Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Definition of Complex Orders and Stock/Options Orders To Accommodate the Trading of Option Contracts Overlying 10 Shares of a Security, 18649-18652 [2013-07005]
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Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices
All submissions should refer to File
Number SR–ICC–2013–03. 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 (https://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 Section, 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
filings will also be available for
inspection and copying at the principal
office of ICC and on ICC’s Web site at
https://www.theice.com/publicdocs/
regulatory_filings/
ICEClearCredit_20130306.pdf.
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–ICC–2013–03 and should
be submitted on or before April 17,
2013.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2013–07008 Filed 3–26–13; 8:45 am]
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69197; File No. SR–
NYSEArca–2013–28]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the Definition
of Complex Orders and Stock/Options
Orders To Accommodate the Trading
of Option Contracts Overlying 10
Shares of a Security
March 20, 2013.
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 March
19, 2013, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
definition of Complex Orders and
Stock/Options orders to accommodate
the trading of option contracts overlying
10 shares of a security (‘‘mini-options
contracts’’). 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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
6 17
CFR 200.30–3(a)(12).
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18649
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange recently amended its
rules to allow for the listing of minioptions contracts on SPDR S&P 500
(‘‘SPY’’), Apple, Inc. (‘‘AAPL’’), SPDR
Gold Trust (‘‘GLD’’), Google Inc.
(‘‘GOOG’’) and Amazon.com Inc.
(‘‘AMZN’’).4 Whereas standard option
contracts represent a deliverable of 100
shares of an underlying security, minioptions contracts represent a deliverable
of 10 shares. Except for the difference in
the number of deliverable shares, minioptions contracts have the same terms
and contract characteristics as regularsized equity and ETF options, including
exercise style. The Exchange notes that
Exchange rules that apply to the trading
of standard option contracts would
apply to mini-option contracts as well.
Prior to the commencement of trading
mini-options, the Exchange proposes to
amend Rule 6.62 (Certain Types of
Orders Defined) and Rule 6.92
(Definitions) to provide that Exchange
rules regarding complex orders shall
apply to mini-options and that
consequently, OTP Holders may execute
complex orders and Stock/Option
Orders involving mini-options
contracts. Moreover, the Exchange seeks
to amend these rules to provide that all
permissible ratios referenced in the
definitions of Stock/Option Orders
represent the total number of shares of
the underlying stock in the option leg to
the total number of shares of the
underlying stock in the stock leg.
Finally, the Exchange seeks to make
these amendments to coincide with a
similar proposal recently submitted by
another options market.5
Exchange Rule 6.62 governs Complex
Orders and Stock/Options Orders on the
Exchange and Rule 6.92 lists definitions
applicable to intermarket linkage.
Currently, a Stock/Option Orders are
defined in Rule 6.62(h)(1) and Rule
6.92(a)(4)(ii) as an order to buy or sell
a stated number of units of an
underlying stock or a security
convertible into the underlying stock
coupled with the purchase or sale of
options contract(s) on the opposite side
of the market representing either (A) the
same number of units of the underlying
stock or convertible security, or (B) the
number of units of the underlying stock
4 See Securities Exchange Act Release Nos. [sic]
67948 (September 28, 2012), 77 FR 60735 (October
4, 2012) (SR–NYSE–Arca–2012–64) (SR–ISE–2012–
58).
5 See Securities Exchange Act Release No. 34–
69129 (March 13, 2013) (SR–CBOE–2013–33).
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necessary to create a delta neutral
position, but in no case in a ratio greater
than 8 options contracts per unit of
trading of the underlying stock or
convertible security established for that
series by the Clearing Corporation.
Therefore, under this definition it
would be permissible to execute, for
example, a trade where the options leg
consists of one (1) standard option
contract (i.e., 100 shares) and the stock
leg consists of 100 shares of the
underlying stock. Additionally, it would
be permissible to execute a trade where
the options leg consists of eight (8)
standard option contracts (i.e., 800
shares) and the stock leg consists of 100
shares of the underlying stock.
