[Federal Register Volume 83, Number 151 (Monday, August 6, 2018)]
[Notices]
[Pages 38434-38441]
[FR Doc No: 2018-16724]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83753; File No. SR-FINRA-2018-015]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Granting Approval of a Proposed Rule Change To
Amend FINRA Rule 6433 To Adopt the OTC Quotation Tier Pilot as
Permanent

July 31, 2018.

I. Introduction

    On April 20, 2018, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend FINRA Rule 6433 to adopt as permanent the
minimum quotation sizes that are applicable to quotations in over-the-
counter (``OTC'') equity securities and that were implemented on a
pilot basis. The proposed rule change was published for comment in the
Federal Register on May 7, 2018.\3\ The Commission received one comment
letter on the proposed rule change.\4\ On June 13, 2018, pursuant to
Section 19(b)(2) of the Act,\5\ the Commission designated a longer
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\6\ In a letter dated July 5, 2018,
FINRA responded to the comment letter.\7\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83129 (April 30,
2018), 83 FR 20131 (``Notice'').
    \4\ See Letter from Eugene P. Torpey, Chief Compliance Officer,
Vandham Securities Corp., dated May 10, 2018. Comments on the
proposed rule change are available at https://www.sec.gov/comments/sr-finra-2018-015/finra2018015.htm.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 83422, 83 FR 28483
(June 19, 2018).
    \7\ See Letter from Racquel L. Russell, Associate General
Counsel, FINRA, to Brent J. Fields, Secretary, Commission (``FINRA
Letter''). The FINRA Letter is available at https://www.sec.gov/comments/sr-finra-2018-015/finra2018015-4002848-167246.pdf.

---------------------------------------------------------------------------

    This order approves the proposal.

II. FINRA's Description of the Proposed Rule Change

    FINRA proposes to amend FINRA Rule 6433 (Minimum Quotation Size
Requirements for OTC Equity Securities) to adopt as permanent the
minimum quotation sizes applicable to quotations in OTC equity
securities \8\ that were proposed pursuant to File No. SR-FINRA-2011-
058 \9\ and implemented on a pilot basis on November 12, 2012 (``Tier
Size Pilot'' or ``Pilot''). The Pilot initially was approved for a one-
year term,\10\ has been extended a number of times,\11\ and currently
is scheduled to expire on December 7, 2018.\12\
---------------------------------------------------------------------------

    \8\ An OTC equity security is an equity security that is not an
``NMS Stock'' as defined in Rule 600(b)(47) of Regulation NMS;
provided, however, that the term ``OTC equity security'' shall not
include any Restricted Equity Security. See FINRA Rule 6420(f).
    \9\ See Securities Exchange Act Release No. 65568 (October 14,
2011), 76 FR 65307 (October 20, 2011) (Notice of Filing of File No.
SR-FINRA-2011-058) (``Original Proposal''). Comments on the Original
Proposal are available at https://www.sec.gov/comments/sr-finra-2011-058/finra2011058.shtml.
    \10\ See Securities Exchange Act Release No. 67208 (June 15,
2012), 77 FR 37458 (June 21, 2012) (Notice of Filing of Amendment
No. 2 and Order Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment Nos. 1 and 2, To Amend FINRA Rule
6433 (Minimum Quotation Size Requirements for OTC Equity
Securities)) (``Order Approving Tier Size Pilot'').
    \11\ See Securities Exchange Act Release No. 70839 (November 8,
2013), 78 FR 68893 (November 15, 2013) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change to Extend the Tier
Size Pilot to November 14, 2014; File No. SR-FINRA-2013-049);
Securities Exchange Act Release No. 73299 (October 3, 2014), 79 FR
61120 (October 9, 2014) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Extend the Tier Size
Pilot to February 13, 2015; File No. SR-FINRA-2014-041); Securities
Exchange Act Release No. 74251 (February 11, 2015), 80 FR 8741
(February 18, 2015) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change to Extend the Tier Size Pilot to May 15,
2015; File No. SR-FINRA-2015-002); Securities Exchange Act Release
No. 74927 (May 12, 2015), 80 FR 28327 (May 18, 2015) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Extend the Tier Size Pilot to August 14, 2015; File No. SR-FINRA-
2015-010); Securities Exchange Act Release No. 75639 (August 7,
2015), 80 FR 48615 (August 13, 2015) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Extend the Tier Size
Pilot to December 11, 2015; File No. SR-FINRA-2015-028); Securities
Exchange Act Release No. 76519 (November 24, 2015), 80 FR 75155
(December 1, 2015) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change to Extend the Tier Size Pilot to June 10,
2016; File No. SR-FINRA-2015-051); Securities Exchange Act Release
No. 77923 (May 26, 2016), 81 FR 35432 (June 2, 2016) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Extend the Tier Size Pilot to December 9, 2016; File No. SR-FINRA-
2016-016); Securities Exchange Act Release No. 79401 (November 25,
2016), 81 FR 86762 (December 1, 2016) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change to Extend the Tier
Size Pilot to June 9, 2017; File No. SR-FINRA-2016-044); Securities
Exchange Act Release No. 80727 (May 18, 2017), 82 FR 23953 (May 24,
2017) (Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change to Extend the Tier Size Pilot to December 8, 2017; File
No. SR-FINRA-2017-014); and Securities Exchange Act Release No.
82153 (November 22, 2017), 82 FR 56300 (November 28, 2017) (Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change to
Extend the Tier Size Pilot to June 7, 2018; File No. SR-FINRA-2017-
035)
    \12\ See Securities Exchange Act Release No. 83392 (June 7,
2018), 83 FR 27638 (June 13, 2018) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Extend the Tier Size
Pilot to December 7, 2018; File No. SR-FINRA-2018-022).
---------------------------------------------------------------------------

    According to FINRA, the Pilot tiers are designed to: (1) Simplify
the structure of the minimum quotation sizes for OTC equity securities;
(2) facilitate the display of customer limit orders under FINRA Rule
6460 (Display of Customer Limit Orders) (``limit order display rule'');
and (3) expand the scope of FINRA Rule 6433 to provide for uniform
treatment of the types and sources of quotations that would be subject
to FINRA Rule 6433.\13\ FINRA believes that the Pilot has resulted in
its intended objectives, and particularly notes that the Pilot has
yielded a significant positive result with regard to increased display
of customer limit orders. FINRA states that, at the same time, market
quality measures have been neutral (i.e., unchanged) or slightly
positive (i.e., slightly improved) overall during the Pilot, as
compared to the pre-Pilot period, as discussed more fully below.
Accordingly, FINRA believes that it is appropriate and consistent with
the Act to adopt the Pilot tier sizes on a permanent basis.
---------------------------------------------------------------------------

    \13\ See Order Approving Tier Size Pilot, supra note 10, 77 FR
at 37458.
---------------------------------------------------------------------------

Objectives of the Pilot

    FINRA Rule 6433 sets forth the minimum quotation sizes applicable
to the display of quotations in OTC equity securities on any inter-
dealer quotation system that permits quotation updates on a real-time
basis. FINRA Rule 6433 provides different minimum quotation sizes that
apply depending upon the price level of the bid or offer in the
security.
    Prior to the Pilot, which has been in effect since November 12,
2012,\14\ FINRA Rule 6433 provided for nine tier sizes that applied
only to market makers' proprietary quotes. The pre-Pilot tiers ranged
in price points from $0.00 through $2,500.01, and are shown below in
Table 1.
---------------------------------------------------------------------------

    \14\ See FINRA Regulatory Notice 12-51 (November 2012),
available at: http://www.finra.org/industry/notices/12-51; see also
FINRA Regulatory Notice 12-37 (August 2012), available at: http://www.finra.org/industry/notices/12-37.

