased (decreased) by the specified
percentage. As such, the price collar thresholds are applied on both
sides of the Auction Reference Price. The Exchange proposes to modify
how Auction Collars are calculated as proposed:
     Proposed Rule 7.35(e)(7)(B)(i) would specify how Auction
Collars would be determined for a Trading Halt Auction following a
Trading Pause. As proposed, if the Auction Reference Price is the Lower
(Upper) Price Band, the lower (upper) Auction Collar would be the
Auction Reference Price decreased (increased) by the Price Collar
Threshold, rounded down to the nearest MPV,\9\ and the upper (lower)
Auction Collar would be the Upper (Lower) Price Band. This proposed
rule implements the proposed standardized trading practice that, for
Trading Halt Auctions following a Trading Pause, the Auction Collars
should be widened only in the direction of the trading that invoked the
Trading Pause. For example, if a Trading Pause is triggered following a
Limit State at the Lower Price Band, this would indicate selling
pressure in that NMS Stock. Accordingly, the proposed lower boundary
Auction Collar would be widened by subtracting the Price Collar
Threshold from the Auction Reference Price, i.e., the Lower Price Band.
To address the concept of mean reversion, i.e., that prices may revert
back to the mean or average price of the NMS Stock, and to avoid a
security from trading outside of where it would have been permitted to
trade before the

Trading Pause, the Exchange proposes that the Auction Collar on the
opposite side of the trading pressure should be the Price Band in place
before the Trading Pause was triggered. Taking the above example, the
Upper Auction Collar would therefore be the Upper Price Band. This way,
if during the trading pause, the selling pressure reverses and becomes
buying pressure, the Auction Collars would not permit a trade higher
than would have been permitted under the Price Bands before the Trading
Pause.
---------------------------------------------------------------------------

    \9\ See Rules 7.6 and 7.46 (specifying the minimum price
variation (``MPV'') for quoting and entry of orders).
---------------------------------------------------------------------------

     Proposed Rule 7.35(e)(7)(B)(ii) would specify how Auction
Collars would be determined for a Trading Halt Auction following a MWCB
Halt or regulatory halt. In this case, because there would not be a
security-specific pricing direction reason for the halt, the Exchange
proposes that the Price Collar Threshold would be applied on both sides
of the Auction Reference Price. Accordingly, for stocks priced above
$3.00, the upper (lower) boundary of the Auction Collar would be the
Auction Reference Price (as defined in Rule 7.35(a)(8)(A)), plus
(minus) the Auction Reference Price multiplied by 5%. For stocks priced
$3.00 and under, the upper (lower) boundary of the Auction Collar would
be the Auction Reference Price (as defined in Rule 7.35(a)(8)(A)), plus
(minus) $0.15. For Trading Halt Auctions following a MWCB Halt or
regulatory halt, if the Price Collar Threshold calculation results in a
price that is not in the applicable MPV for the security, the Exchange
proposes to round down to the nearest price in the applicable MPV.
    Auction Collar for Extensions: Proposed Rule 7.35(e)(7)(C) would
specify how the Exchange would adjust Auction Collars for each
Extension. As proposed, the Auction Collar on the side of the
Impermissible Price would be widened for each Extension. In other
words, if the Indicative Match Price is below the lower Auction Collar
for the initial Re-Opening Time or there is a sell Market Imbalance,
the Exchange would widen only the lower Auction Collar. As further
proposed, the Auction Collar on the opposite side of the Impermissible
Price would remain the same as the last-calculated Auction Collar on
that side. Thus, in the case of selling pressure that would result in
an Auction Extension, the upper Auction Collar would remain as the last
Upper Price Band.
     Proposed Rule 7.35(e)(7)(C)(i) would further provide that
if the Impermissible Price is on the side of the Lower (Upper) Auction
Collar, the last-calculated Lower (Upper) Auction Collar would be
decreased (increased) by a Price Collar Threshold and the Upper (Lower)
Auction Collar would stay the same.
     To address the concept of mean reversion, proposed Rule
7.35(e)(7)(C)(ii) would provide that if the side of the Impermissible
Price changes from the Lower (Upper) Auction Collar to the Upper
(Lower) Auction Collar, the last-calculated Upper (Lower) Auction
Collar would be widened for that Extension and the last-calculated
Lower (Upper) Auction Collar will remain the same. Therefore, if,
during an Extension, the directional trading pressure switches from
sell to buy, the upper Auction Collar would be widened, and the last-
Lower Auction Collar would remain the same.
    Proposed Rules 7.35(e)(8) and (9) would specify the Exchange's
proposed handling of orders for a Trading Halt Auction, which are
discussed in greater detail below.
    Proposed Rule 7.35(e)(10) would specify what the Exchange would do
if a Re-Opening Time would be in the last ten minutes of trading before
the end of Core Trading Hours. The Participants are proposing to amend
the Plan to provide that if an NMS Stock is in a Trading Pause during
the last ten minutes of trading before the end of Regular Trading
Hours, the Primary Listing Exchange would not reopen trading and would
attempt to execute a closing transaction using its established closing
procedures.\10\ To implement this proposed amendment to the Plan,
proposed Rule 7.35(e)(10) would provide that, if the Re-Opening Time
for a Trading Halt Auction is in the last ten minutes of trading before
the end of Core Trading Hours, the Exchange would not conduct a Trading
Halt Auction in that security and would not transition to continuous
trading.\11\ Instead, the Exchange would remain paused or halted and
would conduct a Closing Auction in such security as provided for in
Rule 7.35(d).
---------------------------------------------------------------------------