The terms Complex Order in Rule
6.62(e) and Complex Trade in Rule
6.92(a)(4)(i) are defined substantially
identical as any order involving the
execution of two or more different
options series in the same underlying
security occurring at or near the same
time in a ratio that is equal to or greater
than one-to-three (.333) and less than or
equal to three-to-one (3.00).
The Exchange notes that the
abovementioned permissible ratios were
established to ensure that only complex
and Stock/Option orders that seek to
achieve legitimate investment strategies
are afforded certain benefits.
Particularly, since compliance with
trade-through rules may impede a
market participant’s ability to achieve
the legitimate investment strategies that
complex and Stock/Option orders
facilitate, an exception from the
prohibition on trade-throughs is
provided for any transaction that was
effected as a portion of a legitimate
complex and Stock/Option order.
Requiring a meaningful relationship
between the different legs of a complex
and Stock/Option order prevents market
participants from taking advantage of
these orders to circumvent the
otherwise applicable trade-through rules
(e.g., preventing the execution of a
Stock/Option Order where the option
leg consists of 100 options (i.e., 10,000
shares) and the stock leg consists of only
100 shares).
The Exchange proposes to amend the
definition of Stock/Option Orders in
Rule 6.62(h)(1) and Rule 6.92(a)(4)(ii).
As discussed above, the Stock/Option
Order definition in both Rule 6.62 and
Rule 6.92 clearly permits that an option
leg may be coupled with a stock leg
representing the same number of units
of the underlying stock (i.e., one-to-one
ratio). The Exchange seeks to provide
that mini-options contracts may also be
coupled with a stock leg if the stock leg
represents the same number of units of
the underlying stock. For example,
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pursuant to the definition, it would be
permissible to execute a trade where leg
one consists of one (1) mini-option
contract (i.e., 10 shares) and leg two
consists of 10 shares of the underlying
stock.
Next, the Exchange seeks to amend
the Stock/Option Order definition in
Rule 6.62 and Rule 6.92 to provide that
in addition to standard options, minioptions contracts may be coupled with
a stock leg consisting of however many
units of the underlying stock is
necessary to create a delta neutral
position, provided that the total number
of shares of the underlying stock in the
option leg to the total number of shares
of the underlying stock in the stock leg
does not exceed an eight-to-one ratio.
The proposed change specifies that the
permissible ratios should be calculated
and scaled based upon the total number
of shares of the underlying stock in the
option leg to the total number of shares
of the underlying stock in the stock leg,
instead of by the total number of option
contracts in the option leg to the total
number of shares of the underlying
stock in the stock leg. An example of a
permitted Stock/Option Order involving
mini-options contracts would be an
order in which leg one consists of eighty
(80) mini-options contracts (i.e., 800
shares) and leg two consists of 100
shares of the underlying stock (i.e.,
eight-to-one ratio). Similarly, an order
where leg one consists of eight (8) minioptions contracts (i.e., 80 shares) and leg
two consists of 10 shares of the
underlying stock would be permitted.
The proposed rule change provides
that market participants may execute
complex and Stock/Option orders
involving mini-options contracts. The
proposed change also ensures that the
principle behind the permissible ratios
(i.e., to provide a meaningful
relationship between the legs of
complex and Stock/Option Orders) is
maintained for mini-options contracts.
The Exchange also proposes to amend
the definition of Complex Order and
Complex Trade to specify that when
trading a Complex Order/Complex
Trade that is comprised of both minioptions contracts and standard
contracts, ten mini-options contracts
will represent one standard contract.
The Exchange seeks to make clear that
the current definition of Complex Order
in Rule 6.62(e) and Complex Trade in
Rule 6.92(a)(4)(i) applies to both
standard options and mini-options. The
Exchange acknowledges that in
accordance with the provisions of Rules
6.62(e) and 6.92(a)(4)(i), one leg of a
complex order may consist of minioptions contract(s) and the other leg of
the order may consist of standard
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options contract(s), so long as the
underlying security is the same and the
transaction does not violate the
permissible ratios set forth in the rules
(i.e. ratio greater or equal to one-to-three
or less or equal to three-to-one).
