[Federal Register Volume 81, Number 232 (Friday, December 2, 2016)]
[Notices]
[Pages 87114-87119]
[FR Doc No: 2016-28937]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79410; File No. 4-631]

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

November 28, 2016.

I. Introduction

    On September 19, 2016, NYSE Group, Inc., on behalf of the following
parties to the National Market System Plan to Address Extraordinary
Market Volatility (``the Plan''): \1\ Bats BZX Exchange, Inc., Bats BYX
Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc.,
Chicago Stock Exchange, Inc., the Financial Industry Regulatory
Authority, Inc. (``FINRA''), Investors Exchange LLC, National Stock
Exchange, Inc., NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock
Market LLC (``Nasdaq''), New York Stock Exchange LLC (``NYSE''), NYSE
Arca, Inc., and NYSE MKT LLC (collectively, the ``Participants'') filed
with the Securities and Exchange Commission (``Commission'') pursuant
to Section 11A(a)(3) of the Securities Exchange Act of 1934 (``Exchange
Act'') \2\ and Rule 608 thereunder,\3\ a proposal to amend the Plan
(``Twelfth Amendment'').\4\ The proposal reflects changes unanimously
approved by the Participants. The Twelfth Amendment proposes to provide
that a Trading Pause \5\ will continue until the Primary Listing
Exchange has reopened trading using its established reopening
procedures, even if such reopening is more than 10 minutes after the
beginning of a Trading Pause, and to require that trading centers may
not resume trading in an NMS Stock following a Trading Pause without
Price Bands in such NMS Stock, as discussed below. A copy of the Plan,
as proposed to be amended is attached as Exhibit A hereto. The
Commission is publishing this notice to solicit comments from
interested persons on the Twelfth Amendment.\6\
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    \1\ On May 31, 2012, the Commission approved the Plan, as
modified by Amendment No. 1. See Securities Exchange Act Release No.
67091, 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Plan Approval
Order''). On February 20, 2013, the Commission noticed for immediate
effectiveness the Second Amendment to the Plan. See Securities
Exchange Act Release No. 68953, 78 FR 13113 (February 26, 2013). On
April 3, 2013, the Commission approved the Third Amendment to the
Plan. See Securities Exchange Act Release No. 69287, 78 FR 21483
(April 10, 2013). On August 27, 2013, the Commission noticed for
immediate effectiveness the Fourth Amendment to the Plan. See
Securities Exchange Act Release No. 70273, 78 FR 54321 (September 3,
2013). On September 26, 2013, the Commission approved the Fifth
Amendment to the Plan. See Securities Exchange Act Release No.
70530, 78 FR 60937 (October 2, 2013). On January 7, 2014, the
Commission noticed for immediate effectiveness the Sixth Amendment
to the Plan. See Securities Exchange Act Release No. 71247, 79 FR
2204 (January 13, 2014). On April 3, 2014, the Commission approved
the Seventh Amendment to the Plan. See Securities Exchange Act
Release No. 71851, 79 FR 19687 (April 9, 2014). On February 19,
2015, the Commission approved the Eight Amendment to the Plan. See
Securities Exchange Act Release No. 74323, 80 FR 10169 (February 25,
2015). On October 22, 2015, the Commission approved the Ninth
Amendment to the Plan. See Securities Exchange Act Release No.
76244, 80 FR 66099 (October 28, 2015). On April 21, 2016, the
Commission approved the Tenth Amendment to the Plan. See Securities
Exchange Act Release No. 77679, 81 FR 24908 (April 27, 2016). On
August 26, 2016, the Commission noticed for immediate effectiveness
the Eleventh Amendment to the Plan. See Securities Exchange Act
Release No. 78703, 81 FR 60397 (September 1, 2016).
    \2\ 15 U.S.C. 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Elizabeth King, General Counsel and
Corporate Secretary, NYSE, to Brent Fields, Secretary, Commission,
dated September 16, 2016. (``Transmittal Letter'').
    \5\ Unless otherwise specified, the terms used herein have the
same meaning as set forth in the Plan.
    \6\ 17 CFR 242.608.
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II.