    \10\ See supra note 6.
    \11\ Rule 7.12 provides that a MWCB Halt following a Level 1
Decline or Level 2 Decline will not be declared after 3:25 p.m.
Eastern Time. However, if, as proposed, a MWCB Halt in an NMS Stock
that was triggered at or before 3:25 p.m. Eastern Time is extended
pursuant to proposed Rule 7.35(e)(5) to after 3:50 p.m. Eastern Time
(or 12:50 p.m. Eastern Time in the case of an early scheduled
close), the Exchange would not conduct a Trading Halt Auction in
that NMS Stock.
---------------------------------------------------------------------------

    In such circumstances, as specified in proposed Rule
7.35(e)(10)(A), MOO Orders, LOO Orders, and IO Orders (described below)
entered during the pause or halt would not participate in the Closing
Auction and would expire at the end of the Core Trading Session. The
Exchange proposes to add this rule text to provide transparency to ETP
Holders of how orders that are designated to participate in a Trading
Halt Auction only would be handled if the Exchange transitions to a
Closing Auction without conducting that Trading Halt Auction. The
Exchange believes this proposed rule text would provide notice for ETP
Holders to enter closing-only interest, i.e., MOC or LOC Orders, to
participate in the Closing Auction.
    In addition, as specified in proposed Rule 7.35(e)(10)(B), the
Auction Collars for the Closing Auction for such security would be the
most recently widened Auction Collars for the Trading Halt Auction that
did not occur. Currently, the Auction Collars for Closing Auctions are
5% for securities with an Auction Reference Price of $25.00 or less, 2%
for securities with an Auction Reference Price of greater than $25.00
and less than or equal to $50.00, or 1% for securities with an Auction
Reference Price greater than $50.00. The Exchange believes that if the
Exchange goes directly from an unresolved Trading Pause, MWCB Halt, or
regulatory halt in an NMS Stock to a Closing Auction, the narrower
price collar thresholds applicable to the Closing Auction would result
in Auction Collars that do not correlate to the trading condition for
that NMS Stock.
    The Exchange proposes to make a related amendment to Rule
7.35(a)(10)(A) to add the clause ``except as provided for in Rule
7.35(e)(10)(B)''. This proposed rule text makes clear that the price
collar thresholds for a Closing Auction are defined in Rule
7.35(a)(10)(A), except as provided for in proposed Rule 7.35(e)(10)(B).
    The Exchange proposes to amend Rule 7.10(a) to provide that ETP
Holders may not request a review of a Trading Halt Auction under Rule
7.10(b), which specifies the procedures for an ETP Holder to request a
review of an execution, as clearly erroneous. The Exchange believes
that this proposed rule text would implement the proposed standardized
trading practice that reopening auctions would not be eligible for
review by ETP Holders as a clearly erroneous execution.\12\
---------------------------------------------------------------------------

    \12\ The Participants will be engaging in a more comprehensive
review of Rule 7.10 in connection with amendments to the Plan
relating to tiering of securities and applicable percentage
parameters. The Exchange proposes to make this limited amendment to
Rule 7.10 as an initial step to eliminating its clearly erroneous
executions rules in their current form.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to amend Rule 7.11 to delete
obsolete rule text and conform the remaining rule text to the proposed
amendments to the