Moreover, the Exchange’s proposed
amendment seeks to provide that the
permissible ratios represent the total
number of shares of the underlying
stock in the mini-option leg to the total
number of shares of the underlying
stock in the standard option leg. An
example of a permissible complex order
involving mini-options and standard
options would be an order in which leg
one consists of thirty (30) mini-options
(i.e. 300 shares) and leg two consists of
one (1) standard options (i.e. 100 shares)
in the same underlying security (i.e., a
ratio equal to 3.0). Another example of
a permissible complex order would be
an order in which leg one consists of ten
(10) mini-options (i.e. 100 shares) and
leg two consists of one (1) standard
options (i.e. 100 shares) in the same
underlying security (i.e., a ratio equal to
one-to-one). The Exchange believes the
proposed amendment will reduce
potential confusion for investors when
trading mini-options contracts. Further,
the Exchange proposes to provide that
Complex Orders comprised of both
mini-options contracts and standard
contracts are not available for Electronic
Complex Order trading pursuant to Rule
6.91.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) 6 of the Securities Exchange Act of
1934 (the ‘‘Act’’), in general, and
furthers the objectives of Section
6(b)(5),7 in particular, because it is
designed to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts, to
remove impediments to and to perfect
the mechanism for a free and open
market and a national market system
and, in general, to protect investors and
the public interest.
Specifically, the Exchange believes
that investors and other market
participants would benefit from the
current rule proposal because it would
allow market participants to take
advantage of legitimate investment
strategies and execute complex and
Stock/Option orders in mini-options
contracts. Additionally, the Exchange
believes the proposed rule change will
avoid investor confusion if both
standard options and mini-options on
the same underlying security are
6 15
7 15
E:\FR\FM\27MRN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
27MRN1
Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices
permitted to trade as complex and
Stock/Option orders. Also, the proposal
to maintain the permissible ratios that
are applicable to standard options in
proportion for mini-options contracts
ensures that the principle behind the
permissible ratios (i.e., to provide a
meaningful relationship between the
legs of complex and Stock/Option
orders) is maintained for mini-options,
which promotes just and equitable
principles of trade. The Exchange
believes that describing prior to the
commencement of trading how the
permissible ratios in complex and
Stock/Option orders rules will be scaled
for mini-options contracts would lessen
investor and marketplace confusion.
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. In particular,
the proposed amendment is based upon
recently published rule amendments by
other option exchanges.8 Since minioptions contracts are permitted on
multiply-listed classes, other exchanges
that have received approval to trade
mini-options will have the opportunity
to similarly amend their rules to clarify
and accommodate complex and Stop/
Option orders in mini-options.
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
Because the foregoing 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 for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) 9 of the
Act and Rule 19b–4(f)(6) 10 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) of the Act 11 normally
does not become operative prior to 30
days after the date of the filing.
However, pursuant to Rule 19b–
4(f)(6)(iii) of the Act,12 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has requested the Commission
to waive the 30-day operative delay so
that the proposal may become operative
immediately upon filing. In June 2012,
the Exchange filed a proposed rule
change to amend its rules to list and
trade certain mini-options contracts on
the Exchange, and represented in that
filing that the Exchange’s rules that
apply to the trading of standard options
contracts would apply to mini-options
contracts.13 The Exchange believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because such waiver would minimize
confusion among market participants
about how complex orders and stockoptions orders involving mini-options
contracts will trade.14
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. Such
waiver would allow the Exchange to
implement the proposed rule change
immediately, thereby mitigating
potential investor confusion as to how
complex orders and stock options orders
involving mini-options contracts will
trade. For this reason, the Commission
hereby waives the 30-day operative
delay and designates the proposed rule
change to be operative upon filing with
the Commission.15
The Exchange represented that it
began trading in mini-options contracts
on March 18, 2013.16 The Commission
notes that this proposed rule change
was filed on March 19, 2013, and,
therefore, pursuant to Rule 19b–4(f)(6),
waiver of the 30-day operative delay
renders this proposed rule change
effective upon the day that it was filed,
March 19, 2013.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
11 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
13 See Securities Exchange Act Release No. 67283
(June 27, 2012), 77 FR 39535 (July 3, 2012). See also
supra note 4.