III. Description of the Plan

    Set forth in this Section II is the statement of the purpose and
summary of the Twelfth Amendment, along with the information required
by Rule 608(a)(4) and (5) under the Exchange Act,\7\ prepared and
submitted by the Participants to the Commission.\8\
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    \7\ See 17 CFR 242.608(a)(4) and (a)(5).
    \8\ See Transmittal Letter, supra note 4.
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A. Statement of Purpose and Summary of the Plan Amendment

    The Participants filed the Plan on April 5, 2011, to create a
market-wide Limit Up-Limit Down (``LULD'') mechanism intended to
address extraordinary market volatility in NMS Stocks, as defined in
Rule 600(b)(47) of Regulation NMS under the Exchange Act. The Plan sets
forth procedures that provide for market-wide LULD requirements that
prevent trades in individual NMS Stocks from occurring outside of the
specified Price Bands. The LULD requirements are coupled with Trading
Pauses, as defined in Section I(Y) of the Plan, to accommodate more
fundamental price moves. In particular, the Participants adopted this
Plan to address the type of sudden price movements that the market
experienced on the afternoon of May 6, 2010.
    As set forth in more detail in the Plan, all trading centers in NMS
Stocks, including both those operated by Participants and those
operated by members of Participants, shall establish, maintain, and
enforce written policies and procedures that are reasonably designed to
comply with the requirements specified in the Plan. More specifically,
the Participants will cause and enable the single plan processor
responsible for consolidation of information for an NMS Stock pursuant
to Rule 603(b) of Regulation NMS under the Exchange Act to calculate
and disseminate a Lower Price Band and Upper Price Band, as provided
for in Section V of the Plan. Section VI of the Plan sets forth the
LULD requirements of the Plan, and in particular, that all trading
centers in NMS Stocks, including both those operated by Participants
and those operated by members of Participants, shall establish,
maintain, and enforce written policies and procedures that are
reasonably designed to prevent trades at prices that are below the
Lower Price Band or above the Upper Price Band for an NMS Stock,
consistent with the Plan.
    With respect to Trading Pauses, Section VII(A)(1) of the Plan
provides that if trading for an NMS Stock does not exit a Limit State
within 15 seconds of entry during Regular Trading Hours, then the
Primary Listing Exchange shall declare a Trading Pause for such NMS
Stock and shall notify the Processor. Section VII(B)(1) of the Plan
further provides that five minutes after declaring a Trading Pause for
an NMS Stock, and if the Primary Listing Exchange has not declared a
Regulatory Halt, the Primary Listing Exchange shall attempt to reopen
trading using its established procedures and the Trading Pause shall
end when the Primary Listing Exchange reports a Reopening Price.
However, Section VII(B)(3) of the Plan currently provides that if the
Primary Listing Exchange does not report a Reopening Price within ten
minutes after the declaration of a Trading Pause in an NMS Stock, and
has not declared a Regulatory Halt, all trading centers may begin
trading the NMS Stock.
Overview of Proposed Amendments
    The Participants propose to amend the Plan to provide that a
Trading Pause