Plan, as described above. First, the Exchange proposes to amend Rule
7.11(b) to delete the text following the heading of Rule 7.11(b) and
delete Rules 7.11(b)(1), (b)(1)(A)-(C), and (b)(3). This rule text
governed how trading pauses were triggered before the Plan was
implemented and is now obsolete. Second, the Exchange proposes that the
text currently set forth in Rule 7.11(b)(2) would be moved to be the
rule text for Rule 7.11(b). In moving this rule text, the Exchange
proposes to delete the second substantive sentence of current Rule
7.11(b)(2) as inconsistent with the proposed amendments to the Plan,
described above.\13\ Third, the Exchange proposes to renumber current
Rule 7.11(b)(4) as proposed Rule 7.11(b)(1) and amend this paragraph to
add that the Exchange would notify the single plan processor if the
Exchange is unable to reopen trading at the end of the Trading Pause
due to a systems or technology issue, which is consistent with the
proposed amendments to the Plan. Finally, the Exchange proposes to
renumber current Rule 7.11(b)(5) as proposed Rule 7.11(b)(2) and amend
the text to provide that if a primary listing market issues an Trading
Pause, the Exchange would resume trading as provided for in Rule
7.18(a).\14\ This proposed amendment is consistent with the proposed
amendments to the Plan, described above.
---------------------------------------------------------------------------

    \13\ The sentence that the Exchange would delete provides that
``[i]n the event of a significant imbalance at the end of a Trading
Pause, the Corporation may delay the re-opening of a security. The
Exchange will issue a notification if it cannot resume trading for a
reason other than a significant imbalance.''
    \14\ Rule 7.18(a) provides that if the UTP Listing Market
declares a UTP Regulatory Halt, which includes a Trading Pause, the
Exchange will halt trading until it receives the first Price Band in
that security. Accordingly, following a Trading Pause declared by
another Primary Listing Market, the Exchange already waits to
receive Price Bands before it resumes trading in that UTP Security.
The Exchange proposes to delete the current rule text in Rule
7.11(b)(5) that provides that the Exchange ``will pause trading in
that security until trading has resumed on the primary listing
market or notice has been received from the primary listing market
that trading may resume. If the primary listing market does not
reopen the security within 10 minutes of notification of a Trading
Pause, the Corporation may resume trading the security.''
---------------------------------------------------------------------------

Other Proposed Rule Changes
    IO Order: The Exchange proposes to add a new order type, an
Imbalance Only (``IO'') Order, that would be eligible to participate in
Trading Halt Auctions only. The Exchange proposes to amend Rule
7.31(c), which specifies the Exchange's Auction-Only Order types, to
add new subsection (5) to describe an IO Order. As proposed, an IO
Order would be a Limit Order to buy (sell) that is to be traded only in
a Trading Halt Auction.
    Proposed Rule 7.31(c)(5)(A) would provide that an IO Order would be
accepted only during a halt or pause, including any extensions. This
proposed rule text is consistent with the Exchange's current rules that
MOO or LOO Orders designated to participate in a Trading Halt Auction
will be accepted only during the trading halt that precedes such
Trading Halt Auction.\15\
---------------------------------------------------------------------------

    \15\ See Rule 7.31(c)(1) and (2).
---------------------------------------------------------------------------

    Proposed Rule 7.31(c)(5)(B) would provide that an IO Order would
participate in a Trading Halt Auction only if: (i) There is an
imbalance in the security on the opposite side of the market from the
IO Order after taking into account all other orders eligible to trade
at the Indicative Match Price; and (ii) the limit price of the IO Order
to buy (sell) would be at or above (below) the Indicative Match Price.
Proposed Rule 7.31(c)(5)(C) would provide that the working price of an
IO Order to buy (sell) would be adjusted to be equal to the Indicative
Match Price, provided that the working price of the IO Order would not
be higher (lower) than its limit price. Finally, proposed Rule
7.31(c)(5)(D) would provide that an IO Order that participates in a
Trading Halt Auction would be ranked in time priority among IO Orders
after all other orders eligible to participate in the auction have been
allocated. The Exchange notes that the proposed IO Order is based in
part on the Closing Offset (``CO'') Order offered by the New York Stock
Exchange LLC (``NYSE'').\16\
---------------------------------------------------------------------------