                                 Table 1
------------------------------------------------------------------------
                                                           Minimum quote
                  Price (bid or offer)                     size (number
                                                            of shares)
------------------------------------------------------------------------
$0 to $0.50.............................................           5,000
$0.51 to $1.00..........................................           2,500
$1.01 to $10.00.........................................             500
$10.01 to $100.00.......................................             200
$100.01 to $200.00......................................             100
$200.01 to $500.00......................................              25
$500.01 to $1,000.00....................................              10
$1,000.01 to $2,500.00..................................               5
$2,500.01+..............................................               1
------------------------------------------------------------------------

    Under the Pilot, the number of tiers was reduced from nine to six
tiers, and the tiers apply to all quotations displayed by market
makers, whether representing proprietary or customer interest, as well
as quotations displayed by non-market makers (i.e., alternative trading
systems or any other member firm).\15\
---------------------------------------------------------------------------

    \15\ FINRA initially proposed six tiers, some of which differed
from those tiers that ultimately were adopted. However, in response
to comments received, FINRA amended its original filing to increase
the minimum quotation size for most price points between $0.02 and
$1.00. FINRA stated that the amended tiers were intended to
facilitate the display of additional liquidity by market makers. See
Securities Exchange Act Release No. 66819 (April 17, 2012), 77 FR
23770 (April 20, 2012) (Amendment No. 1 to File No. SR-FINRA-2011-
058); see also Original Proposal, supra note 9.
---------------------------------------------------------------------------

    In addition, for price points between $1.00 and $174.99, the Pilot
established a minimum quotation size of 100 shares, which is comparable
to the minimums generally applicable to quotations in securities on
equity exchanges. The Pilot also revised the smallest price point from
$0.00 to $0.0001 to conform to the minimum quotation increments under
FINRA Rule 6434 (Minimum Pricing Increment for OTC Equity
Securities).\16\ The Pilot tiers that ultimately were adopted are shown
below in Table 2.
---------------------------------------------------------------------------

    \16\ FINRA Rule 6434, among other things, prohibits members from
displaying a bid or offer in an OTC equity security in an increment
smaller than $0.01 if the bid or offer is priced $1.00 or greater
per share, or in an increment smaller than $0.0001 if the bid or
offer is priced below $1.00.

                                 Table 2
------------------------------------------------------------------------
                                                           Minimum quote
                  Price (bid or offer)                     size (number
                                                            of shares)
------------------------------------------------------------------------
$0.0001 to $0.0999......................................          10,000
$0.10 to $0.1999........................................           5,000
$0.20 to $0.5099........................................           2,500

$0.51 to $0.9999........................................           1,000
$1.00 to $174.99........................................             100
$175.00+................................................               1
------------------------------------------------------------------------

    FINRA states that the Pilot was designed to facilitate the display
of customer limit orders under FINRA's limit order display rule, which
generally requires that OTC market makers fully display better-priced
customer limit orders (or same-priced customer limit orders that are at
the best bid or offer and that increase the OTC market maker's size by
more than a de minimis amount).\17\ Pursuant to FINRA's limit order
display rule, OTC market makers are not required to display a customer
limit order on an inter-dealer quotation system unless doing so would
comply with the minimum quotation size applicable to the price of the
quotation under FINRA Rule 6433. Therefore, although a customer limit
order otherwise would have been required to be displayed under the
limit order display rule--for example, because it improved price or the
size (more than a de minimis amount)--if the size of the order were
less than the minimum quotation size prescribed by FINRA Rule 6433, the
member would not be required to display the order. Thus, FINRA believed
that the revisions implemented by the Pilot would improve the overall
display of customer limit orders.
---------------------------------------------------------------------------

    \17\ See FINRA Rule 6460 (Display of Customer Limit Orders).
---------------------------------------------------------------------------

    For example, because the Pilot would reduce the minimum quotation
size from 2,500 to 100 shares for securities priced at or above $1.00,
FINRA believed that competitively priced customer limit orders, which
tend to be smaller-sized orders, would more likely be displayed and
potentially yield a variety of benefits, including improved price
transparency, enhanced execution of customer limit orders, and narrower
spreads. In addition, in a memorandum on the potential effects of the
Pilot, Commission staff of the Division of Risk, Strategy and Financial
Innovation (n/k/a the Division of Economic Research and Analysis
(``DERA'')) noted that enhanced visibility of customer limit orders
could reduce customers' execution costs.\18\
---------------------------------------------------------------------------

    \18\ See Memorandum to File No. SR-FINRA-2011-058 re: FINRA
Proposal to Reduce Minimum Quotation Size in OTC Market Tiers from
Division of Risk, Strategy, and Financial Innovation, dated June 1,
2012, available at: http://www.sec.gov/comments/sr-finra-2011-058/finra2011058-13.pdf (``Memorandum from Division of Risk, Strategy,
and Financial Innovation'').
---------------------------------------------------------------------------

    An additional objective of the Pilot was to expand the scope of
FINRA Rule 6433 to apply to all member quotations on an inter-dealer
quotation system. Prior to the Pilot, FINRA Rule 6433 applied only to
market makers' proprietary quotes in OTC equity securities on an inter-
dealer quotation system. Under the Pilot, the minimum tier sizes apply
to any member quotations entered on an inter-dealer quotation system
(including quotes representing customer interest and quotations entered
by non-market makers).

Concerns Raised Regarding FINRA's Original Proposal

    The Commission received several comments in response to FINRA's
Original Proposal.\19\ Commenters generally were supportive of the goal
of increased customer limit order display.\20\ However, commenters also
raised concerns regarding the impact of the proposed revisions to the
tiers in FINRA Rule 6433. Specifically, some commenters questioned
whether the proposed Pilot might harm market quality by permitting
market makers to post quotes representing minimum dollar value
commitments that would not be financially meaningful, or otherwise
would erode market maker liquidity in OTC equity securities.\21\ In
addition, some commenters believed that there was not sufficient data
analysis to support the proposed changes to the then existing tier
sizes.\22\
---------------------------------------------------------------------------

    \19\ See supra note 9.
    \20\ See Order Approving Tier Size Pilot, supra note 10.
    \21\ See id.
    \22\ See id. at 37461-62.
---------------------------------------------------------------------------

    In response to commenters' concerns, FINRA filed Amendment No. 1 to
the Original Proposal to increase the minimum quotation sizes for most
price points between $0.02 and $1.00, and proposed that the revised
tiers operate as a one-year pilot program instead of on a permanent
basis. FINRA also submitted Amendment No. 2 to the Original Proposal,
which, among other things, specified the items of data that FINRA would
collect and provide to the Commission during the duration of the Pilot.
These data items were:
    1. The price of the first trade of each trading day executed at or
after 9:30:00 a.m., based on execution time.
    2. The price of the last trade of each trading day executed at or
before 4:00:00 p.m., based on execution time.
    3. Daily share volume.
    4. Daily dollar volume.
    5. Number of limit orders from customers and in total.
    6. Percentage of the day that the size of the Best Bid or Offer
(``BBO'') equals the minimum quote size.
    7. Number of market makers actively quoting.
    8. Number of executions from a limit order and number of limit
orders at the BBO or better by tier size from a customer and in total.
    9. Liquidity/BBO metrics
    a. Time-weighted quoted spread.
    b. Effective spread.
    c. Time-weighted quoted depth (number of shares) at the inside.
    d. Time-weighted quoted depth (dollar value of shares) at the
inside.
    FINRA also committed to submitting an assessment, at least 60 days
before the end of the Pilot, that would address the impact of the
proposed Pilot, the concerns raised by commenters during the rule
filing process, and whether the proposed Pilot resulted in its desired
effects.\23\
---------------------------------------------------------------------------

    \23\ See Order Approving Tier Size Pilot, supra note 10.
---------------------------------------------------------------------------

Pilot Assessment

    FINRA submitted an assessment on the operation of the Tier Size
Pilot on September 13, 2013, which utilized pilot data covering the
period from November 12, 2012 through June 30, 2013.\24\ The 2013
Assessment, discussed in greater detail below, included a
recommendation, based on the analysis conducted, that the Pilot tiers
be adopted as permanent. Nonetheless, FINRA submitted proposed rule
changes to extend the Pilot's duration to allow the effects of the
Pilot to be more thoroughly reviewed.\25\ During this extension period,
DERA conducted a study, dated July 28, 2017, that assessed the impact
of the Pilot on the liquidity of OTC equity securities.\26\ Although
the two studies covered different time periods and employed different
methods, FINRA notes that the DERA Memo to File reported findings
consistent with those of the 2013 Assessment. In light of the 2013

Assessment, FINRA's further observations, and the DERA Memo to File,
FINRA continues to believe that it is appropriate for the Commission to
approve permanently the tier sizes that have been in operation since
November 12, 2012.
---------------------------------------------------------------------------

    \24\ FINRA engaged a third-party, Cornerstone Research, to
conduct an analysis of the impact of the Pilot on OTC market
quality. The ``OTC Tier Size Analysis'' prepared by Cornerstone
Research and the accompanying FINRA Executive Summary were submitted
as Exhibit 3a of the instant proposed rule change and are available
at https://www.sec.gov/rules/sro/finra/2018/34-83129-ex3a.pdf
(``2013 Assessment'').
    \25\ See supra notes 11 and 12.
    \26\ See DERA Staff Memorandum regarding FINRA's Pilot Program
Amending Minimum Quotation Size Requirements for OTC Equity
Securities (SR-FINRA-2011-058), dated July 28, 2017, available at:
https://www.sec.gov/files/otc_tiersizepilot_memo.pdf (``DERA Memo to
File'').
---------------------------------------------------------------------------