will continue until the Primary Listing Exchange has reopened trading
using its established reopening procedures and reports a Reopening
Price. The Participants further propose to eliminate the current
allowance for a trading center to resume trading in an NMS Stock
following a Trading Pause if the Primary Listing Exchange has not
reported a Reopening Price within ten minutes after the declaration of
a Trading Pause and has not declared a Regulatory Halt. In addition, to
preclude potential scenarios when trading may resume without Price
Bands, the Participants propose 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 in which there is no Reopening Price from the
Primary Listing Exchange to use to calculate Price Bands, the
Participants propose 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 in such a scenario or if the Primary Listing
Exchange reopens trading on a zero bid or zero offer, or both.
    In conjunction with filing this amendment to the Plan, each Primary
Listing Exchange will file proposed rule changes with the Commission
under Section 19(b) of the Exchange Act to amend their respective rules
for automated reopenings following a Trading Pause consistent with a
standardized approach agreed to by Participants that would allow for
extensions of a Trading Pause if equilibrium cannot be met for a
Reopening Price within specified parameters.\9\ In addition, the
Participants believe that the proposed amendments to the Plan, together
with the proposed standardized approach to reopening trading following
a Trading Pause, reduce the potential that an order or orders entered
by a member of a Primary Listing Exchange would cause a reopening
auction to execute at a clearly erroneous price. Accordingly, the
Primary Listing Exchanges will file proposed rule changes with the
Commission under Section 19(b) of the Exchange Act to amend their
respective rules to preclude members from requesting review of a
reopening auction as a clearly erroneous execution.\10\
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    \9\ The Commission notes that the Primary Listing Exchanges have
filed associated proposed rule changes. See Securities Exchange Act
Release Nos. 79162 (October 26, 2016), 81 FR 75875 (November 1,
2016) (SR-BatsBZX-2016-61); 79158 (October 26, 2016), 81 FR 75879
(November 1, 2016) (SR-NASDAQ-2016-131); and 79107 (October 18,
2016), 81 FR 73159 (October 24, 2016) (File No. SR-NYSEArca-2016-
130).
    \10\ See supra note 9.
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Proposed Amendments to the Plan
    To effect the proposed changes, the Participants propose the
following amendments to the Plan:
    First, the Participants propose to delete current Section VII(B)(3)
of the Plan, which, as described above, currently provides that all
trading centers may begin trading an NMS Stock if the Primary Listing
Exchange does not report a Reopening Price within ten minutes after the
declaration of a Trading Pause and has not declared a Regulatory Halt.
By deleting current Section VII(B)(3) of the Plan, trading centers
would no longer be permitted to begin trading an NMS Stock ten minutes
after declaration of a Trading Pause in an NMS Stock if the Primary
Listing Exchange has not either reported a Reopening Price or declared
a Regulatory Halt.
    The Participants propose to replace Section VII(B)(3) of the Plan
with new text that would provide that trading centers may not resume
trading in an NMS Stock following a Trading Pause without Price Bands
in such NMS Stock. This amendment would thus require that a trading
center may resume trading only if there are Price Bands. This
amendment, together with the requirement that the Trading Pause would
not end until the Primary Listing Exchange reports a Reopening Price,
would ensure that any trading based on Price Bands must be based on the
Reopening Price of the Primary Listing Exchange as the Reference Price
for such Price Bands.
    Second, the Participants propose to amend the Plan to provide
procedures for situations in which the Primary Listing Exchange is
unable to reopen an NMS Stock due to a systems or technology issue. As
described above, the Participants propose to amend the Plan to require
that trading centers must wait to resume trading in an NMS Stock
following a Trading Pause until the Primary Listing Exchange
disseminates a Reopening Price, at which point Price Bands will be
available. The Participants believe that the Plan should include
provisions to address a circumstance in which a Primary Listing
Exchange is unable to reopen an NMS Stock due to a systems or
technology issue. As proposed, in such case, trading centers may resume
trading an NMS Stock, but only if (i) the Primary Listing Exchange
notifies the Processor that it is unable to reopen trading due to a
systems or technology issue and (ii) the Processor has disseminated
Price Bands based on a Reference Price.
    To reflect this change, the Participants propose to amend Section
VII(B)(2) of the Plan, which currently provides that the Primary
Listing Exchange shall notify the Processor if it is unable to reopen
trading in an NMS Stock for any reason other than a significant order
imbalance and if it has not declared a Regulatory Halt. This section
further provides that the Processor shall disseminate this information
to the public, and all trading centers may begin trading the NMS Stock
at this time. The Participants propose to amend this Section to be
clear that the only time a trading center may resume trading in an NMS
Stock in the absence of a Reopening Price from the Primary Listing
Exchange is if the Primary Listing Exchange notifies the Processor that
it is unable to reopen trading in an NMS Stock due to a systems or
technology issue. The Participants believe that if a Primary Listing
Exchange is unable to reopen trading due to a systems or technology
issue, trading should be permitted to resume in that NMS Stock.
    The Participants also propose to amend the last sentence of Section
VII(B)(2) of the Plan to delete the phrase, ``and all trading centers
may begin trading the NMS Stock at this time'' so that the sentence
provides instead that ``The Processor shall disseminate this
information to the public.'' The Participants believe that this
proposed amendment clarifies that if a Primary Listing Exchange
notifies the Processor that it is unable to reopen trading due to a
systems or technology issue, the Processor would disseminate that
information to the public.
    Third, to clarify how Price Bands may be determined, the
Participants propose to amend Section V(A)(1) of the Plan to add a new
sentence before the last sentence of that section that would address
how a trading center may calculate and apply Price Bands that are the
same as the Price Bands that would have been disseminated by the
Processor before the trading center receiving such Price Bands from the
Processor (``Synthetic Price Bands''). Currently, the first sentence of
Section V(A)(1) provides that the Processor shall calculate and
disseminate Price Bands for each NMS Stock to the public. However,
there are limited circumstances currently in which a trading center may
resume trading using Synthetic Price Bands calculated by the trading
center, rather than using Price Bands received from the Processor. For