14 See id.
15 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
16 See SR–NYSEArca–2013–28, Item 7.
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12 17
8 See
supra note 5.
U.S.C. 78s(b)(3)(A).
10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of the filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
9 15
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18651
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
to determine whether the proposed rule
change should be approved or
disapproved.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2013–28 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2013–28. 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 (https://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 20549–1090, 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
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submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2013–28, and should be
submitted on or before April 17, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07005 Filed 3–26–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69204; File No. SR–Phlx–
2013–31]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Sections I and II of the Pricing
Schedule
March 21, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on March 15,
2013, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ 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 Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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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 the
Exchange’s Pricing Schedule at Section
I entitled ‘‘Rebates and Fees for Adding
and Removing Liquidity in Select
Symbols,’’ 3 and Section II entitled
‘‘Multiply Listed Options Fees.’’ 4
While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on April 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The rebates and fees in Section I apply to certain
Select Symbols which are listed in Section I of the
Pricing Schedule. The Select Symbols are listed in
Section I of the Pricing Schedule.
4 The pricing in Section II includes options
overlying equities, ETFs, ETNs and indexes which
are Multiply Listed.
1 15
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nasdaqomxphlx.cchwallstreet.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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to increase certain Simple
Order Fees for Removing Liquidity and
Firm Options Transaction Charges in
Penny and Non-Penny Pilot Options.
Despite the increase to these fees, the
Exchange believes that the fees remain
competitive with fees assessed by other
options exchanges. The Exchange is also
proposing to waive the Firm Options
Transaction Charge for the buy side of
a transaction if the same member is both
the buyer and seller of a Firm
transaction when such members are
trading in their own proprietary account
in order to incentivize Firms to add and
remove liquidity in the market.
Section I Amendments
The Exchange proposes to amend the
Simple Order fees in Section I, Part A
of the Pricing Schedule which apply to
Select Symbols. Currently, the Exchange
pays the following Simple Order Fees
for Removing Liquidity: Customer $0.00
per contract and a Specialist,5 Market
Maker,6 Firm, Broker-Dealer and
Professional 7 $0.44 per contract. The
5 A ‘‘Specialist’’ is an Exchange member who is
registered as an options specialist pursuant to Rule
1020(a).
6 A ‘‘Market Maker’’ includes Registered Options
Traders (Rule 1014(b)(i) and (ii)), which includes
Streaming Quote Traders (see Rule 1014(b)(ii)(A))
and Remote Streaming Quote Traders (see Rule
1014(b)(ii)(B)). Directed Participants are also market
makers.
7 The term ‘‘Professional’’ means any person or
entity that (i) is not a broker or dealer in securities,
and (ii) places more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Rule
1000(b)(14).
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Exchange proposes to amend the Simple
Order Fees for Adding Liquidity by
increasing Specialist, Market Maker,
Firm, Broker-Dealer and Professional
fees from $0.44 to $0.45 per contract.
The Exchange proposes to continue to
assess Customers no Fee for Removing
Liquidity in Simple Orders.
Section II Amendments
The Exchange proposes to increase
the Firm electronic Options Transaction
Charge in Penny Pilot Options from
$0.44 to $0.45 per contract. The
Exchange also proposes to amend the
Firm electronic Options Transaction
Charge in Non-Penny Pilot Options from
$0.45 to $0.50 per contract.
The Exchange proposes to waive the
Firm Floor Options Transaction Charge
for the buy side of a transaction if the
Firm represents both sides of a Firm
transaction when such members or its
affiliates under Common Ownership 8
are trading in their own proprietary
account.9 The Firm Floor Options
Transaction Charges in Penny Pilot and
Non-Penny Options are $0.25 per
contract. The Exchange also proposes to
relocate another Firm Options
Transaction Charges waiver for
members executing facilitation orders
pursuant to Exchange Rule 1064 when
such members are trading in their own
proprietary account (including FLEX
and Cabinet Options Transaction
Charges) to a new bullet on the Pricing
Schedule and amend that text to clarify
that the waiver applies to Floor Options
Transaction Charges, which the
Exchange proposes to capitalize for
consistency. The Exchange also
proposes to capitalize the terms ‘‘Floor’’
and ‘‘Options Transaction Charge’’ in
Section II.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Pricing Schedule
is consistent with Section 6(b) of the
Act 10 in general, and furthers the
objectives of Section 6(b)(4) of the Act 11
in particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members and
other persons using its facilities.