    \16\ See NYSE Rule 13(c)(1) (defining a CO Order as a day Limit
Order to buy or sell as part of the closing transaction where the
eligibility to participate in the closing transaction is contingent
upon: (i) an imbalance in the security on the opposite side of the
market from the CO Order; (ii) after taking into account all other
types of interest eligible for execution at the closing price, there
is still an imbalance in the security on the opposite side of the
market from the CO Order; and (iii) the limit price of the CO Order
being at or within the price of the closing transaction. CO Orders
eligible to participate in the closing transaction are executed in
time priority of receipt by NYSE systems, up to the size of the
imbalance in the security, on the opposite side of the market from
the CO Order. Any eligible CO Orders not executed due to trading
halt (as defined in Rule NYSE 123D) or insufficient volume of the
contra side imbalance will be cancelled.)
---------------------------------------------------------------------------

    For example, assume for a Trading Halt Auction that the lower
boundary of an Auction Collar is $10.00. Assume further that after
allocating all other orders eligible to participate in the Trading Halt
Auction, there is a sell Total Imbalance of 10,000 shares and absent
Auction Collars, the Indicative Match Price would be below $10.00. As
provided for in Rule 7.35(a)(10)(B), once the Auction Collars are
applied, the Indicative Match Price for that Trading Halt Auction would
be $10.01 (i.e., one MPV above the lower Auction Collar). Assume now
there are seven IO Orders to buy, each for 2,000 shares, with limit
prices of $10.00, $10.01, $10.02, $10.03, $10.04, $10.05 and $10.06,
and they are entered in that order. In this scenario, the IO Order to
buy with a limit price of $10.00 would not be eligible to participate,
because the $10.01 Indicative Match Price is higher than the limit
price of the order. The remaining six IO Orders to buy would be
assigned a working price of $10.01. However, because the IO Order with
a limit price of $10.06 was entered last in time, it would not
participate in the Trading Halt Auction.
    Auction Imbalance Freeze: The Exchange proposes to add an Auction
Imbalance Freeze before a Trading Halt Auction. As defined in Rule
7.35(a)(3), the Auction Imbalance Freeze means the period that begins
before the scheduled time for the Early Open Auction, Core Open
Auction, or Closing Auction, as specified in paragraphs (b), (c), and
(d) of Rule 7.35, and that ends once the Auction Processing Period
begins. To effect the proposed rule change, the Exchange proposes to
add a reference to Trading Halt Auction and Rule 7.35(e) to Rule
7.35(a)(3).
    Proposed Rule 7.35(e)(8) would describe how the Trading Halt
Auction Imbalance Freeze would function. As proposed, the Trading Halt
Auction Imbalance Freeze would begin five seconds before the Re-Opening
Time, including Re-Opening Times for each Extension. The Exchange
proposes to use the same period of time for the Trading Halt Auction
Imbalance Freeze, five seconds, as provided for in Rule 7.35(c)(3) for
the Core Open Auction. Specifically, the Exchange believes that the
proposed five-second time period strikes the appropriate balance for
providing sufficient time for market participants to enter and cancel
orders before the Trading Halt Auction while at the same time having a
short period for any imbalance to stabilize before the auction is
conducted. The rule would further provide that if a pause or halt is
extended, the Trading Halt Auction Imbalance Freeze for the prior
period would end, new orders and order instructions received during the
prior period's Trading Halt Auction Imbalance Freeze would be
processed, and the Exchange would accept new order entry and
cancellation as provided for in Rule 7.18(c) until the next Trading
Halt Auction Imbalance Freeze. In other words, if at the Re-Opening
Time, the Exchange extends the Trading Pause for five minutes, the
restrictions on order