example, in 2016, Primary Listing Exchanges implemented procedures to
calculate and apply Synthetic Price Bands based on the Opening or
Reopening Price sent to the Processor until Price Bands are received
from the Processor. The proposed amendment would clarify the Plan and
make clear that any trading center could calculate and apply Synthetic
Price Bands.
    Specifically, as proposed, if the Processor has not yet
disseminated Price Bands, but a Reference Price is available, a trading
center may calculate and apply Synthetic Price Bands based on the same
Reference Price that the Processor would use for calculating such Price
Bands until such trading center receives Price Bands from the
Processor. The Participants believe that this proposed amendment would
clarify that before Price Bands have been received from the Processor,
a trading center may calculate and apply its own Synthetic Price Bands.
An exception to a trading center trading based on Synthetic Price Bands
would be, as described above in proposed amendments to Section
VII(B)(3) [sic],\11\ when the Primary Listing Exchange is unable to
reopen due to a systems or technology issue. In that scenario, all
trading centers must wait for the Processor to disseminate Price Bands
before trading may resume.
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    \11\ The Commission notes that the scenario where the Primary
Listing Exchange is unable to reopen due to a systems or technology
issue is discussed in the proposed amendment to Section VII(B)(2).
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    Fourth, the Participants propose to amend Section V(C), which
describes how the Reference Price will be determined following a
reopening. Currently, Section V(C)(1) specifies that the next Reference
Price following a Trading Pause will be the Reopening Price on the
Primary Listing Exchange if such Reopening Price occurs within ten
minutes after the beginning of the Trading Pause. Because, as described
above, trading centers may not resume trading an NMS Stock if the
Primary Listing Exchange does not disseminate a Reopening Price ten
minutes after the beginning of the Trading Pause, the Participants
propose to amend the first sentence of Section V(C)(1) of the Plan to
delete the phrase ``if such Reopening Price occurs within ten minutes
after the beginning of the Trading Pause.'' The Participants also
propose to delete the penultimate sentence of Section V(C)(1), which
specifies that if the Reopening Price does not occur within ten minutes
after the beginning of the Trading Pause, the first Reference Price
following the Trading Pause shall be equal to the last effective
Reference Price before the Trading Pause. With the proposed amendments
to Section VII(B)(3), this Plan text is no longer necessary.
    Fifth, the Participants propose to amend Section V(C)(1) to specify
how the Reference Price would be determined following a Reopening.
Currently, this Section provides that if the Primary Listing Exchange
has not declared a Regulatory Halt, the next Reference Price shall be
the Reopening Price on the Primary Listing Exchange. The Participants
propose to close a gap in the current Plan that would allow for trading
to resume without any Price Bands. Specifically, if a Primary Listing
Exchange were to resume trading on a quote with either a zero bid or
zero offer, or both, there would be no midpoint to report to the
Processor as a Reopening Price, and therefore the Processor would not
have a first Reference Price from which to calculate Price Bands
following such Trading Pause. Currently, in such case, the Processor
does not calculate and disseminate Price Bands until five minutes after
the conclusion of the Trading Pause or if a trade occurs. Thus, the
first trade following the Trading Pause, if effected within five
minutes following the end of the Trading Pause, would not be subject to
Price Bands.
    The Participants propose to amend the first sentence of Section