The Exchange believes that increasing
the Simple Order Fees For Removing
Liquidity in Select Symbols from $0.44
to $0.45 per contract is reasonable
because the fees will continue to remain
8 Common Ownership is defined as members or
member organizations under 75% common
ownership or control. See Preface to the Exchange’s
Pricing Schedule.
9 This waiver does not apply to electronic
transactions.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4).
E:\FR\FM\27MRN1.SGM
27MRN1
]]>Agencies
[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Notices]
[Pages 18649-18652]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07005]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69197; File No. SR-NYSEArca-2013-28]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the
Definition of Complex Orders and Stock/Options Orders To Accommodate
the Trading of Option Contracts Overlying 10 Shares of a Security
March 20, 2013.
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 March 19, 2013, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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.
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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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend the definition of Complex Orders and
Stock/Options orders to accommodate the trading of option contracts
overlying 10 shares of a security (``mini-options contracts''). 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange recently amended its rules to allow for the listing of
mini-options contracts on SPDR S&P 500 (``SPY''), Apple, Inc.
(``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. (``GOOG'') and
Amazon.com Inc. (``AMZN'').\4\ Whereas standard option contracts
represent a deliverable of 100 shares of an underlying security, mini-
options contracts represent a deliverable of 10 shares. Except for the
difference in the number of deliverable shares, mini-options contracts
have the same terms and contract characteristics as regular-sized
equity and ETF options, including exercise style. The Exchange notes
that Exchange rules that apply to the trading of standard option
contracts would apply to mini-option contracts as well.
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\4\ See Securities Exchange Act Release Nos. [sic] 67948
(September 28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSE-Arca-
2012-64) (SR-ISE-2012-58).
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Prior to the commencement of trading mini-options, the Exchange
proposes to amend Rule 6.62 (Certain Types of Orders Defined) and Rule
6.92 (Definitions) to provide that Exchange rules regarding complex
orders shall apply to mini-options and that consequently, OTP Holders
may execute complex orders and Stock/Option Orders involving mini-
options contracts. Moreover, the Exchange seeks to amend these rules to
provide that all permissible ratios referenced in the definitions of
Stock/Option Orders represent the total number of shares of the
underlying stock in the option leg to the total number of shares of the
underlying stock in the stock leg. Finally, the Exchange seeks to make
these amendments to coincide with a similar proposal recently submitted
by another options market.\5\
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\5\ See Securities Exchange Act Release No. 34-69129 (March 13,
2013) (SR-CBOE-2013-33).
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Exchange Rule 6.62 governs Complex Orders and Stock/Options Orders
on the Exchange and Rule 6.92 lists definitions applicable to
intermarket linkage. Currently, a Stock/Option Orders are defined in
Rule 6.62(h)(1) and Rule 6.92(a)(4)(ii) as an order to buy or sell a
stated number of units of an underlying stock or a security convertible
into the underlying stock coupled with the purchase or sale of options
contract(s) on the opposite side of the market representing either (A)
the same number of units of the underlying stock or convertible
security, or (B) the number of units of the underlying stock
[[Page 18650]]
necessary to create a delta neutral position, but in no case in a ratio
greater than 8 options contracts per unit of trading of the underlying
stock or convertible security established for that series by the
Clearing Corporation. Therefore, under this definition it would be
permissible to execute, for example, a trade where the options leg
consists of one (1) standard option contract (i.e., 100 shares) and the
stock leg consists of 100 shares of the underlying stock. Additionally,
it would be permissible to execute a trade where the options leg
consists of eight (8) standard option contracts (i.e., 800 shares) and
the stock leg consists of 100 shares of the underlying stock.