    According to FINRA, the 2013 Assessment demonstrates that the Pilot
has accomplished its objectives, including increased customer limit
order display, and that key market quality indicators have been
unchanged or have slightly improved overall. FINRA continued to collect
and provide Pilot data to the Commission after the issuance of the 2013
Assessment. In addition, FINRA continued to monitor the impact of the
operation of the Pilot on market quality metrics for the over-the-
counter marketplace, which FINRA generally believes indicate positive
trends overall, thus providing continued support for permanent adoption
of the Pilot tiers.\27\ Moreover, FINRA states that the DERA Memo to
File provides further evidence, in a regression framework, to support
the conclusion that the Pilot had a neutral to positive impact on
market quality.
---------------------------------------------------------------------------

    \27\ FINRA engaged in outreach with member firms that are active
in the market for OTC equity securities regarding the operation of
the Tier Size Pilot, and the majority of those firms did not oppose
the permanent adoption of the Pilot.
---------------------------------------------------------------------------

    FINRA further believes that the 2013 Assessment demonstrates that
the Pilot has resulted in a meaningful increase in the display of
customer limit orders. Moreover, FINRA believes that the data collected
during the Pilot also supports that market quality has not been harmed,
as suggested by the analysis of market quality measures such as spreads
and market depth.
(A) Enhanced Customer Limit Order Display
    According to FINRA, when the Commission approved the Pilot, it
recognized the potential benefits of enhancing customer limit order
display. Notably, the Commission stated that ``[i]n the Commission's
view, FINRA's proposed revisions are designed to protect investors by
revising the . . . tier thresholds [in FINRA Rule 6433] such that a
larger percentage of customer limit orders are reflected in quotations
for OTC equity securities, thereby potentially improving the prices at
which customer limit orders will be executed, consistent with the
protection of investors and the public interest.'' \28\ FINRA believes
that the Pilot has achieved the objective of increased customer limit
order display.
---------------------------------------------------------------------------

    \28\ See Order Approving Tier Size Pilot, supra note 10, 77 FR
at 37466. See also Memorandum from Division of Risk, Strategy, and
Financial Innovation, supra note 18.
---------------------------------------------------------------------------

    As noted in the 2013 Assessment, FINRA analyzed the number of
customer limit orders that would be eligible under both the Pilot and
the pre-Pilot tier sizes and observed that between November 1, 2012 and
June 30, 2013, for all tier sizes combined, there was a 13% increase in
the number of customer limit orders that met the minimum quotation
sizes to be eligible for display under the Pilot tiers.\29\ For that
same period, FINRA also observed a significant increase in the number
of customer limit orders in securities priced between $0.20 and $100.00
that became eligible for display. According to FINRA, this trend
continued through July 31, 2014. Specifically, for the period between
July 1, 2013 and July 31, 2014, FINRA indicates that it observed, for
all tier sizes combined, an 18.45% increase in the number of customer
limit orders that met the minimum quotation sizes and, therefore, were
eligible for display, with the most significant increase observed for
securities priced between $0.20 and $100.00.\30\
---------------------------------------------------------------------------

    \29\ See Notice, supra note 3.
    \30\ See Notice, supra note 3.
---------------------------------------------------------------------------

    Tables 3 \31\ and 4 \32\ below show the percentage of customer
limit orders that were equal to or greater than the minimum quotation
size under both the Pilot and pre-Pilot tier sizes for the specified
price ranges for the periods of November 1, 2012 through June 30, 2013,
and from July 1, 2013 through July 31, 2014, respectively.
---------------------------------------------------------------------------

    \31\ Table 3 originally was included in FINRA's Executive
Summary, dated September 13, 2013, which is part of the 2013
Assessment. See supra note 24. See also Notice, supra note 3.
    \32\ Table 4 was included in the Notice, supra note 3.

                                                     Table 3
                                    [November 1, 2012 through June 30, 2013]
----------------------------------------------------------------------------------------------------------------
                                                                  Customer limit                  Customer limit
                   Price range                      Pilot tier    orders >= tier  Pre-pilot tier  orders >= tier
                                                       size          size (%)          size          size (%)
----------------------------------------------------------------------------------------------------------------
0.0001-0.0999...................................          10,000           78.29           5,000           86.30
0.10-0.1999.....................................           5,000           56.89           5,000           56.89
0.20-0.5099.....................................           2,500           57.35           5,000           43.30
0.51-0.9999.....................................           1,000           72.81           2,500           46.05
1.00-10.00......................................             100           97.86             500           74.73
10.01-100.00....................................             100           98.24             200           87.93
100.01-174.99...................................             100           90.49             100           90.49
175.00-200.00...................................               1             100             100           96.71
200.01-500.00...................................               1             100              25           90.74
500.01-1,000.00.................................               1             100              10           64.62
1,000.00-2,500.00...............................               1             100               5           61.38
2,500.00+.......................................               1             100               1          100.00
----------------------------------------------------------------------------------------------------------------

                                                     Table 4
                                      [July 1, 2013 through July 31, 2014]
----------------------------------------------------------------------------------------------------------------
                                                                  Customer limit                  Customer limit
                   Price range                      Pilot tier    orders >= tier  Pre-pilot tier  orders >= tier
                                                       size          size (%)          size          size (%)
----------------------------------------------------------------------------------------------------------------
0.0001-0.0999...................................          10,000           78.29           5,000           88.70

0.10-0.1999.....................................           5,000           56.89           5,000           57.78
0.20-0.5099.....................................           2,500           57.35           5,000           42.31
0.51-0.9999.....................................           1,000           72.81           2,500           42.10
1.00-10.00......................................             100           97.86             500           68.36
10.01-100.00....................................             100           98.24             200           78.03
100.01-174.99...................................             100           90.49             100           90.60
175.00-200.00...................................               1             100             100           91.94
200.01-500.00...................................               1             100              25           89.41
500.01-1,000.00.................................               1             100              10           66.65
1,000.00-2,500.00...............................               1             100               5           65.58
2,500.00+.......................................               1             100               1          100.00
----------------------------------------------------------------------------------------------------------------

    FINRA states that, as was noted in the 2013 Assessment, of the
301,628,686 customer limit orders in OTC equity securities reported to
FINRA's Order Audit Trail System (``OATS'') between November 1, 2012
and June 30, 2013, over 86.6% were priced between $0.20 and $100.00.
FINRA further notes that 58.7 million customer limit orders, or almost
20% of all customer limit orders, were priced between $1.00 and $10.00.
According to FINRA, this price range experienced an increase of almost
24% in the number of customer limit orders that met the minimum
quotation size to be eligible for display under the Pilot. Further,
181.6 million customer limit orders, or over 60% of all customer limit
orders, were priced between $10.01 and $100.00. FINRA observes that
this price range experienced an increase of over 10% in the number of
customer limit orders that met the Pilot tier sizes and were eligible
for display under the Pilot tier sizes. FINRA points out that the 2013
Assessment found that an additional 32 million customer limit orders
priced between $1.00 and $100.00 became eligible for display during the
Pilot that otherwise would not have been eligible for display.
    According to FINRA, the trends during the period since the 2013
Assessment are similar. FINRA states that of the 573,973,197 customer
limit orders in OTC equity securities reported to OATS between July 1,
2013 and July 31, 2014, 81.4% were priced between $0.20 and $100.00.
FINRA notes that 114.5 million customer limit orders, or almost 20% of
all customer limit orders, were priced between $1.00 and $10.00. From
July 1, 2013 through July 31, 2014, this price range experienced an
increase of over 29% in the number of customer limit orders that met
the minimum quotation size to be eligible for display under the Pilot
than would have been eligible in the absence of the Pilot. Further,
312.1 million customer limit orders, or over 54% of all customer limit
orders, were priced between $10.01 and $100.00. FINRA remarks that this
price range experienced an increase of over 19% in the number of
customer limit orders that met the Pilot tier sizes and were eligible
for display under the Pilot tier sizes. Consequently, an additional
94.9 million customer limit orders priced between $1.00 and $100.00
became eligible for display during the Pilot between June 30, 2013 and
July 31, 2014 than otherwise would have been eligible for display.
    FINRA states that there was an aggregate overall increase in
displayed customer limit orders in OTC equity securities over the
period from November 12, 2012 through July 31, 2014 of 16.24%,
representing approximately 142 million additional orders than otherwise
would have been eligible for display As a result, FINRA believes that
the impact of the Pilot on limit order display has been positive, with
stronger than average results concentrated in the price points ranging
from $10.01 and $100.00 (the range in which the majority of all
customer limit orders fell (approximately 57%)).
(B) Impact on Market Quality
    FINRA explains that when the Commission approved the Pilot, it
acknowledged that the Pilot may raise issues of ``potentially competing
forces''--enhanced customer limit order display on the one hand and
potential harm to OTC equity market quality (liquidity, efficiency, and
volatility) on the other.\33\ FINRA notes that the Commission, however,
expressed the view that ``as well as increasing the number of customer
limit orders eligible for display and the potential for better
executions, arguments can be made that FINRA's proposal will benefit
the OTC market by facilitating market making activity, narrowing
spreads and increasing liquidity.'' \34\
---------------------------------------------------------------------------