entry and cancellation from the prior freeze would no longer be in
effect, and any order instructions that were not processed will be
processed.
    The proposed rule would further provide how order entry and
cancellation during the Trading Halt Auction Imbalance Freeze would be
processed:
     As proposed in Rule 7.35(e)(8)(A), MOO Orders and LOO
Orders that are on the same side as the Imbalance, would flip the
Imbalance, or would create a new Imbalance would be rejected. This
proposed rule text is based on how MOC Orders and LOC Orders are
processed during the Closing Auction Imbalance Freeze, as described in
Rule 7.35(d)(2)(A).
     As proposed in Rule 7.35(e)(8)(B), Market Orders (other
than MOO Orders) and Limit Orders would be accepted but would not be
included in the calculation of the Indicative Match Price or the
Trading Halt Auction Imbalance Information. Such orders would
participate in the Trading Halt Auction only to offset the Imbalance
that would be remaining after all orders entered before the Trading
Halt Auction Imbalance Freeze, including the non-display quantity of
Reserve Orders, are allocated in the Trading Halt Auction, and would be
allocated in price-time priority under Rule 7.36(c)-(g) consistent with
the priority ranking associated with each order and ahead of any IO
Orders. This proposed rule text is based on how [sic] Market Orders
(other than MOO Orders) and Limit Orders that are entered during the
Core Open Auction Imbalance Freeze, as described in Rule 7.35(c)(3)(B).
As such, these orders would participate in the Trading Halt Auction
only to offset the final Imbalance for the auction. Such orders would
be ranked in price-time priority after all other orders, except for IO
Orders, have been allocated. Because the Exchange would be accepting IO
Orders for the Trading Halt Auction and because IO Orders do not
participate until all other eligible interest has been allocated, the
Exchange proposes a substantive difference from the rule governing the
Core Open Auction to address how IO Orders would be processed relative
to Market Orders (other than MOO Orders) or Limit Orders entered during
the Trading Halt Auction Imbalance Freeze. As proposed, IO Orders would
not be allocated until Market Orders (other than MOO Orders) and Limit
Orders entered during the Trading Halt Auction Imbalance Freeze have
been allocated.
     Proposed Rule 7.35(e)(8)(C) would provide that requests to
cancel and requests to cancel and replace Market Orders, LOO Orders,
Limit Orders, and IO Orders would be accepted but not processed until
after the Trading Halt Auction concludes, as provided for in Rule
7.35(h). This proposed rule text is based on Rule 7.35(c)(3)(C)
governing which order instructions will be accepted but not processed
during the Core Open Auction Imbalance Freeze. The Exchange proposes a
substantive difference to reference how requests to cancel IO Orders
would be processed if received during the freeze period.
     Finally, proposed Rule 7.35(e)(8)(D) would provide that
all other order instructions would be accepted. This proposed rule text
is based on Rules 7.35(c)(3)(D) and (d)(2)(C), without any differences.
    Unexecuted Limit Orders: The Exchange proposes to specify how it
would process Limit Orders that do not participate in the Trading Halt
Auction. As discussed above, an Impermissible Price would occur if
there is a Market Imbalance or if the Indicative Match Price were
outside the specified Price Collar Thresholds. However, if the
Indicative Match Price were within the specified Price Collar
Thresholds and there is no Market Imbalance, it is still possible to
have an imbalance of Limit Orders within the Auction Collars. In such
case, the Exchange proposes to transition such unexecuted Limit Orders
to continuous trading. The Exchange believes that because such Limit
Orders would have a limit price within the Auction Collars, having such
Limit Orders transition to continuous trading would not have
significant pricing impact on post-Trading Halt Auction trading.
Accordingly, proposed Rule 7.35(e)(9) would provide that any Limit
Orders that were eligible to participate in the Trading Halt Auction,
but did not participate, would transition to continuous trading as
provided for in paragraph (h) of this Rule.
    Auction Imbalance Information: The Exchange proposes to enhance the
Auction Imbalance Information. Rule 7.35(a)(4) defines Auction
Imbalance Information as the information that is disseminated by the
Exchange for an auction and includes, if applicable, the Total
Imbalance, Market Imbalance, Indicative Match Price, and Matched
Volume.\17\ The Exchange proposes to enhance the Auction Imbalance
Information to include the following additional information: Auction
Reference Price, Auction Collar, Book Clearing Price, Far Clearing
Price, Imbalance Freeze Indicator, and Auction Indicator. The Auction
Reference Price is defined in Rule 7.35(a)(8)(A) and proposed Rule
7.35(e)(7)(A), described above. The Auction Collar is defined in Rule
7.35(a)(10) and proposed Rules 7.35(e)(7) and (e)(10)(B), described
above. The Exchange proposes to define the additional terms as follows:
---------------------------------------------------------------------------

    \17\ See Rule 7.35(a)(7) (defining the terms Total Imbalance and
Market Imbalance); 7.35(a)(8) (defining the term Indicative Match
Price); and 7.35(a)(9) (defining the term Matched Volume).
---------------------------------------------------------------------------