V(C)(1) to provide that use of the Reopening Price from a Primary
Listing Exchange as the first Reference Price is only when there is a
transaction or quotation that does not include a zero bid or a zero
offer from which to derive a midpoint. As with the current Plan,
subsequent Reference Prices shall be determined in the manner
prescribed for normal openings, as specified in Section V(B)(1) of the
Plan.
    To close the gap described above, the Participants also propose to
specify what the first Reference Price would be if either the Primary
Listing Exchange notifies the Processor that it is unable to reopen an
NMS Stock due to a systems or technology issue or the Primary Listing
Exchange reopens trading with a quotation that has a zero bid or offer,
or both. For these circumstances, the Participants propose to add a new
sentence to Section V(C)(1) of the Plan that would provide that the
next Reference Price would be the last effective Price Band that was in
a Limit State before the Trading Pause. For example, if the Limit State
that triggered a Trading Pause was the Lower Price Band price and the
Primary Listing Exchange is unable to reopen to a systems or technology
issue or the reopening quotation has a zero bid or zero offer, or both,
the first Reference Price that the Processor would use to calculate
Price Bands would be the last Lower Price Band. The Participants
believe that in such circumstances, using the last effective Limit
State that triggered the Trading Pause would be a closer approximation
of the most recent trading in that NMS Stock. By using that Limit State
Price as a Reference Price, the next calculated Price Bands would take
into consideration the directional movement of the trading in that NMS
Stock because it would allow for additional trading in the direction of
the last Limit State. As with the current Plan, any subsequent
Reference Prices shall be calculated as specified in Section V(A) of
the Plan.
    Sixth, the Participants propose to make a related change to Section
V(A)(1) of the Plan regarding how Price Bands are calculated. The last
sentence of this section currently provides that if a Reopening Price
does not occur within ten minutes after the beginning of a Trading
Pause, the Price Band, for the first 30 seconds following reopening
after that Trading Pause, shall be calculated by applying triple the
Percentage Parameters set forth in Appendix A. Because the Plan would
provide for a resumption of trading in the absence of a Reopening Price
only if the Primary Listing Exchange is unable to reopen due to a
systems or technology issue, the Participants propose to revise this
Plan text to reflect this proposed amendment. As proposed, this
sentence would instead provide that if under Section VII(B)(2), the
Primary Listing Exchange notifies the Processor that it is unable to
reopen an NMS Stock due to a systems or technology issue and it has not
declared a Regulatory Halt, the Processor will calculate and
disseminate Price Bands by applying triple the Percentage Parameters
set forth in Appendix A for the first 30 seconds such Price Bands are
disseminated.\12\
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    \12\ The Participants have convened a working group to study how
NMS Stocks are tiered under the Plan, and as a related matter, the
Percentage Parameters assigned to a tier. The Participants are not
proposing at this time to revise any of the Percentage Parameters or
tier determinations.
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    Seventh, the Participants propose to amend Section VII(B)(4) of the
Plan, which currently provides that when trading begins after a Trading
Pause, the Processor shall update the Price Bands as set forth in
Section V(C)(1) of the Plan. Because, as described above, the
Participants propose to amend the Plan to require that trading may not
resume following a Trading Pause without Price Bands, the Participants
propose to amend Section VII(B)(4) to provide the