The terms Complex Order in Rule 6.62(e) and Complex Trade in Rule
6.92(a)(4)(i) are defined substantially identical as any order
involving the execution of two or more different options series in the
same underlying security occurring at or near the same time in a ratio
that is equal to or greater than one-to-three (.333) and less than or
equal to three-to-one (3.00).
The Exchange notes that the abovementioned permissible ratios were
established to ensure that only complex and Stock/Option orders that
seek to achieve legitimate investment strategies are afforded certain
benefits. Particularly, since compliance with trade-through rules may
impede a market participant's ability to achieve the legitimate
investment strategies that complex and Stock/Option orders facilitate,
an exception from the prohibition on trade-throughs is provided for any
transaction that was effected as a portion of a legitimate complex and
Stock/Option order. Requiring a meaningful relationship between the
different legs of a complex and Stock/Option order prevents market
participants from taking advantage of these orders to circumvent the
otherwise applicable trade-through rules (e.g., preventing the
execution of a Stock/Option Order where the option leg consists of 100
options (i.e., 10,000 shares) and the stock leg consists of only 100
shares).
The Exchange proposes to amend the definition of Stock/Option
Orders in Rule 6.62(h)(1) and Rule 6.92(a)(4)(ii). As discussed above,
the Stock/Option Order definition in both Rule 6.62 and Rule 6.92
clearly permits that an option leg may be coupled with a stock leg
representing the same number of units of the underlying stock (i.e.,
one-to-one ratio). The Exchange seeks to provide that mini-options
contracts may also be coupled with a stock leg if the stock leg
represents the same number of units of the underlying stock. For
example, pursuant to the definition, it would be permissible to execute
a trade where leg one consists of one (1) mini-option contract (i.e.,
10 shares) and leg two consists of 10 shares of the underlying stock.
Next, the Exchange seeks to amend the Stock/Option Order definition
in Rule 6.62 and Rule 6.92 to provide that in addition to standard
options, mini-options contracts may be coupled with a stock leg
consisting of however many units of the underlying stock is necessary
to create a delta neutral position, provided that the total number of
shares of the underlying stock in the option leg to the total number of
shares of the underlying stock in the stock leg does not exceed an
eight-to-one ratio. The proposed change specifies that the permissible
ratios should be calculated and scaled based upon the total number of
shares of the underlying stock in the option leg to the total number of
shares of the underlying stock in the stock leg, instead of by the
total number of option contracts in the option leg to the total number
of shares of the underlying stock in the stock leg. An example of a
permitted Stock/Option Order involving mini-options contracts would be
an order in which leg one consists of eighty (80) mini-options
contracts (i.e., 800 shares) and leg two consists of 100 shares of the
underlying stock (i.e., eight-to-one ratio). Similarly, an order where
leg one consists of eight (8) mini-options contracts (i.e., 80 shares)
and leg two consists of 10 shares of the underlying stock would be
permitted.
The proposed rule change provides that market participants may
execute complex and Stock/Option orders involving mini-options
contracts. The proposed change also ensures that the principle behind
the permissible ratios (i.e., to provide a meaningful relationship
between the legs of complex and Stock/Option Orders) is maintained for
mini-options contracts.
