Financial Industry Regulatory Authority

F1nra

Financial Industry Regulatory Authority

Robe rt LO. Colby

Execut ive Vice President

and Chief Legal Officer

February 23, 2017

Robert W. Errett

Deputy Secretary

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-1090

Re:

Exemptive Application Pursuant to Rule 608 of Regulation NMS ­

NMS Plan to Implement a Tick Size Pilot Program

Dear Mr. Errett:

Pursuant to Rule 608(e) of Regulation NMS under the Securities Exchange Act

of 1934 ("Exchange Act"), Financial Industry Regulatory Authority, Inc. ("FINRA"),

on behalf of itself and Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., Bats

EDGA Exchange, Inc., Bats EDGX Exchange, Inc., Chicago Stock Exchange, Inc.,

Investors Exchange LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The Nasdaq

Stock Market LLC, NYSE National, Inc., New York Stock Exchange LLC ("NYSE"),

NYSE MKT LLC, and NYSE Arca, Inc. (collectively, "Participants"), requests that

the Securities and Exchange Commission ("Commission" or "SEC") grant an

exemption from the website data publication requirements of the National Market

System Plan to Implement a Tick Size Pilot Program ("Plan" or "Pilot"), 1 as discussed

below. 2

In consultation with the Commission, the Participants intend to submit

proposed rule changes to modify certain aspects of the website data publication

provisions ("Date of Appendix B Data Publication Rule Filings"). 3 Specifically, the

Participants intend to file proposed rule changes, as necessary, to delay the website

publication of the required Appendix B data until April 28, 2017, to permit additional

time to assess a means of addressing the confidentiality concerns raised in connection

See Securities Exchange Act Release No. 74892 (May 6, 2015), 80 FR 27513

(May 13, 2015) ("Approval Order").

2

Capitalized terms used herein, but not otherwise defined, shall have the

meanings ascribed to them in the Plan.

3

See e.g., File No. SR-FINRA-2017-005.

Investor protection. Market integrity.

1735 K Street, NW

Washington, DC

20006-1506

t 202 728 8484

f 202 728 8075

www.finra.org

Robert Errett

February 23, 2017

Page 2of5

with the publication of Appendix B data. 4 To the extent that the provisions contained

in the Date of Appendix B Data Publication Rule Filings alter the data requirements in

the Plan, as approved by the Commission, the Participants respectfully request that the

Commission grant an exemption from those provisions of the Plan.

Background

On August 25, 2014, the Participants filed the Plan5 with Commission,

pursuant to Section 1 lA of the Act 6 and Rule 608 of Regulation NMS thereunder. 7

The Participants filed the Plan to comply with an order issued by the Commission on

June 24, 2014. 8 The Plan was published for comment in the Federal Register on

November 7, 2014, and approved by the Commission, as modified, on May 6, 2015. 9

The Commission approved the Pilot on a two-year basis, with implementation to begin

no later than May 6, 2016. 10 On November 6, 2015, the SEC provided an exemption

to the Participants from implementing the Pilot until October 3, 2016. 11 The Plan is

designed to allow the Commission, market participants, and the public to study and

assess the impact of increment conventions on the liquidity and trading of the common

stock of small-capitalization companies. Each Participant is required to comply, and

to enforce compliance by its member organizations, as applicable, with the provisions

of the Plan.

Among other things, the Plan provides for the collection of specified data, the

transmission of data to the SEC, and the publication of data on Participant websites. 12

4

See Letters from Adam C. Cooper, Senior Managing Director and Chief Legal

Officer, Citadel Securities, to Brent J. Fields, Secretary, Commission, dated

December 21, 2016 ("Citadel letter"); and William Hebert, Managing Director,

Financial Information Forum, to Robert Errett, Deputy Secretary, Commission,

dated December 21, 2016 ("FIF letter").

5

See Letter from Brendon J. Weiss, Vice President, Intercontinental Exchange,

Inc., to Secretary, Commission, dated August 25, 2014.

6

15 u.s.c. 78k-l.

7

17 CFR 242.608.

8

See Securities Exchange Act Release No. 72460 (June 24, 2014), 79 FR 36840

(June 30, 2014).

9

See Approval Order.

10

Id.

11

See Securities Exchange Act Release No. 76382 (November 6, 2015), 80 FR

70284 (November 13, 2015).