requirement for the Processor to update such Price Bands. As proposed,
this section would provide that the Processor would update the Price
Bands as set forth in Section V(C)(1)-(2) of the Plan after receiving
notification from the Primary Listing Exchange of a Reopening Price
following a Trading Pause (or a resume message in the case of a
reopening quote that has a zero bid or zero offer, or both), or that it
is unable to reopen trading following a Trading Pause due to a systems
or technology issue, provided that if the Primary Listing Exchange is
unable to reopen due to a systems or technology issue, the update to
the Price Bands would be no earlier than ten minutes after the
beginning of the Trading Pause. This proposed amendment would make
clear that the Participants will require the Processor to calculate and
publish Price Bands in all potential scenarios following a Trading
Pause. In addition, the proposed amendment would maintain the existing
requirement that if a Primary Listing Exchange cannot reopen due to a
systems or technology issue, trading would not resume until ten minutes
after the beginning of the Trading Pause.
    Eighth, the Participants propose to amend Section VII(C)(1) of the
Plan, which currently provides that if a Trading Pause for an NMS Stock
is declared in the last ten minutes of trading before the end of
Regular Trading Hours, the Primary Listing Exchange shall not reopen
trading and shall attempt to execute a closing transaction using its
established closing procedures. The Participants propose to amend this
text 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 shall attempt to execute a closing
transaction using its established closing procedures. With the proposed
change to require all trading centers to wait to resume trading in an
NMS Stock subject to a Trading Pause until the Primary Listing Exchange
has reported a Reopening Price, it is possible that a Trading Pause
that was declared before the last ten minutes of trading before the end
of Regular Trading Hours could be extended until after the last ten
minutes of trading before the end of Regular Trading Hours. The
Participants believe that in such case, trading in such NMS Stock
should not resume, and instead the Primary Listing Exchange should
attempt to execute a closing transaction using established closing
procedures.
    Ninth, the Participants propose to eliminate Trading Pauses
following a Straddle State. Under Section VII(A)(2) of the Plan, a
Primary Listing Exchange may declare a Trading Pause for an NMS Stock
when an NMS Stock is in a Straddle State. A Straddle State is when the
National Best Bid (Offer) is below (above) the Lower (Upper) Price Band
and the NMS Stock is not in a Limit State, and trading in that NMS
Stock deviates from normal trading characteristics such that declaring
a Trading Pause would support the Plan's goals to address extraordinary
market volatility. Accordingly, under the Plan, declaring a Trading
Pause is in the discretion of the Primary Listing Exchange for that NMS
Stock. Since implementation of the Plan, there have not been any
Trading Pauses declared following a Straddle State. The Participants
therefore propose to eliminate Trading Pauses following a Straddle
State as unnecessary.\13\ In addition, the Participants believe that
eliminating the ability for a Primary Listing Exchange to declare a
Trading Pause following a Straddle State would promote transparency
regarding the operation of the Plan as it would remove a discretionary
circumstance for declaring a Trading Pause.
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    \13\ Straddle States were discussed in the ``Limit Up--Limit
Down: National Market System Plan Assessment to Address
Extraordinary Market Volatility,'' dated May 28, 2015, which was
prepared for the Limit Up--Limit Down Operating Committee by James
J. Angel, Associate Professor of Finance, Georgetown University and
which was provided to the Commission (``Angel Report''). A copy of
the Angel Report is available here: https://www.sec.gov/comments/4-631/4631-39.pdf. As noted in the Angel Report, the majority of
Straddle States occurred in a limited number of low-liquidity NMS
Stocks. They are often due to a lack of liquidity, and are resolved
quickly. The Angel Report opined that a Trading Pause following the
type of trading circumstances that leads to a Straddle State is
unlikely to prevent any extreme trades or be followed by a re-
opening cross. There have not been any Trading Pauses following a
Straddle State since the publication of the Angel Report.
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    To effect this change, the Participants propose to (i) delete
Section I(W), which defines the term ``Straddle State'' and renumber
the definitions following that definition accordingly; (ii) delete
section VII(A)(2) of the Plan, which describes how Trading Pauses
following a Straddle State may be declared, and renumber current
Section VII(A)(3) as new Section VII(A)(2); and (iii) delete the text
relating to gathering raw data relating to Straddle States, as
specified in Section II(A) of Appendix B.
    Tenth, the Participants propose a non-substantive amendment to
delete Sections VIII(A)-(C) of the Plan. These provisions currently set
forth the schedule for implementing the Plan across all NMS Stocks.
Because the Plan has been implemented across all NMS Stocks, the
Participants believe it is no longer necessary to include this text in
the Plan. As amended, Section VIII would state the initial date of Plan
operations and the pilot end date.
    Finally, the Participants propose non-substantive amendments to
Section II(A) of the Plan (List of Parties) and Section X of the Plan
(Counterparts and Signatures) to update the names of the exchanges
owned by Bats Global Markets and to formally add the IEX to the list of
signatories to the Plan.\14\
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    \14\ As provided for in Section II(C) of the Plan, IEX became a
Participant in the Plan effective August 11, 2016.
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* * * * *
    The Participants believe that the proposed amendments to the Plan
would be necessary or appropriate in the public interest for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to and perfect the mechanisms of a
national market system, or otherwise in furtherance of the purposes of
the Act.
    Specifically, these proposed amendments to the Plan are designed 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. The proposed Plan amendments also support this
initiative by providing greater clarity regarding how the Reference
Price and Price Bands following a Trading Pause would be determined in
all circumstances, including if the Primary Listing Exchange is unable
to conduct a reopening due to a systems or technology issue or if the
reopening quote is a zero bid or a zero offer, or both.