    \33\ See Order Approving Tier Size Pilot, supra note 10, 77 FR
at 37467.
    \34\ Id.
---------------------------------------------------------------------------

    FINRA believes that analysis of the Pilot and pre-Pilot data
generally shows that the market quality measures that the Commission
had identified--i.e., market maker activity, spreads and liquidity--
were unchanged to slightly improved, and that therefore there has been
an overall neutral to positive impact on OTC market quality for the
majority of Pilot tiers as compared to the pre-Pilot data.\35\
---------------------------------------------------------------------------

    \35\ FINRA notes that, from an analytical perspective, changes
in market quality measures may not be attributable solely as a
result of the Pilot, since they also may be impacted by other
contemporaneous market factors.
---------------------------------------------------------------------------

    As noted in the 2013 Assessment, where the minimum quotation size
decreased under the Pilot, effective spreads generally remained the
same or narrowed, quoted spreads narrowed, and price impact generally
decreased. The 2013 Assessment also stated that some of the market
quality metrics provided inconclusive results, specifically for Tier 1
securities, where the minimum quote size requirement had increased
under the Pilot. FINRA remarks that the 2013 Assessment documented that
effective spreads had widened, but with no significant reduction in
quoted depth.\36\
---------------------------------------------------------------------------

    \36\ FINRA points out that for Tier 1 securities, the DERA Memo
to File finds that both quoted and effective spreads increased
between the pre-Pilot period (November 14, 2011 through October 31,
2012) and the Pilot period (November 12, 2012 through November 28,
2014) covered by the analysis. However, the DERA Memo to File does
not find sufficient evidence that these increases in spreads were
caused by the Pilot, because spreads had started to widen at least
six months prior to the implementation of the Pilot.
---------------------------------------------------------------------------

    In the post-2013 Assessment period of July 1, 2013 through July 31,
2014,

FINRA observes that the number of stocks quoted in the OTC market has
remained relatively constant \37\ and market makers continued to
provide liquidity.\38\ The number of BBO quotes also significantly
increased throughout 2014, which was the second year of the Pilot, as
the number of quotes generally hovered around 2 million per day during
the Pre-Pilot period, but steadily increased, reaching a high of
approximately 6 million per day in early 2014 and leveling off to an
average of 5 million per day during the month of July 2014. The average
number of trades per day was higher during the first two years of the
Pilot compared to the pre-Pilot level, and more than tripled by March
2014.\39\ FINRA states, however, that trading activity appears to have
leveled-off in mid-2014, albeit still at levels above the pre-Pilot
trading.\40\ Liquidity continued to be provided at levels greater than
the minimum required depth, evidenced by executions at sizes greater
than the required minimums, which enabled the execution of large trades
in the OTC market. For example, for Tier 1 securities where the minimum
quotation size increased, the number of trades executed above the
minimum size increased by approximately 75%. Although there was
virtually no change in the frequency of trades above the minimum size
for Tiers 2 and 3, FINRA notes that all the other tiers experienced a
positive change. Trading in sizes greater than the minimum quotation
size occurred infrequently in these tiers both prior to and during the
Pilot.
---------------------------------------------------------------------------

    \37\ The number of stocks quoted on the OTC market remained
stable at around 10,000 throughout the pre-Pilot period and during
the period covered in the 2013 Assessment, as well as during FINRA's
subsequent observations (November 1, 2012 through July 31, 2014).
    \38\ There was an average of nine market-makers for each symbol
with no significant change in the number of market makers between
the pre-Pilot period and during the period covered in the 2013
Assessment and during FINRA's subsequent observations (November 1,
2012 through July 31, 2014).
    \39\ The daily number of trades executed during the year prior
to the Pilot is estimated at approximately 75,000, and reached
around 250,000 trades by the end of the first quarter in 2014.
    \40\ The daily average number of trades was approximately
100,000 by July 2014.
---------------------------------------------------------------------------

    FINRA further notes that the analysis of data from the second year
of the Pilot also confirms its position that the impact of the change
in the minimum quotation size on the market quality metrics generally
is positive. FINRA staff analyzed the change in five measures to
evaluate the impact of the Pilot on market quality--time-weighted
quoted spreads, volume-weighted spreads, time-weighted quoted depth at
the BBO, time-weighted quoted depth around the BBO, and price impact.
Based on FINRA's analysis, time-weighted quoted spreads continued to
narrow during the first two years of the Pilot and these positive
changes in time-weighted quoted spreads between the pre-Pilot and the
first two years of the Pilot were statistically significant for all
tiers.\41\ Similarly, volume-weighted spreads were unchanged (or
slightly narrowed) for all tiers between the pre-Pilot period and the
first two years of the Pilot when accounting for the longer Pilot
period.
---------------------------------------------------------------------------

    \41\ For stocks in price tiers where the minimum quotation size
requirement had decreased, the DERA Memo to File also finds that
both quoted and effective spreads had decreased between the pre-
Pilot period (from November 14, 2011 to October 31, 2012) and the
Pilot period (November 12, 2012 to November 28, 2014) covered by the
analysis. Furthermore, the DERA Memo to File's analysis suggests
that these decreases in spreads may reflect causal effects of the
Pilot. In contrast, for stocks in price tiers where the minimum
quotation size requirement increased or remained the same, the DERA
Memo to File does not find sufficient evidence that the Pilot had a
causal impact on spreads.
---------------------------------------------------------------------------

    FINRA observes that the displayed depth decreased slightly for most
tiers, but a consideration of depth beyond the BBO demonstrated that
any declines were mostly statistically insignificant across tiers in
the first two years of the Pilot. FINRA believes that consideration of
depth beyond the BBO is a useful additional measure for assessing
market depth.
    In addition, based on a data review using the same methodology as
was employed for the 2013 Assessment, subsequent to the completion of
the 2013 Assessment, FINRA observed that the price impact of
hypothetical market orders continued to remain lower during the second
year of the Pilot period than during the pre-Pilot period.\42\ For
example, the following two tables prepared by FINRA present the price
impact for hypothetical market buy and sell orders with sizes five
times larger than the minimum size requirement for each tier. The price
impact associated with the hypothetical orders is estimated to have
declined for all tiers, which is an indication of improved market
quality. The decline is significant for all levels except for Tiers 5b
and 5c (for buy trades) and Tier 1 (for sell trades).
---------------------------------------------------------------------------

    \42\ As FINRA discussed in the 2013 Assessment, the price impact
of hypothetical market orders is the effective half spread for a
hypothetical market ``sweep'' order of a particular size. In other
words, it is an estimate of what the volume-weighted average
effective half spread would have been had a market order been broken
up and routed to the market makers based on price priority.
---------------------------------------------------------------------------

    According to FINRA, the t-statistic in the charts below is designed
to measure whether the price impact associated with a trade of a given
(relative) size is different between the pre-Pilot and Pilot sample
periods. The difference is tested for significance by calculating the
two-sample un-pooled Student's t-statistic,
[GRAPHIC] [TIFF OMITTED] TN06AU18.004

    The null hypothesis (i.e., that price impact is unchanged between
the two sample periods) is rejected at the 90% and 95% confidence
levels, if the t-statistics are greater than 1.65 and 1.96,
respectively.