12

See Section VII of the Plan. See also Appendices B and C to the Plan.

Robert Errett

February 23, 2017

Page 3of5

The Participants previously were granted exemptive relief and proposed rule changes

to, among other things, delay the publication of website data pursuant to Appendices B

and C to the Plan until February 28, 2017, and to delay the ongoing website

publication by ninety days such that it would be published within 120 calendar days

following the end of the month. 13

Rule 608 and the Proposed Exemption

Rule 608(c) of Regulation NMS provides that "[e]ach self-regulatory

organization shall comply with the terms of any effective national market system plan

of which it is a sponsor or a participant. Each self-regulatory organization also shall,

absent reasonable justification or excuse, enforce compliance with any such plan by its

members and persons associated with its members." 14 Rule 608(e) allows the

Commission to "exempt from the provisions of this section, either unconditionally or

on specified terms and conditions, any self-regulatory organization, member thereof,

or specified security, if the Commission determines that such exemption is consistent

with the public interest, the protection of investors, the maintenance of fair and orderly

markets and the removal of impediments to, and perfection of the mechanisms of, a

national market system." 15 The Participants are seeking exemptive relief from the

specific Plan provisions set forth below.

Website Data Publication Requirements

Section VIl(A) of the Plan (Collection of Trading Center Pilot Data) provides

that the Participants must collect the following data with respect to Pilot Securities (as

set forth in Appendix B): 16

Daily market quality statistics of orders by security, order type, original

order size (as observed by the Trading Center), hidden status (as

applicable), and coverage under Rule 605 of Regulation NMS;

Specified data regarding market orders and marketable limit orders;

13

See. e.g., Letter from David S. Shillman, Associate Director, Division of

Trading and Markets, Commission, to Marcia E. Asquith, Senior Vice

· President and Corporate Secretary, FINRA, dated November 30, 2016; see also

Securities Exchange Act Release No. 79424 (November 29, 2016), 81 FR

87603 (December 5, 2016) (Notice of Filing and Immediate Effectiveness of

File No. SR-FINRA-2016-042).

14

17 CFR 242.608(c).

15

17 CFR 242.608(e).

16

See Section VIl(A) of the Plan.

Robert Errett

February 23, 2017

Page 4of5

Daily number of registered Market Makers; and

Daily Market Maker participation statistics.

Section VIl(A) of the Plan further provides, among other things, that on a monthly

basis, each Participant and the DEA for each member of a Participant operating a

Trading Center will, as applicable, make specified data publicly available on its

respective website for free.

As stated above, the SEC previously provided exemptive relief, and the

Participants amended their rules, as appropriate, to delay website publication of data

pursuant to Appendices Band C until February 28, 2017, and to extend the 30-day

delay provided for in the Plan by an additional 90 days. 17 These delays were intended

to address data confidentiality concerns by providing for the passage of additional

time between the market information reflected in the data and the public availability of

such information.

The Participants are requesting an exemption from Section VII(A) of the Plan

to permit the Participants to adopt rule amendments, as necessary, to further delay

website publication of Appendix B data until April 28, 201 7, to permit additional time

to assess a means of addressing the confidentiality concerns raised in connection with

the publication of Appendix B data. 18 The Participants believe that extending the

period by which Participants must make publicly available the Appendix B data on

Participant websites will support the Plan's objective that the data made publicly

available will not identify the Trading Center that generated the data. 19 The

Participants are requesting this additional delay solely with regard to the publication of

Appendix B data (Participant Appendix C data for the Pre-Pilot Period through the

month of January 2017, will be published on the FINRA website on February 28,

2017). The Participants anticipate that proposed rule changes will be filed in the near

future, as necessary, to address the data confidentiality issues raised regarding

Appendix B data publication. 20

*****

For the reasons set forth above, the Participants respectfully request that,

pursuant to Rule 608(e), the Commission grant exemptive relief to the provisions in

the Plan as set forth above. The Participants therefore believe that this exemption is

consistent with the public interest, the protection of investors, the maintenance of fair

17

See supra note 13.

18

See Citadel letter and FIF letter.

19

See Section VII(A) of the Plan.

20

See Citadel letter and FIF letter.

Robert Errett

February 23, 2017

Page 5of5

and orderly markets and the removal of impediments to, and perfection of the

mechanisms of, a national market system.

Thank you in advance for your consideration of this request.

Robert L.D. Colby