NYSE and NYSE Arca amended their rules (NYSE Rule 80C and NYSE Arca Rule 7.11), discussed

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1 September 15, 2015 Highlights: On May 31, 2012, the Securities and Exchange Commission (SEC) approved, on a pilot basis, a National Market System Plan, known as the Limit Up/Limit Down Plan or LULD, to address extraordinary market volatility. 1 The purpose of this document is to inform readers of how NYSE, NYSE MKT and NYSE Arca handle order flow sent or routed directly to our systems under LULD. 2 Please refer to each market s rule filings for complete details. OVERVIEW The Plan is designed to prevent trades in individual NMS Stocks from occurring outside of specified price bands, which will be set at a percentage level above and below the average reference price of a security over the preceding five minute period (SEC Approval order linked below). LULD was implemented in two phases. Phase I, became effective on February 4, 2013, and comprises all securities in the S&P 500, the Russell 1000 and select Exchange Traded Products (ETPs), collectively called Tier 1 NMS Stocks. The list can be found in the link provided below 3. Phase II, became effective six months after the start of Phase I, extended to all NMS securities, except for rights and warrants (Tier 2). NYSE and NYSE Arca amended their rules (NYSE Rule 80C and NYSE Arca Rule 7.11), discussed below, consistent with the LULD Plan. OPERATION OF PRICE BANDS The price bands consisting of a Lower and Upper Price Band for each NMS Stock will be calculated by the two SIPs CTA and Nasdaq UTP. When the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band, the SIPs shall disseminate the National Best Bid (Offer) with an indicator identifying it as unexecutable. Trading immediately enters a Limit State if the National Best Offer (Bid) equals but does not cross the Lower (Upper) Price Band. When a Limit State occurs, the SIPs shall indicate that National Best Bid (Offer) as a Limit State Quotation. Trading exits a Limit State if, within 15 seconds of entering the Limit State, all Limit State Quotations were executed or canceled in their entirety. If the market does not exit a Limit State within 15 seconds, the primary listing exchange will declare a five minute Trading Pause. 1 The Plan Participants are: BATS Exchange, Inc., BATS Y Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, the Nasdaq Stock Market LLC, and National Stock Exchange, Inc., NYSE, NYSE MKT, and NYSE Arca. 2 References to NYSE include NYSE MKT. 3 limit up limit down 1

2 A Straddle State occurs when the National Best Bid (Offer) is below (above) the Lower (Upper) Price Band and the NMS Stock is not in a Limit State. For example, assume the Lower Price Band for an NMS Stock is $9.50 and the Upper Price Band is $10.50, such NMS stock would be in a Straddle State if the National Best Bid were below $9.50, and therefore non executable, and the National Best Offer were above $9.50 (including a National Best Offer that could be above $10.50). If an NMS Stock is in a Straddle State and trading in that stock deviates from normal trading characteristics, the primary listing exchange may declare a Trading Pause for that NMS Stock. CALCULATION OF PRICE BANDS The SIPs calculate price bands by applying a formula to a Reference Price, which is the arithmetic mean price of Eligible Reported Transactions over the prior five minute period. (The first Reference Price will be either the opening price or the midpoint of the opening quote of the primary listing market.) Transactions that do not update the last sale are not considered. If no eligible trades have occurred in the prior five minutes, the previous Reference Price remains in effect. The Reference Price is updated after 30 seconds only if a new Reference price would be least 1% away from the current Reference Price. The Price Bands are calculated by multiplying the current Reference Price by the applicable Percentage Parameter and then adding or subtracting that value from the Reference Price and rounded to the nearest penny. Price Band = (Reference Price)+/ ((Reference Price)x (Percentage Parameter)) Table 1: Tier 1 Securities (9:45 am 3:35 pm) Previous Closing Price Percentage Parameter Greater than $3.00 5% $0.75 up to and including $ % Less than $0.75 Lesser of $0.15 or 75% Table 2: Tier 2 Securities (9:45 am 3:35 pm) Previous Closing Price Percentage Parameter Greater than $ % $0.75 up to and including $ % Less than $0.75 Lesser of $0.15 or 75% Price Bands are doubled during the first 15 and last 25 minutes of the regular trading day for both Tier 1 and Tier 2 Securities. 2