The Exchange also proposes to amend the definition of Complex Order
and Complex Trade to specify that when trading a Complex Order/Complex
Trade that is comprised of both mini-options contracts and standard
contracts, ten mini-options contracts will represent one standard
contract. The Exchange seeks to make clear that the current definition
of Complex Order in Rule 6.62(e) and Complex Trade in Rule
6.92(a)(4)(i) applies to both standard options and mini-options. The
Exchange acknowledges that in accordance with the provisions of Rules
6.62(e) and 6.92(a)(4)(i), one leg of a complex order may consist of
mini-options contract(s) and the other leg of the order may consist of
standard options contract(s), so long as the underlying security is the
same and the transaction does not violate the permissible ratios set
forth in the rules (i.e. ratio greater or equal to one-to-three or less
or equal to three-to-one). Moreover, the Exchange's proposed amendment
seeks to provide that the permissible ratios represent the total number
of shares of the underlying stock in the mini-option leg to the total
number of shares of the underlying stock in the standard option leg. An
example of a permissible complex order involving mini-options and
standard options would be an order in which leg one consists of thirty
(30) mini-options (i.e. 300 shares) and leg two consists of one (1)
standard options (i.e. 100 shares) in the same underlying security
(i.e., a ratio equal to 3.0). Another example of a permissible complex
order would be an order in which leg one consists of ten (10) mini-
options (i.e. 100 shares) and leg two consists of one (1) standard
options (i.e. 100 shares) in the same underlying security (i.e., a
ratio equal to one-to-one). The Exchange believes the proposed
amendment will reduce potential confusion for investors when trading
mini-options contracts. Further, the Exchange proposes to provide that
Complex Orders comprised of both mini-options contracts and standard
contracts are not available for Electronic Complex Order trading
pursuant to Rule 6.91.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5),\7\ in
particular, because it is designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and to perfect the mechanism for a free and open
market and a national market system and, in general, to protect
investors and 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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Specifically, the Exchange believes that investors and other market
participants would benefit from the current rule proposal because it
would allow market participants to take advantage of legitimate
investment strategies and execute complex and Stock/Option orders in
mini-options contracts. Additionally, the Exchange believes the
proposed rule change will avoid investor confusion if both standard
options and mini-options on the same underlying security are
[[Page 18651]]
permitted to trade as complex and Stock/Option orders. Also, the
proposal to maintain the permissible ratios that are applicable to
standard options in proportion for mini-options contracts ensures that
the principle behind the permissible ratios (i.e., to provide a
meaningful relationship between the legs of complex and Stock/Option
orders) is maintained for mini-options, which promotes just and
equitable principles of trade. The Exchange believes that describing
prior to the commencement of trading how the permissible ratios in
complex and Stock/Option orders rules will be scaled for mini-options
contracts would lessen investor and marketplace confusion.
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. In particular, the proposed
amendment is based upon recently published rule amendments by other
option exchanges.\8\ Since mini-options contracts are permitted on
multiply-listed classes, other exchanges that have received approval to
trade mini-options will have the opportunity to similarly amend their
rules to clarify and accommodate complex and Stop/Option orders in
mini-options.
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\8\ See supra note 5.
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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
Because the foregoing 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 for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) \9\ of the Act and
Rule 19b-4(f)(6) \10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of the filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) of the Act \11\
normally does not become operative prior to 30 days after the date of
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\12\
the Commission may designate a shorter time if such action is
consistent with the protection of investors and the public interest.
The Exchange has requested the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. In June 2012, the Exchange filed a proposed rule change to
amend its rules to list and trade certain mini-options contracts on the
Exchange, and represented in that filing that the Exchange's rules that
apply to the trading of standard options contracts would apply to mini-
options contracts.\13\ The Exchange believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest because such waiver would minimize confusion among
market participants about how complex orders and stock-options orders
involving mini-options contracts will trade.\14\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ See Securities Exchange Act Release No. 67283 (June 27,
2012), 77 FR 39535 (July 3, 2012). See also supra note 4.
\14\ See id.
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Such waiver would allow the Exchange to implement the proposed rule
change immediately, thereby mitigating potential investor confusion as
to how complex orders and stock options orders involving mini-options
contracts will trade. For this reason, the Commission hereby waives the
30-day operative delay and designates the proposed rule change to be
operative upon filing with the Commission.\15\
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\15\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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The Exchange represented that it began trading in mini-options
contracts on March 18, 2013.\16\ The Commission notes that this
proposed rule change was filed on March 19, 2013, and, therefore,
pursuant to Rule 19b-4(f)(6), waiver of the 30-day operative delay
renders this proposed rule change effective upon the day that it was
filed, March 19, 2013.
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\16\ See SR-NYSEArca-2013-28, Item 7.
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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 to
determine whether the proposed rule change should be approved or
disapproved.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2013-28 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2013-28. 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 (https://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 20549-1090, 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
[[Page 18652]]
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2013-28, and should be submitted on or before April 17, 2013.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07005 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P