     Proposed Rule 7.35(a)(11) would define the term ``Book
Clearing Price'' to mean the price at which all interest eligible to
participate in an auction could be traded if not subject to an Auction
Collar. The rule would further provide that the Book Clearing Price
would be zero if a sell (buy) imbalance cannot be filled by any buy
(sell) orders. For example, if there are only sell orders and no buy
orders, the Book Clearing Price would be zero.
     Proposed Rule 7.35(a)(12) would define the term ``Far
Clearing Price'' to mean the price at which Auction-Only Orders could
be traded within the Auction Collar. Auction-Only Orders are defined in
Rule 7.31(c).
     Proposed Rule 7.35(a)(13) would define the term ``Auction
Indicator'' to mean an indicator of whether an auction could be
conducted, based on the applicable Auction Collar and Imbalance. This
information would be relevant for the Trading Halt Auction and provide
transparency regarding whether a Trading Pause, MWCB Halt, or
regulatory halt would be eligible to be conducted. If an Auction
Indicator is ``no,'' market participants would be on notice that
submitting offsetting interest may reduce the possibility of the
Exchange extending a Trading Halt Auction.
     Proposed Rule 7.35(a)(14) would define the term
``Imbalance Freeze Indicator'' to mean an indicator of whether a
security is currently in an Auction Imbalance Freeze. This indicator
would put market participants on notice of whether there are order
entry and cancellation restrictions in place at any given time before
an auction.
* * * * *
    The Exchange proposes to implement the proposed rule change
following the Commission's approval of Amendment 12 to the Plan. The
Exchange will announce the implementation date via Trader Update to be
issued after this proposed rule change is approved.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the

``Act''),\18\ in general, and furthers the objectives of Section
6(b)(5),\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed changes would 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, because they are designed, together with the proposed
amendments to the Plan, to address the issues experienced on August 24,
2015 by reducing the number of repeat Trading Pauses in a single NMS
Stock. The proposed Plan amendments are an essential component to
Participants' goal of more standardized processes across Primary
Listing Exchanges in reopening trading following a Trading Pause, and
facilitates the production of an equilibrium Reopening Price by
centralizing the reopening process through the Primary Listing
Exchange, which would also improve the accuracy of the reopening Price
Bands. The proposed Plan amendments support this initiative by
requiring trading centers to wait to resume trading following Trading
Pause until there is a Reopening Price.
    This proposed rule change further supports this initiative by
proposing uniform trading practices for reopening trading following a
Trading Pause. The Exchange believes that the proposed standardized
approach for how the Primary Listing Exchanges would conduct certain
aspects of an automated reopening following a Trading Pause would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because it would provide certainty
for market participants regarding how a security would reopen following
a Trading Pause, regardless of the listing exchange. The Exchange
further believes that the proposed changes would remove impediments to
and perfect the mechanism of a free and open market and a national
market system and protect investors and the public interest because the
goal of the proposed changes is to ensure that all Market Order
interest could be satisfied in an automated reopening auction while at
the same time reducing the potential for multiple Trading Pauses in a
single security due to a large order imbalance.
    The Exchange further believes that the standardized proposal to
extend a Trading Pause an additional five minutes would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would provide additional time to
attract offsetting liquidity. If at the end of such extension, Market
Orders still cannot be satisfied within price collar thresholds or if
the reopening auction would be priced outside of the applicable price
collar thresholds, the Primary Listing Exchange would extend the
Trading Pause an additional five minutes, which the Exchange believes
would further protect investors and the public interest by reducing the
potential for significant price disparity in post-auction trading,
which could otherwise trigger another Trading Pause. With each such
extension, the Exchange believes that widening the price collar
threshold on the side of the market on which there is buying or selling
pressure would remove impediments to and perfect the mechanism of a
free and open market and a national market system because it would
provide additional time to attract offsetting interest while at the
same time addressing that an imbalance may not be resolved within the
prior Auction Collars.
    With respect to price collar thresholds, the Exchange believes that
using the price of the limit state that preceded the Trading Pause,
i.e., either the Lower or Upper Price Band price, would better reflect
the most recent price of the security and therefore should be used as
the reference price for determining the Auction Collars for such
Trading Halt Auction. The Exchange believes that widening Auction
Collars only in the direction of the imbalance would address issues
relating to the concept of mean reversion, which would protect
investors and the public interest by reducing the potential for wide
price swings following a Trading Halt Auction.
    The Exchange believes that applying the proposed changes to its
Trading Halt Auctions not only following a Trading Pause, but also
following a MWCB Halt or regulatory halt, would remove impediments to
and perfect the mechanism of a free and open market and a national
market system because it would promote consistency in how the Exchange
conducts its Trading Halt Auctions, thus reducing complexity in the
marketplace.
    The Exchange believes that precluding ETP Holders from requesting a
review of a Trading Halt Auction as a clearly erroneous execution would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because the proposed new procedures
for reopening trading following a Trading Pause would reduce the
possibility that an order(s) from an ETP Holder(s) caused a Trading
Halt Auction to be clearly erroneous. Specifically, the Exchange
believes that the proposed standardized procedures for reopening
trading following a Trading Pause incorporates a methodology that
allows for widened collars, which may result in a reopening price away
from prior trading prices, but which reopening price would be a result
of a measured and transparent process that eliminates the potential
that such trade would be considered erroneous.
    The Exchange believes that the proposed amendments to Rule 7.11
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because the proposed changes
would remove obsolete rule text and amend the remaining rule text to
conform to the proposed amendments to the Plan, as described above.
    The Exchange believes that the proposed rule change to add an IO
Order for Trading Halt Auctions would further remove impediments to and
perfect the mechanism of a free and open market and a national market
system because such order type is designed to attract offsetting
interest that would participate in the Trading Halt Auction. The
Exchange believes that offering such order type would provide an option
for market participants that are willing to participate in an auction
to offset an imbalance, but do not want such orders to participate in
continuous trading. The proposed order type is based in part on the CO
Order offered by the NYSE, with the main difference being that the IO
Order would be offered for the Trading Halt Auction only, whereas the
CO Order on NYSE is available for the closing transaction only.
However, in function, the two orders are designed with the same
purpose--to reduce the imbalance to assist in achieving pricing
equilibrium.
    The Exchange further believes that the proposed rule change to add
a Trading Halt Auction Imbalance Freeze would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because it