B. Governing or Constituent Documents

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

C. Implementation of Plan

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

D. Development and Implementation Phases

    The Plan was initially implemented as a one-year pilot program in
two Phases, consistent with Section VIII of the Plan: Phase I of Plan
implementation began on April 8, 2013 and was completed on May 3, 2013.
Implementation of Phase II of the Plan began on August 5, 2013 and was
completed on February 24, 2014. Pursuant to the Ninth Amendment, the
Participants extended the Pilot until April 22, 2016.\15\ Pursuant to
the Tenth Amendment, the pilot period of the Plan was extended until
April 21, 2017 and the proposed modifications described in the Tenth
Amendment were implemented three months after SEC approval of Amendment
No. 10.
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    \15\ See supra note 1.
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    The Participants propose to implement this amendment to the Plan no
later than six months after approval of this amendment.

E. Analysis of Impact on Competition

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

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

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

G. Approval of Amendment of the Plan

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

H. Terms and Conditions of Access

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

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

    Not applicable.

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    Section III(C) of the Plan provides that each Participant shall
designate an individual to represent the Participant as a member of an
Operating Committee. No later than the initial date of the Plan, the
Operating Committee shall designate one member of the Operating
Committee to act as the Chair of the Operating Committee. Any
recommendation for an amendment to the Plan from the Operating
Committee that receives an affirmative vote of at least two-thirds of
the Participants, but is less than unanimous, shall be submitted to the
Commission as a request for an amendment to the Plan initiated by the
Commission under Rule 608.
    On September 13, 2016, the Operating Committee, duly constituted
and chaired by Mr. Paul Roland, Nasdaq, met and voted unanimously to
amend the Plan as set forth herein in accordance with Section III(C) of
the Plan. The Plan Advisory Committee was notified in connection with
the Twelfth Amendment.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the amendment is
consistent with the Exchange Act. The Commission encourages commenters
to explain how data analysis, including prior Participant submitted
data analysis on reopenings and Straddle States, informs their
comments.
    In addition, the Commission requests comment on the Participants'
proposal to remove references to Straddle States in the Plan. To effect
this change, the Participants propose to: (i) Delete the definition of
the term ``Straddle State'' in Section I(A)(W) of the Plan; (ii) delete
section VII(A)(2) of the Plan, which provides that the Primary Listing
Exchanges may declare a Trading Pause following a Straddle State and
requires the Primary Listing Exchanges to develop policies and
procedures for declaring a Trading Pause and notify the Processor in
such circumstances; and (iii) remove the requirement to gather and
provide to the Commission raw data relating to Straddle States as
specified in Section II(A) of Appendix B.
    The Commission notes that the provisions related to Straddle States
were added to the Plan in response to concerns that a stock could
remain in a Straddle State for an indefinite period of time.\16\ In the
Plan Approval Order, the Commission observed that the ability of a
Primary Listing Exchange to declare a Trading Pause in response to a
Straddle State should help to ensure that the market for a stock would
not remain impaired for an indefinite period of time, while also
providing the Primary Listing Exchange with the discretion to determine
whether such impairment is inconsistent with the stock's normal trading
characteristics.\17\
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    \16\ See Plan Approval Order, supra note 1, at 33503.
    \17\ See id., at 33509.