                                                     Table 5
                             [Price impact for hypothetical large market buy orders]
----------------------------------------------------------------------------------------------------------------
                     Minimum
     Tier        quotation size      Number of    Pre-pilot  (10/   Pilot  (11/     Difference      t-statistic
                     change           stocks       2011-10/2012)   2012-7/2014)
----------------------------------------------------------------------------------------------------------------
1.............  Increased.......           3,586          0.0055          0.0050         -0.0005          (2.60)
2.............  Maintained......           1,254          0.0235          0.0197         -0.0038          (5.03)
3.............  Decreased.......           1,752          0.0506          0.0420         -0.0086          (6.41)
4.............  Decreased.......           1,537          0.0969          0.0810         -0.0159          (5.00)

5a............  Decreased.......           3,038          0.3295          0.2530         -0.0765          (7.79)
5b............  Decreased.......           2,026          1.1630          1.0661         -0.0969          (1.55)
5c............  Maintained......             177          4.8322          4.7906         -0.0416          (0.06)
----------------------------------------------------------------------------------------------------------------

                                                     Table 6
                             Price impact for hypothetical large market sell orders
----------------------------------------------------------------------------------------------------------------
                     Minimum
     Tier        quotation size      Number of    Pre-pilot  (10/   Pilot  (11/     Difference      t-statistic
                     change           stocks       2011-10/2012)   2012-7/2014)
----------------------------------------------------------------------------------------------------------------
1.............  Increased.......           3,931          0.0062          0.0059         -0.0003          (1.60)
2.............  Maintained......           1,483          0.0233          0.0169         -0.0064          (3.41)
3.............  Decreased.......           1,787          0.0540          0.0311         -0.0229          (4.87)
4.............  Decreased.......           1,676          0.1214          0.0656         -0.0558          (4.95)
5a............  Decreased.......           3,059          0.4170          0.1500         -0.2670          (6.01)
5b............  Decreased.......           2,145          2.3563          0.4214         -1.9349          (6.79)
5c............  Maintained......             288         14.8135          4.2683        -10.5452          (3.13)
----------------------------------------------------------------------------------------------------------------

    As noted above, FINRA states that the 2013 Assessment was not
conclusive as to the impact of the Pilot on market quality for Tier 1
securities, the only tier where the minimum quotation size had
increased. For example, the 2013 Assessment indicated that the time-
weighted quoted spread was unchanged for Tier 1 securities in the Pilot
period. However, FINRA explains that from June 30, 2013 to July 2014,
there was a statistically significant narrowing of time-weighted quoted
spreads in this tier. Evidence from the second year of the Pilot
suggests that volume-weighted effective spreads and depth beyond the
BBO were unchanged from pre-Pilot levels, but there was a statistically
significant increase in depth at the BBO. FINRA therefore concludes
that the updated analysis provides reliable evidence that market
quality for Tier 1 securities also has improved during the Pilot.\43\
The data for other tiers, however, continue to provide reliable
evidence that market quality has been unchanged or slightly improved
under the Pilot. Thus, because the Pilot had a demonstrable positive
impact on customer limit order display, and appears to have had an
overall neutral to positive impact on market quality, FINRA believes
that it is appropriate and in the best interest of investors to adopt
the Pilot tiers as permanent.
---------------------------------------------------------------------------

    \43\ As noted in note 36, supra, FINRA points out that the DERA
Memo to File finds that quoted and effective spreads for Tier 1
securities increased between the pre-Pilot period of November 14,
2011 to October 31, 2012 and the Pilot period of November 12, 2012
to November 28, 2014 covered by the analysis, but it does not find
sufficient evidence that these increases in spreads were caused by
the Pilot.
---------------------------------------------------------------------------

    FINRA notes that, if the Commission approves the proposed rule
change, the implementation date of the proposed rule change shall be
the date of approval by the Commission.

III. Comment Summary and FINRA's Response

    As noted above, the Commission received one comment letter on the
proposed rule change and a response letter from FINRA.\44\ The
commenter generally supports making the proposed tier sizes
permanent.\45\ However, the commenter believes that there should be no
tier sizes for unsolicited customer orders.\46\ The commenter is
concerned that when a broker-dealer is quoting on an unsolicited basis
in certain securities, the tier sizes work to restrict customers from
being able to trade their positions because the unsolicited customer
order does not meet the revised tier size requirements.\47\
---------------------------------------------------------------------------

    \44\ See supra note 4.
    \45\ Id.
    \46\ Id.
    \47\ Id.
---------------------------------------------------------------------------

    In its response letter, FINRA states that one of its goals in
revising FINRA Rule 6433 was to achieve a reasonable balance between
customer limit order display and facilitating a meaningful minimum
dollar-value commitment to the market for all displayed quotations.\48\
FINRA believes that the Pilot tiers achieve an appropriate balance of
these objectives.\49\ FINRA further explains that the Pilot tiers have
resulted in a positive impact on the level of customer limit orders
eligible for display under FINRA Rule 6460 and does not believe that an
exception for any subset of customer orders should be adopted at this
time.\50\
---------------------------------------------------------------------------

    \48\ See FINRA Letter, supra note 7.
    \49\ Id. at 2.
    \50\ Id.
---------------------------------------------------------------------------

IV. Discussion of Commission Findings

    After careful review of the proposed rule change, the comment
letter, and FINRA's response to the comment letter, the Commission
finds that the proposal is consistent with the requirements of the Act
and the rules and regulations thereunder that are applicable to a
national securities association.\51\ Specifically, the Commission finds
that the rule change is consistent with Section 15A(b)(6) of the
Exchange Act,\52\ which requires, among other things, that FINRA rules
be designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, and, in general, to
protect investors and the public interest. The Commission also finds
that the proposed rule change is consistent with the provisions of
Section 15A(b)(11) of the Act,\53\ which requires that FINRA rules
include provisions governing the form and content of quotations
relating to securities sold otherwise than on a national securities
exchange which may be distributed or published by any

member or person associated with a member, and the persons to whom such
quotations may be supplied.
---------------------------------------------------------------------------

    \51\ In approving this rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \52\ 15 U.S.C. 78o-3(b)(6).
    \53\ 15 U.S.C. 78o-3(b)(11).
---------------------------------------------------------------------------

    As stated in the Notice, FINRA believes that making the Pilot tiers
permanent would promote just and equitable principles of trade and
protect investors and the public interest. FINRA believes that the 2013
Assessment and subsequent observations demonstrate that the Pilot has
resulted in an increased display of customer limit orders. FINRA notes
that the 2013 Assessment found a 13% increase in the number of customer
limit orders that met the minimum quotation sizes eligible for display
across all Pilot tiers, and FINRA's updated data through July 2014
shows an even greater increase of 18.45% than otherwise would have been
eligible for display. The increase in customer limit orders eligible
for display was significant in tiers that make up substantial
percentages of the overall volume transacted in OTC equity securities.
    In the Notice, FINRA further states its belief that any concerns
about market quality raised by public commenters prior to the
Commission's approval of the Pilot have not materialized. In fact,
FINRA states that it believes that the Pilot has had a positive impact
on OTC market quality for the majority of OTC equity securities and the
tiers set forth in the Pilot. FINRA believes that the Pilot data shows
overall a slight reduction in spreads for most OTC equity securities
with no negative (and perhaps a positive) impact on liquidity.
    When the Commission approved the Pilot, it emphasized the potential
benefit of increasing customer limit order display. For instance, the
Commission noted that increased limit order display potentially could
improve the prices at which customer limit orders would be executed,
consistent with the protection of investors and the public
interest.\54\ The Commission also stated its belief that greater
customer limit order display could increase quote competition, narrow
spreads, and increase the likelihood of price improvement for OTC
equity securities.\55\ The Commission has maintained a longstanding
view that there are benefits to promoting customer limit order
display.\56\
---------------------------------------------------------------------------

    \54\ See Order Approving Tier Size Pilot, supra note 10, 77 FR
at 37466.
    \55\ See id. at 37469.
    \56\ See id. at 37469 n.168 (citing, among other things, the
Commission's 1996 Order Handling Rules Release).
---------------------------------------------------------------------------

    As noted above, the sole commenter on the proposed rule change is
concerned that when a firm is quoting on an unsolicited basis in
certain securities, the Pilot tier sizes work to restrict customers
from being able to trade their positions if the unsolicited customer
order does not meet FINRA's minimum tier size requirements.\57\ The
Commission notes that FINRA's 2013 Assessment and its subsequent
assessment for the period covering July 1, 2013 through July 31, 2014
indicate that there was a meaningful increase in the number of customer
limit orders eligible for display. The Commission agrees with FINRA
that the minimum tier size requirements of FINRA Rule 6433, which have
been in place on a Pilot basis, achieve a reasonable balance between
fostering customer limit order display and facilitating a meaningful
minimum dollar-value commitment to the market for all displayed
quotations.
---------------------------------------------------------------------------

    \57\ See supra note 4.
---------------------------------------------------------------------------

    The Commission believes that the Pilot has accomplished its
intended objectives and has realized its anticipated benefits,
including greater customer limit order display. At the same time,
market quality indicators during the Pilot suggest that the revised
tiers and evidence of greater customer limit order display did not
result in a harmful reduction in liquidity for OTC equity securities.
The Commission believes that these results are consistent with FINRA's
assessment that the Pilot has had a neutral to positive impact on
liquidity for the majority of OTC equity securities and price
tiers.\58\ At the same time, the Commission notes that there is
inconclusive evidence regarding the effects of the Pilot on liquidity
for the price tier for which the minimum quotation size requirement was
increased.\59\ In light of the foregoing, the Commission believes that
it is consistent with the Act to adopt the Pilot tiers, which have been
in effect for nearly six years, on a permanent basis.
---------------------------------------------------------------------------

    \58\ See id. at 2.
    \59\ Id. The minimum quotation size requirement increased for
those securities prices between $0.0001 and $0.0999. These
securities are included in the lowest tier which requires a minimum
quotation size of 10,000 shares.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) \60\ of the
Exchange Act that the proposal (SR-FINRA-2018-015) be and hereby is
approved.
---------------------------------------------------------------------------

    \60\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\61\
---------------------------------------------------------------------------

    \61\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16724 Filed 8-3-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Rules and Regulations]
[Pages 38913-38914]
[FR Doc No: 2015-16713]

========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.

