[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25741-25742]
[FR Doc No: 2015-10404]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74837; File No. SR-NYSE-2015-19]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Rule 15 To Reflect That Exchange Systems Will Not Publish
Order Imbalance Information on the Initial Public Offering of a
Security

April 29, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on April 21, 2015, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Rule 15 to reflect that Exchange
systems will not publish Order Imbalance Information on the initial
public offering (``IPO'') of a security. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 15 to reflect that Exchange
systems will not publish Order Imbalance Information if a security is
an IPO.
    Rule 15(c) currently provides that Exchange systems may make
available, from time to time and as the Exchange shall determine, Order
Imbalance Information \4\ prior to the opening of a security on the
Exchange. Rule 15(c)(2)(i) provides that Order Imbalance Information
will use the last reported sale price in the security on the Exchange
as the reference price to indicate the number of shares required to
open the security with an equal number of shares on the buy side and
sell side of the market. For circumstances when there is no last
reported sale in a security on the Exchange, i.e., IPOs or transferred
securities, Rule 15(c)(2)(ii)(D) and (E) specify a different reference
price, which for IPOs is the offering price.
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    \4\ Order Imbalance Information reflects real-time order
imbalances that accumulate prior to the opening transaction on the
Exchange and the price at which interest eligible to participate in
the opening transaction may be executed in full. Order Imbalance
Information disseminated pursuant to Rule 15(c) includes all
interest eligible for execution in the opening transaction of the
security in Exchange systems, i.e., electronic interest, including
Floor broker electronic interest, entered into Exchange systems
prior to the opening. Order Imbalance Information is disseminated on
the Exchange's proprietary data feeds. See Rule 15(c)(1). As
discussed below, during IPOs there is significant non-electronic
pre-opening interest in the form of oral orders by Floor brokers
that would not be captured by the Exchange's order imbalance feed.
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    To reduce confusion regarding pricing of an IPO, the Exchange
proposes to discontinue publishing Order Imbalance Information if a
security is an IPO. The Exchange believes that the Order Imbalance
Information currently published for IPOs may not be the most accurate
indication of the state of the market for individual IPO securities. In
calculating Order Imbalance Information for IPOs, Exchange systems do
not have access to interest represented in the crowd by Floor brokers,
i.e., orally bid or offered at the point of sale on the trading Floor,
which in the case of IPOs can represent significant interest.
Similarly, Exchange systems do not have access to DMM interest. In the
case of IPOs, both types of interest play an important role in
determining the initial opening price, which can fluctuate
significantly during the price discovery process leading up to the
opening transaction. The Exchange believes it is therefore appropriate
to discontinue publishing Order Imbalance Information for a security
that is an IPO.
    The Exchange notes that indications as required pursuant to Rules
15(a) and/or 123D(1), if applicable,\5\ would still be published, if
warranted. Because the DMM, who does have knowledge of Floor-based
trading interest for an IPO, is responsible for publishing indications
pursuant to Rules 15(a) and/or 123D(1), the Exchange believes that such
indications represent a truer state of the market for an IPO. The
Exchange believes that discontinuing Order Imbalance Information would
reduce any confusion in the market if there is a difference between the
Order Imbalance Information and pricing information that may be
published

pursuant to a Rule 15(a) or Rule 123D(1) indication.
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    \5\ Rule 15(a) provides that if the opening transaction in a
security will be at a price that represents a change of more than
the ``applicable price change'' specified in the Rule (representing
a numerical or percentage change from the security's closing price
per share or, in the case of an IPO, the security's offering price),
the DMM arranging the opening transaction or the Exchange shall
issue a pre-opening indication (a ``Rule 15 Indication''), which is
represents a range of where a security may open. The Rule 15
Indication is a one-time snapshot that is published on the
Exchange's proprietary data feeds prior to the scheduled 9:30 a.m.
opening time. A Rule 15 Indication includes the security and the
price range within which the DMM anticipates the opening transaction
will occur, and would include any orally-represented Floor broker
interest for the open. In contrast, because Exchange systems would
not have access to orally-represented interest in the trading crowd,
Rule 15 Indications published by the Exchange would not reflect
Floor broker orally-represented crowd interest. For this reason,
DMM-entered Rule 15 Indications have priority over Exchange-
generated Rule 15 Indications and therefore if a DMM issues a Rule
15 Indication, the Exchange would not publish a Rule 15 Indication
in that security. See Exchange Act Release No. 34-73352 (October 15,
2014), 79 FR 63005, 63006 (October 21, 2014). Rule 123D(1) requires
the dissemination of one or more indications in connection with any
delayed opening where a security has not opened or been quoted by 10
a.m. In addition, Rule 123D(1) provides that dissemination of one or
more indication is mandatory for an opening which will result in a
``significant'' price change from the previous close. For securities
priced under $10, such indications are mandatory if the price change
is one dollar of more; for securities between $10 and $99.99,
indications are required for price movements of the lesser of 10% or
three dollars; and for securities over $100, indications are
required for price movements of five dollars or more. These
guidelines are applicable to IPOs based on the offering price. The
Rule provides specific guidelines for both the number of indications
and length of time between indications. The DMM is responsible for
publishing the Rule 123D mandatory indication and when determining
the price range for the indication, takes into consideration Floor
broker interest that has been orally entered and what, at a given
time, the DMM anticipates the dealer participation in the opening
transaction would be. All indications pursuant to Rule 123D require
the supervision and approval of a Floor Official and are published
to the Consolidated Tape.
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    To effectuate this change, the Exchange proposes to delete the rule
text in subpart (D) of Rule 15(c)(2)(ii), which requires the Exchange
to use the IPO price as the reference price for automated Order
Imbalance Information, and renumber current Rule 15(c)(2)(ii)(E) as new
Rule 15(c)(2)(ii)(D). No other changes to the Exchange's rules are
necessary.
    Because of the technology changes associated with the proposed rule
change, the Exchange proposes to announce the implementation date via
Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\7\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest. The
Exchange believes that discontinuing publishing Order Imbalance
Information for a security that is an IPO would remove impediments to
and perfect the mechanism of a free and open market and a national
market system by eliminating a source of information that may not
accurately reflect the market for such securities, and which may differ
from indications published by the DMM pursuant to either Rule 15(a) or
Rule 123D(1), as may be applicable. The Exchange further believes that
discontinuing publishing such information would advance the efficiency
and transparency of the opening process, thereby fostering accurate
price discovery at the open of trading. For the same reasons, the
proposal is also designed to protect investors as well as the public
interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather improve the
current process of providing pre-market information to customers and
the investing public about a security that is an IPO.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    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) \12\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2015-19 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-2015-19. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2015-19 and should be
submitted on or before May 26, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10404 Filed 5-4-15; 8:45 am]
 BILLING CODE 8011-01-P