3 Example of How LULD Works: Assume that XYZ is a Tier 1 security and has a previous closing price of $25. As such, its percentage parameter would fall within the first bucket (Greater than $3.00) of table 1 above. Security XYZ would therefore have upper and lower price bands that are 5% greater ($26.25) and lower ($23.75) than that of the previous closing price, respectively. The bands would be as follows: AMENDMENT TO NYSE RULE 80C NYSE systems re price or cancel buy (sell) interest that is priced or could be executed above (below) the Upper (Lower) Price Band. Any interest that is re priced pursuant to this Rule shall retain its original time stamp. The NYSE will not ack back to the customer the re filed price. The NYSE plans to re price or cancel certain trading interest as follows: Market Orders. A market order will be executed to the extent possible at or within the Price Bands. Any unexecuted portions of a buy (sell) market order shall be displayed at the Upper (Lower) Price Band. Limit priced Interest. Limit priced interest to buy (sell) that is priced above (below) the Upper (Lower) Price Band (both displayable and non displayable) shall be re priced to the Upper (Lower) Price Band. NYSE systems shall also re price resting limit priced interest to buy (sell) to the Upper (Lower) Price Band if Price Bands move and the price of resting limitpriced interest to buy (sell) is above (below) the new Upper (Lower) Price Band as a result. If the Price Bands move and the original limit price of re priced interest is at or within the Price Bands, NYSE systems shall re price such interest to its original limit price. IOC Orders. An IOC order will be executed to the extent possible at or within the Price Bands, with any unexecuted portion being cancelled. Market Pegging Interest. Market Pegging Interest to buy (sell) shall peg to the specified pegging price or the Upper (Lower) Price Band, whichever is lower (higher). Sell Short Orders. During a Short Sale Price Test, as defined in NYSE Rule 440B(b), Short Sale Orders priced below the Lower Price Band shall be re priced to the higher of the Lower Price Band or the Permitted Price, as defined in Rule 440B(e). Original Order Instructions. Any interest re priced pursuant to these rules shall return to its original order instructions for purposes of the re opening transaction following a Trading Pause. Routing away. NYSE systems will not route buy (sell) interest to an away market displaying a sell (buy) quote that is above (below) the Upper (Lower) Price Band. 3

4 NYSE ARCA RULE 7.11 ARCA Exchange systems will cancel buy (sell) interest that is priced or could be executed above (below) the Upper (Lower) Price Band. ARCA will provide a Per Order Override Option on both incoming and resting orders for specific order types (detailed below) that allow orders to be repriced to the LULD Band Price. Any interest that is re priced pursuant to this Rule shall receive a new time priority. The ARCA Exchange does not ack back to the customer the re filed price. The ARCA Exchange cancels or re prices (when applicable) certain trading interest as follows: Market, IOC, ISO IOC, Pegged, MPL, MPL IOC, PL, Tracking, PNP Blind, FOK, Inside Limit and Market Maker Q Orders. All sweep up or down, or if applicable are routed to an away market, to the fullest extent possible within the LULD Price Bands, subject to Trade Collars for Market Orders and the Price Check for limit orders, and then cancel the balance. ETP holders shall be notified of the reason for the cancellation. Cross Orders. All crosses priced outside of the bands are rejected. ALO, Limit, Discretion Limit, Discretionary, PNP, PNP ISO, and All Reserve Orders. All sweep up or down to the LULD and then cancel the balance unless the Order Override Option is selected (FIX Tag 9733=1). If Order Override Option is selected, the above order types will re price at or within the LULD Price Bands and receive a new time priority. If the Price Bands move and the original limit price of a re priced order is at or within the Price Bands, ARCA Exchange systems shall re price such limit orders to their original price and the order will receive a new time priority. Sell Short when SSR is activated. Orders are cancelled if the limit price is priced through the LULD Band. Auction Only, Limit on Open/Close, Market on Open/Close. Orders are allowed as is without regard to the price Bands. Original Order Instructions. Any interest re priced pursuant to these rules shall return to its original order instructions for purposes of the re opening transaction following a Trading Pause. Routing. ARCA Exchange systems shall not route to an away market displaying a sell (buy) quote that is above (below) the Upper (Lower) Price Band. PO orders, PO+ Orders and PO+ versions of MOO, MOC, LOO, and LOC will route to the listing market without regard to the Price Bands. Orders that split time between ARCA and the Listing market (PSO, 9:45 and 3:55 orders) will follow limit order behavior and will be canceled should they violate a Price Band. The orders are eligible for the override instruction to allow re pricing. However, when the order is sent to the listing market it is sent at the original order price and the rules of the listing market exchange will govern its further behavior. 4

5 Contact Info: For any business questions concerning this notice, please contact your NYSE Relationship Manager or: Bob Airo, Michael Paulyson, Bob Hill, ETP Team, Reference Documents: SEC Approval Order pdf CTA Market Data notice UTP Vendor Alert 3 NYSE SSCB FAQs NYSE. All Rights Reserved. 5