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    In their letter to the Commission regarding Amendment 12, the
Participants noted that, since implementation of the Plan, the Primary
Listing Exchanges have not exercised discretion to declare a Trading
Pause in response to a Straddle State.\18\ The Participants further
noted that Straddle State data reported in the Angel Report \19\ showed
that there were approximately 4.8 million Straddle States during the
sample period and that over three quarters of Straddle States
disappeared within one second. The Angel Report also showed that
approximately 110,000 Straddle States lasted over fifteen seconds.
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    \18\ See Transmittal Letter, supra note 4.
    \19\ See supra note 13.
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    Commission staff has also conducted an analysis of Straddle States
under the Plan, covering the period from May 12, 2014 to August 29,
2014, and found that most Straddle States occurred in Tier 2
securities.\20\ Of the 2,073,497 Straddle States examined by Commission
staff that occurred in Tier 2 securities, the vast majority of Straddle
States lasted only five minutes.\21\ However, more than 4,000 Straddle
States lasted between five and 30 minutes, while more than 4,000
Straddle States lasted longer than 30 minutes.\22\
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    \20\ The analysis found that over 99.9% of Straddle States
occurred in Tier 2 securities.
    \21\ For this part of the analysis, the Commission staff used
data on Straddle States, which was provided to the Commission by the
Participants as described in Appendix B of the Plan, to examine 6711
Tier 2 securities over a period of 78 trading days.
    \22\ Notably, this analysis was performed on a time period
before the adoption of Amendment 10, which changed how opening
reference prices are calculated if there is no trading in the
opening auction. As such, it is possible the longer Straddle States
observed in the analysis resulted from an opening reference price
that was based on an opening auction with no trades and in which the
midpoint of the opening bid and ask quotes significantly deviated
from the previous day's closing price. However, information
contained in the Angel Report suggests otherwise. See Angel Report
supra note 13. Table 25 in the Angel Report shows that when all
opening reference prices are included, 1.80% of all Straddle States
last longer than 30 seconds. In contrast, when days with what Angel
refers to as ``bad'' opening reference points are excluded, Table 27
in the Angel Report finds that 8.34% of the Straddle States last
longer than 30 seconds. Id. If a ``bad'' opening reference price
contributed to longer Straddle States, the percentage of Straddle
States lasting longer than 30 seconds would likely decrease once
``bad'' opening reference prices are excluded, not increase.

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    Accordingly, the Commission requests comment on whether the
concerns outlined in the Plan Approval Order about stocks remaining in
Straddle States for indefinite periods of time continues to be a viable
concern, and how the data analysis discussed above informs those
concerns. In this regard, should the Plan continue to provide the
discretion for Primary Listing Markets to declare a Trading Pause when
an NMS Stock is in a Straddle State? Are there other alternatives to
declaring a Trading Pause to address concerns about NMS Stocks
remaining in Straddle States for indefinite periods of time? Should the
Plan continue to provide for the collection of data related to Straddle
States or should the Plan contain any mechanism to monitor Straddle
States? Please explain.
    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 4-631 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-631. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan amendment that are filed
with the Commission, and all written communications relating to the
amendment between the Commission and any person, other than those that
may be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the Participants' offices. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number 4-631 and should be submitted on or before
December 23, 2016.

    By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28937 Filed 12-1-16; 8:45 am]
 BILLING CODE 8011-01-P