would provide market participants with a brief period to assess the
imbalance going into a Trading Halt Auction. During such time, order
entry and cancellation would be revised in a manner designed to reduce
the last-published imbalance. The proposed mechanism for the Trading
Halt Auction Imbalance Freeze is not novel, as it is based in part on
the existing Core Open Auction Imbalance Freeze, i.e., the length of
the Auction Imbalance Freeze, and the Closing Auction Imbalance Freeze,
i.e., how new orders and order instructions would be processed, with a
proposed substantive difference to address how the proposed new IO
Order type would be processed during the Auction Imbalance Freeze.
    The Exchange believes that the proposed manner of how it would
process Limit Orders that do not participate in a Trading Halt Auction,
but have a limit price within the applicable Auction Collars, in that
such orders would roll into continuous trading, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system. Such Limit Orders likely would not impact the
pricing of post-auction trading and trigger another Trading Pause
because the limit price of such orders would be within the same price
range that trading would otherwise be permitted.
    Finally, the Exchange believes that the proposed amendments to
enhance the Auction Imbalance Information to add the Auction Reference
Price, the Auction Collar, the Book Clearing Price, the Far Clearing
Price, the Imbalance Freeze Indicator, and the Auction Indicator would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because they are designed to
promote additional transparency regarding the Exchange's auctions by
providing additional detail regarding what Auction Reference Price
would be used in an auction, the Auction Collars applicable to such
auction, additional information about potential pricing for such
auction, and the status of the applicable auction.

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 Exchange believes that
the proposed rule change is not designed to address any competitive
issues, but rather, to achieve the Participants' goal of more
standardized processes across Primary Listing Exchanges in reopening
trading following a Trading Pause, and facilitates the production of an
equilibrium Reopening Price by centralizing the reopening process
through the Primary Listing Exchange, which would also improve the
accuracy of the reopening Price Bands. The Exchange believes that the
proposed rule change reduces the burden on competition for market
participants because it promotes a transparent and consistent process
for reopening trading following a Trading Pause regardless of where a
security may be listed. The Exchange further believes that the proposed
rule change would not impose any burden on competition because they are
designed to increase transparency regarding the Exchange's Trading Halt
Auction process while at the same time increasing the ability for
offsetting interest to participate in an auction, which would assist in
achieving pricing equilibrium for such an auction.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2016-130 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2016-130. 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-2016-130 and should
be submitted on or before November 14, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-25572 Filed 10-21-16; 8:45 am]
 BILLING CODE 8011-01-P