========================================================================

Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Rules
and Regulations

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 33

[Docket No.FAA-2015-1771; Special Conditions No. 33-016-SC]

Special Conditions: Pratt and Whitney Canada, PW210A; Flat 30-
Second and 2-Minute One Engine Inoperative Rating

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final special conditions.

-----------------------------------------------------------------------

SUMMARY: These special conditions are issued for the Pratt and Whitney
Canada PW210A engine model. This engine will have a novel or unusual
design feature--an additional one engine inoperative (OEI) rating that
combines the 30-second and 2-minute OEI ratings into a single rating.
The applicable airworthiness regulations do not contain adequate or
appropriate safety standards for this design feature. These special
conditions contain the additional safety standards that the
Administrator considers necessary to establish a level of safety
equivalent to that established by the existing airworthiness standards.

DATES: Effective August 7, 2015.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning
these special conditions, contact Tara Fitzgerald, ANE-111, Engine and
Propeller Directorate, Aircraft Certification Service, 12 New England
Executive Park, Burlington, Massachusetts, 01803-5213; telephone (781)
238-7130; facsimile<PHONE_NUMBER>; email<EMAIL_ADDRESS>For
legal questions concerning these special conditions, contact Vincent
Bennett, ANE-7, Engine and Propeller Directorate, Aircraft
Certification Service, 12 New England Executive Park, Burlington,
Massachusetts, 01803-5299; telephone<PHONE_NUMBER>; facsimile (781)
238-7055; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Background

    On February 14, 2013, Pratt and Whitney Canada applied for an
amendment to Type Certificate No. E00083EN-E to include the new PW210A
engine model. The PW210A, which is a derivative of the PW210S currently
approved under E00083EN-E, is intended for rotorcraft use. For their
PW210A engine model, Pratt and Whitney Canada requests an additional
OEI rating that combines the 30-second and 2-minute OEI rating into a
single rating to satisfy the rotorcraft requirements for increased
power in OEI scenarios. This additional OEI rating is named ``Flat 30-
second and 2-minute OEI.''
    These special conditions are necessary because the applicable
airworthiness regulations do not contain adequate or appropriate safety
standards for combining the requirements of the flat 30-second and 2-
minute OEI rating.

Type Certification Basis

    Under the provisions of Sec.  21.101, Pratt and Whitney Canada must
show that the PW210A meets the applicable provisions of 14 CFR part 33,
as amended by Amendments 33-1 through 33-30. These regulations will be
incorporated into Type Certificate No. E00083EN after type
certification approval of the PW210A. The regulations incorporated by
reference in the type certificate are commonly referred to as the
``original type certification basis.'' The regulations incorporated by
reference in Type Certificate No. E00083NE are as follows:
    Title 14 of the Code of Federal Regulations (14 CFR part 33),
effective February 1, 1965, Amendments 33-1 through 33-24 and two
special conditions:
33-008-SC: for on ground engine operation in auxiliary power unit (APU)
mode, and
33-009-SC: for 30-minutes all engines operating (AEO) hovering power
engine rating
For the PW210A the certification basis is:

    1. Airworthiness Standards: 14 CFR part 33, effective February 1,
1965, Amendments 33-1 through 33-30, inclusive.
    2. Environmental Standards: 14 CFR part 34, effective September 10,
1990, as amended by 34-1 through 34-4 and 40 CFR part 87, effective
(ICAO Annex 16, Volume II--Aircraft Engine Emissions, as amended up to
and including Amendment 6).
    In addition, the certification basis includes other regulations,
special conditions and exemptions that are not relevant to these
special conditions. Type Certificate No. E00083EN will be updated to
include a complete description of the certification basis for this
model engine.
    If the Administrator finds that the applicable airworthiness
regulations (i.e., 14 CFR part 33) do not contain adequate or
appropriate safety standards for the PW210A because of a novel or
unusual design feature, special conditions are prescribed under the
provisions of Sec.  21.16.
    Special conditions are initially applicable to the model for which
they are issued. Should the type certificate for that model be amended
later to include any other model that incorporates the same or similar
novel or unusual design feature, or should any other model already
included on the same type certificate be modified to incorporate the
same or similar novel or unusual design feature, the special conditions
would also apply to the other model under Sec.  21.101.
    Accordingly, should type certificate E00083EN be amended to include
another model that incorporates the ``Flat 30-second and 2-minute
OEI,'' the special conditions as defined would apply to models whose
certification basis is amendment 33-25 or later.
    The FAA issues special conditions, as defined in 14 CFR 11.19, in
accordance with Sec.  11.38, and they become part of the type-
certification basis under Sec.  21.17(a)(2).

Novel or Unusual Design Features

    The PW210A will incorporate the following novel or unusual design
features: The design feature is a ``Flat 30-second and 2-minute'' one
engine inoperative (OEI) rating. The Flat 30-second and 2-minute OEI
rating represents a case where the power levels and associated
operating limitations for the 30-second OEI and 2-minute OEI ratings
(defined in Part 33) are the same.

Discussion

    These special conditions are necessary because current part 33
regulations do not contain airworthiness standards for extending the 2-
minute OEI rating for 30-seconds. These special conditions extend the
time dependent requirements applicable to the 30-second OEI or 2-minute
OEI to the 2.5 minutes time duration of the ``Flat 30-second and 2-
minute OEI'' Power.
    The 2.5 minutes time duration for the rating may affect the
engine's structural and operational characteristics that are time
dependent, such as the values for transients, time duration for
stabilization to steady state, and part growth due to deformation. To
address these aspects, we propose special conditions based on revised
requirements of Sec. Sec.  33.27, 33.87(a)(7), and 33.88(b).
    The 2.5 minutes time duration for the rating affects the test
conducted for the endurance test. For the 30-second OEI and 2-minute
OEI the test schedule of Sec.  33.87(f) is divided among the two
ratings. We propose special conditions based on revised requirements of
Sec.  33.87(f) to ensure the test will be run for 2.5 minutes duration
with no interruption.
    The 2.5 minutes time duration for the rating necessitates extending
the time duration requirement of Sec.  33.28(k) applicable to the 30-
second OEI rating from 30 seconds to 2.5 minutes. This requirement is
for automatic availability and control of the engine for the entire
duration of the rating's usage.
    The 2.5 minutes time duration for the rating necessitates extending
the requirements of Sec.  33.29(c) that are applicable to 30-second OEI
and 2-minute OEI ratings to the single Flat 30-second and 2-minute OEI
Power rating. We propose special conditions to ensure that the
instrumentation requirements normally reserved for 30-second OEI and 2-
minute OEI ratings are applied to the Flat 30-second and 2-minute OEI
Power rating over its whole duration. The pilot does not have to be
alerted at the end of 30 seconds use of the Flat 30-second and 2-minute
OEI Power rating, only after the entire 2 minutes 30 seconds has
expired. Paragraph 2.(e)(3) of these special conditions states that the
engine must provide means or provision of means to alert maintenance of
use of the Flat 30-second and 2-minute OEI Power rating, `alert' means
after the aircraft lands, so any required maintenance actions can be
completed before next flight.

Applicability

    As discussed above, these special conditions are applicable to the
PW210A. Should Pratt and Whitney Canada apply at a later date for a
change to the type certificate to include another model incorporating
the same novel or unusual design feature, the special conditions would
apply to that model as well.

Conclusion

    This action affects only the Flat 30-second and 2-minute OEI design
features on the PW210A engine model. It is not a rule of general
applicability and applies only to Pratt and Whitney Canada, who
requested FAA approval of this engine feature.

List of Subjects in 14 CFR Part 33

    Aircraft, Engines, Aviation Safety, Reporting and Recordkeeping
requirements.

    The authority citation for these special conditions is as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701, 44702, 44704.

The Special Conditions

    Accordingly, pursuant to the authority delegated to me by the
Administrator, the following special conditions are issued as part of
the type certification basis for Pratt and Whitney Canada PW210A engine
model.

Flat 30-second and 2-minute OEI

1. Part 1.1 Definitions
    ``Rated Flat 30-second and 2-minute One Engine Inoperative (OEI)
Power,'' with respect to rotorcraft turbine engines, means (1) a single
rating for which the shaft horsepower and associated operating
limitations of the 30-second OEI and 2-minute OEI ratings are equal,
and (2) the shaft horsepower is that developed under static conditions
at the altitude and temperature for the hot day, and within the
operating limitations established under Part 33. The rating is for
continuation of flight operation after the failure or shutdown of one
engine in multiengine rotorcraft, for up to three periods of use no
longer than 2.5 minutes each in any one flight, and followed by
mandatory inspection and prescribed maintenance action.
2. Part 33 requirements
    (a) The airworthiness standards in Part 33 Amendment 30 for the 30-
second OEI and 2-minute OEI ratings are applicable to the Flat 30-
second and 2-minute OEI Power rating. In addition the following special
conditions apply;
    (b) Section 33.7 Engine ratings and operating limitations. Flat 30-
second and 2-minute OEI Power rating and operating limitations are
established for power, torque, rotational speed, gas temperature, and
time duration.
    (c) Section 33.27 Turbine, compressor, fan, and turbosupercharger
rotor overspeed. The requirements of Sec.  33.27, except that following
the test, the rotor may not exhibit conditions such as cracking or
distortion which preclude continued safe operation.
    (d) Section 33.28 Engine controls systems. Must incorporate a
means, or a provision for a means, for automatic availability and
automatic control of the Flat 30-second and 2-minute OEI Power within
the declared operating limitations.
    (e) Section 33.29 Instrument Connection. In lieu of the
requirements of 33.29(c) the PW210A must incorporate a means or a
provision for a means to:
    (1) Alert the pilot when the engine is at the Flat 30-second and 2-
minute OEI Power level, when the event begins, and when the time
interval expires;
    (2) Automatically record each usage and duration of power at the
Flat 30-second and 2-minute OEI Power rating;
    (3) Following each flight when the Flat 30-second and 2-minute OEI
Power rating is used, alert maintenance personnel in a positive manner
that the engine has been operated at the Flat 30-second and 2-minute
OEI Power level, and permit retrieval of the recorded data; and
    (4) Enable routine verification of the proper operation of the
above means.
    (f) Section 33.87 Endurance test. The requirements applicable to
30-second and 2-minute OEI ratings, except for:
    (1) The test of Sec.  33.87(a)(7) for the purposes of temperature
stabilization, must be run with a test period time of 2.5 minutes.
    (2) The tests in Sec.  33.87(f)(2) and (3) must be run continuously
for the duration of 2.5 minutes, and
    (3) The tests in Sec.  33.87(f)(6) and (7) must be run continuously
for the duration of 2.5 minutes.
    (g) Section 33.88 Engine overtemperature test. The requirements of
Sec.  33.88(b) except that the test time is 5 minutes instead of 4
minutes.

    Issued in Burlington, Massachusetts, on June 26, 2015.
Ann C. Mollica,
Acting Manager, Engine & Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 2015-16713 Filed 7-7-15; 8:45 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 83, Number 116 (Friday, June 15, 2018)]
[Notices]
[Pages 28048-28052]
[FR Doc No: 2018-12853]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83404; File No. SR-NYSE-2018-23]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List Related to Co-Location Services in Connection With
the Re-Launch of Trading on NYSE National, Inc. and Proposed NYSE
National Co-Location Services

June 11, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 30, 2018, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its Price List related to co-
location services in connection with the re-launch of trading on NYSE
National, Inc. (``NYSE National'') and proposed NYSE National co-
location services. The Exchange also proposes to make a non-substantive
change to remove obsolete text from the Price List. The proposed rule
change is available on the Exchange's website 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 its Price List related to co-
location \4\ services in connection with the re-launch of trading on
NYSE National and proposed NYSE National co-location services.
Specifically, the Exchange proposes to make changes to General Note 1
and General Note 4 of the Price List to add references to NYSE
National. The Exchange also proposes to make a non-substantive change
to remove obsolete text from the Price List, with respect to the
wireless connection to third party data provided by the Toronto Stock
Exchange (``TSX'').
---------------------------------------------------------------------------

    \4\ The Exchange initially filed rule changes relating to its
co-location services with the Commission in 2010. See Securities
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310
(September 27, 2010) (SR-NYSE-2010-56). The Exchange operates a data
center in Mahwah, New Jersey (the ``data center'') from which it
provides co-location services to Users.
---------------------------------------------------------------------------

    On January 31, 2017, Intercontinental Exchange, Inc. (``ICE''), the
indirect parent of the Exchange, acquired all of the outstanding
capital stock of NYSE National through its wholly-owned subsidiary NYSE
Group.\5\ As a result, NYSE National is an affiliate of the Exchange.
On February 1, 2017, NYSE National ceased trading operations.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 79902 (January 30,
2017), 82 FR 9258 (February 3, 2017) (SR-NSX-2016-16). Prior to its
acquisition, NYSE National was named ``National Stock Exchange,
Inc.''
    \6\ See Securities Exchange Act Release No. 80018 (February 10,
2017), 82 FR 10947 (February 16, 2017) (SR-NSX-2017-04).
---------------------------------------------------------------------------

    NYSE National filed proposed rule changes to re-launch trading
operations.\7\ NYSE National has stated that it anticipates re-
launching trading operations in the second quarter of 2018. In
connection with the anticipated re-launch of NYSE National's trading
operations, NYSE National has filed a proposed rule change to offer the
same co-location services and fees offered by the Exchange, NYSE Arca,
Inc. (``NYSE Arca''), and NYSE American LLC (``NYSE American'' and,
together with NYSE Arca, the ``Affiliate SROs''), which are its
affiliates.\8\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 83289 (May 17, 2018)
(notice of filing of Amendment No. 1 and order granting accelerated
approval of a proposed rule change, as amended by Amendment No. 1,
to support the re-launch of NYSE National, Inc. on the Pillar
Trading Platform) (``NYSE National Trading Rules Approval''). See
also Securities Exchange Act Release No. 82819 (March 7, 2018), 83
FR 11098 (March 13, 2018) (SR-NYSENat-2018-02).
    \8\ See SR-NYSENat-2018-07 (May 18, 2018).
---------------------------------------------------------------------------

    The Exchange requests that the proposed rule change become both
effective and operative immediately upon filing.\9\
---------------------------------------------------------------------------

    \9\ See NYSE National Trading Rules Approval, supra note 7.
---------------------------------------------------------------------------

General Note 1
    General Note 1 of the Price List provides that a User \10\ that
incurs co-location fees for a particular co-location service shall not
be subject to co-location fees for the same co-location service charged
by the other Affiliate SROs.\11\ The Exchange proposes to add NYSE
National to General Note 1, as follows (additions underlined, deletions
in brackets):
---------------------------------------------------------------------------

    \10\ For purposes of the Exchange's co-location services, a
``User'' means any market participant that requests to receive co-
location services directly from the Exchange. See Securities
Exchange Act Release No. 76008 (September 29, 2015), 80 FR 60190
(October 5, 2015) (SR-NYSE-2015-40).
    \11\ See Securities Exchange Act Release No. 70206 (August 15,
2013), 78 FR 51765 (August 21, 2013) (SR-NYSE-2013-59). Some Users
do not connect to the Exchange or the Affiliate SROs, but rather
provide services to other Users co-located at the data center. Id.
[GRAPHIC] [TIFF OMITTED] TN15JN18.017

    By including the proposed reference to NYSE National, General Note
1 would provide that the fees a User pays for co-location services
would not depend on whether the User connects to none, one, some, or
all of the Exchange, the Affiliate SROs, and NYSE National.
General Note 4
    General Note 4 of the Price List provides that, when a User
purchases access to the Liquidity Center Network (``LCN'') or the
internet protocol (``IP'') network, the two local area networks
available in the data center,\12\ a User receives (a) the ability to
access the trading and execution systems of the Exchange and Affiliate
SROs, and (b) connectivity to any of the listed data products
(``Included Data Products'') that it selects.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 79730 (January 4,
2017), 82 FR 3045 (January 10, 2017) (SR-NYSE-2016-92).
---------------------------------------------------------------------------

    The Exchange proposes to add NYSE National to the list of trading
and execution system providers in the first sentence of the first
paragraph, thereby expanding the definition of ``Exchange Systems''
which Users may access to include NYSE National. It also proposes to
add NYSE National to the lists of affiliated entities in the first,
third and fourth sentences. The proposed changes are as follows
(additions underlined, deletions in brackets):

[GRAPHIC] [TIFF OMITTED] TN15JN18.018

    In addition, the Exchange proposes to add NYSE National to the
table of Included Data Products set forth in General Note 4.
Toronto Stock Exchange
    The Exchange offers Users the option to receive certain market data
feeds from third party markets through a wireless connection. The
description of the charge for the TSX wireless connection in the Price
List states that ``[c]ustomers with an existing wireless connection to
TSX at the time the Exchange makes the service available will not be
subject to an initial charge or receive 30-day testing period.''
Because the wireless connection to the TSX has become effective, the
statement is obsolete. Accordingly, the Exchange proposes to delete the
statement from the Price List.
General
    As is the case with all Exchange co-location arrangements, (i)
neither a User nor any of the User's customers would be permitted to
submit orders directly to the Exchange unless such User or customer is
a member organization, a Sponsored Participant or an agent thereof
(e.g., a service bureau providing order entry services); (ii) use of
the co-location services proposed herein would be completely voluntary
and available to all Users on a non-discriminatory basis; \13\ and
(iii) a User would only incur one charge for the particular co-location
service described herein, regardless of whether the User connects only
to the Exchange or to the Exchange, one or both of its Affiliate SROs,
or NYSE National.\14\
---------------------------------------------------------------------------

    \13\ As is currently the case, Users that receive co-location
services from the Exchange will not receive any means of access to
the Exchange's trading and execution systems that is separate from,
or superior to, that of other Users. In this regard, all orders sent
to the Exchange enter the Exchange's trading and execution systems
through the same order gateway, regardless of whether the sender is
co-located in the data center or not. In addition, co-located Users
do not receive any market data or data service product that is not
available to all Users, although Users that receive co-location
services normally would expect reduced latencies in sending orders
to, and receiving market data from, the Exchange.
    \14\ See 78 FR 51765, supra note 11, at 51766. The Affiliate
SROs have also submitted substantially the same proposed rule change
to propose the changes described herein. See SR-NYSEAMER-2018-23 and
SR-NYSEArca-2018-36.
---------------------------------------------------------------------------

    The proposed change is not otherwise intended to address any other
issues relating to co-location services and/or related fees, and the
Exchange is not aware of any problems that Users would have in
complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\16\ 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 regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to, and perfect the mechanisms of,
a free and open market and a national market system and, in general, to
protect investors and the public interest and because it is not
designed to permit

unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would remove
impediments to, and perfect the mechanisms of, a free and open market
and a national market system and, in general, protect investors and the
public interest because the amendments would update General Note 1 to
reflect NYSE National's provision of co-location services. By including
the proposed reference to NYSE National, General Note 1 would provide
that the fees a User pays for co-location services would not depend on
whether the User connects to none, one, some, or all of the Exchange,
the Affiliate SROs, and NYSE National. For example, to charge one User
three times for a cage because that User connects to the Exchange, NYSE
National, and an Affiliate SRO, when another User that buys the same
size cage and only connects to the Exchange only pays once, would not
promote just and equitable principles of trade. The Exchange also
believes that the proposed amendments to General Note 1 are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers because charging a User for co-location services
based on how many markets to which a User connects could result in the
Exchange, NYSE National and the Affiliate SROs receiving the proceeds
from multiple fees despite only providing a service once.
    The Exchange believes that the proposed amendments would remove
impediments to, and perfect the mechanisms of, a free and open market
and a national market system and, in general, protect investors and the
public interest because the amendments would update General Note 4 to
reflect NYSE National's provision of co-location services. By expanding
the definition of ``Exchange Systems'' to include the NYSE National
trading and execution system, incorporating references to NYSE
National, and adding NYSE National to the list of Included Data
Products, the Exchange would provide market participants with clarity
as to what access and connectivity a User receives when it purchases
access to the LCN or IP network, thereby making the description more
accessible and transparent.
    Further, the Exchange believes that revising General Note 4 to
provide a more detailed description of the access and connectivity to
NYSE National that Users would receive with their purchase of access to
the LCN or IP network would promote just and equitable principles of
trade and remove impediments to, and perfect the mechanisms of, a free
and open market and a national market system as it would make clear
that all Users that voluntarily select to access the LCN or IP network
would receive the same access to the NYSE National trading and
execution systems and connectivity to NYSE National data and would not
be subject to a charge above and beyond the fee paid for the relevant
LCN or IP network access. In addition, a User would not be required to
use any of its bandwidth to access the NYSE National trading and
execution system or connect to NYSE National data unless it wishes to
do so. A User only receives the access to Exchange Systems and
connectivity to Included Data Products that it selects, and a User can
change such access or connectivity it receives at any time, subject to
authorization from the data provider or relevant Exchange or Affiliate
SRO.
    The Exchange believes that the non-substantive change to remove
obsolete text with respect to the wireless connection to TSX data would
remove impediments to, and perfect the mechanisms of, a free and open
market and a national market system and, in general, protect investors
and the public interest because the amendment would clarify Exchange
rules and alleviate any possible market participant confusion caused by
the obsolete reference.
    The Exchange also believes that the proposed fee change is
consistent with Section 6(b)(4) of the Act,\17\ in particular, because
it provides for the equitable allocation of reasonable dues, fees, and
other charges among its members, issuers and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers or dealers.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members, issuers and other persons using its facilities and does
not unfairly discriminate between customers, issuers, brokers or
dealers, because the change would result in the Exchange offering co-
location services related to access and connectivity to NYSE National,
an affiliate of the Exchange, on the same terms and in the same manner
as it offers access and connectivity to the Exchange and the Affiliate
SROs. By adding NYSE National to General Notes 1 and 4, the proposed
change would ensure that the fees a User pays for co-location services
would not depend on whether the User connects to none, one or more of
the Exchange, the SRO Affiliates and NYSE National. For example, a User
that connects to the Exchange, NYSE National, and an Affiliate SRO, and
another User that only connects to the Exchange, would both receive the
same services for the same fee, including the same access and
connectivity with their purchase of access to the LCN or IP network.
    The Exchange believes that the proposed non-substantive change to
remove obsolete text with respect to the wireless connection to TSX
data would be reasonable because the change would have no impact on
pricing. Rather, the change would remove obsolete information from the
description of the pricing for the service, alleviating possible market
participant confusion.
    For these reasons, the Exchange believes that the proposal is
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\18\ the Exchange
believes that the proposed rule change will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because, in addition to the use of co-location
services being completely voluntary, they are available to all Users on
an equal basis (i.e., the same range of products and services are
available to all Users).
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the change would result
in the Exchange offering co-location services related to access and
connectivity to NYSE National, an affiliate of the Exchange, on the
same terms and in the same manner as it offers access and connectivity
to the Exchange and the Affiliate SROs. By adding NYSE National to
General Notes 1 and 4, the proposed change would ensure that the fees a
User pays for co-location services would not depend on whether the User
connects only to none, one or more of the Exchange, the SRO Affiliates
and NYSE National. Further, the Exchange believes that revising General
Note 4 to provide a more detailed description of the access and
connectivity to NYSE National that Users would receive with their
purchase of access to the LCN or IP network would make clear that all
Users that voluntarily select to access the LCN or IP network would
receive the same access to the NYSE National trading and execution
systems and connectivity to NYSE National data and would not be

subject to a charge above and beyond the fee paid for the relevant LCN
or IP network access.
    In addition, a User would not be required to use any of its
bandwidth to access the NYSE National trading and execution system or
connect to NYSE National data unless it wishes to do so.
    The Exchange believes that the non-substantive change to remove
obsolete text with respect to the wireless connection to TSX data would
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act because it would
have no impact on pricing or existing services. Rather, the change
would remove obsolete information from the description of the pricing
for the service, alleviating possible market participant confusion.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\21\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requests
that the Commission waive the 30-day operative delay so that the
proposed rule changes may become operative immediately upon filing. The
Exchange believes that waiver of the operative delay is consistent with
the protection of investors and the public interest because it would
allow the Exchange to offer co-location services related to access and
connectivity to NYSE National to coincide with the relaunch of the NYSE
National and its proposed co-location services. The Exchange also notes
that waiver would alleviate the possibility of confusion that could be
caused by inconsistencies between the Exchange's Price List and NYSE
National co-location services that are to be included in NYSE
National's price list. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest as it would allow the Exchange to offer co-locations
services in the form of access and connectivity to NYSE National
without undue delay. Accordingly, the Commission waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\24\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 protected]. Please include
File Number SR-NYSE-2018-23 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-NYSE-2018-23. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2018-23 and should be submitted on
or before July 6, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12853 Filed 6-14-18; 8:45 am]
 BILLING CODE 8011-01-P