Self-Regulatory Organizations; NYSE Arca Inc.; Order Granting Approval of Proposed Rule Change, Modified by Amendment No. 1, Amending Rule 6.87 In Part and Adding a New Section To Address Errors That Involve Complex Orders, 31623-31625 [2013-12438]
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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Notices
retain priority with respect to a
materially different order.
mstockstill on DSK4VPTVN1PROD with NOTICES
2. Statutory Basis
Phlx believes that its proposal is
consistent with Section 6(b) of the Act 8
in general, and furthers the objectives of
Section 6(b)(5) of the Act 9 in particular,
in that it is designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest. Specifically, Phlx
believes that permitting Participants to
change the marking of sell orders
without affecting their priority on the
Phlx book will eliminate an aspect of
PSX that had unnecessarily made it
more difficult for posted sell orders to
execute. Thus, the change will enhance
the fairness and efficiency of PSX
without affecting the ability of
Participants to comply with applicable
regulatory requirements. In addition, the
changes to the rule that describe the
effect of a partial order cancellation
promote the clarity of the rule with
respect to the ability of a Participant to
reduce the size of an existing order
without affecting its priority. Phlx
further believes that allowing an order
to retain priority under these conditions
is consistent with the operation of a free
and open market and the protection of
investors and the public interest, since
the Participant that entered an order
that is partially cancelled has
nevertheless expressed a continued
willingness to trade at a specified price,
and therefore should retain priority over
Participants that joined that price at a
later time. Finally, Phlx believes that the
proposed addition of language to clearly
stipulate that all other order
modifications will result in the
cancellation and replacement of the
original order with a new order with
new time priority is consistent with the
protection of investors and the public
interest because the new language will
make clear an existing feature of the
market that Phlx believes is important to
ensuring that Participants cannot use an
existing order unfairly to retain priority
with respect to a materially different
order.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Phlx does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
8 15
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Mar<15>2010
21:14 May 23, 2013
Specifically, Phlx believes that the
change with respect to allowing
Participants to modify the long, short, or
short exempt marking of a sell order
without affecting its priority will assist
Phlx in competing with the BATS
Exchange and the BATS Y-Exchange,
which already allow their Participants
to do so. Phlx further believes that the
other changes will not have any effect
on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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)(ii) of the Act 10 and
subparagraph (f)(6) of Rule 19b–4
thereunder.11 At any time within 60
days of the filing of the 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.
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–Phlx–2013–54 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.
10 15
11 17
Jkt 229001
PO 00000
U.S.C. 78s(b)(3)(a)(ii).
CFR 240.19b–4(f)(6).
Frm 00109
Fmt 4703
Sfmt 4703
31623
All submissions should refer to File
Number SR–Phlx–2013–54. 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, 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;
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–Phlx–2013–54 and should
be submitted on or before June 14, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–12437 Filed 5–23–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69609; File No. SR–
NYSEArca–2013–15]
Self-Regulatory Organizations; NYSE
Arca Inc.; Order Granting Approval of
Proposed Rule Change, Modified by
Amendment No. 1, Amending Rule 6.87
In Part and Adding a New Section To
Address Errors That Involve Complex
Orders
May 20, 2013.
I. Introduction
On February 1, 2013, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
12 17
E:\FR\FM\24MYN1.SGM
CFR 200.30–3(a)(12).
24MYN1
31624
Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Notices
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 the Exchange’s
Obvious Error Rule in part and add a
new section to address errors that
involve Complex Orders. The proposed
rule change was published for comment
in the Federal Register on February 21,
2013.3 The Commission received no
comment letters on the proposal. On
April 23, 2013, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. Description of Proposal
The Exchange proposes several
changes to its Obvious Error Rule, Rule
6.87. First, the Exchange is proposing to
change the portion of the rule that
addresses errors in series with zero or
no bid. Specifically, the Exchange
proposes replacing reference to ‘‘series
quoted no bid on the Exchange’’ with
‘‘series where the NBBO bid is zero.’’
The Exchange believes that this change
ensures consistency with other relevant
parts of the rule.
Second, the Exchange proposes to
increase the amount of time in which
Market Makers are required to notify the
Exchange in order to have transactions
reviewed under Rule 6.87. Under the
proposal, the time would increase from
five minutes to ten minutes. The
Exchange represents that this additional
time accommodates the potential need
for Market Makers to call multiple
exchanges to have transactions
reviewed.
Third, the Exchange proposes to
extend the time OTP Holders acting as
agent for Customer orders have to notify
the Exchange of a potential error from
twenty minutes to thirty minutes.5 The
Exchange states that because Customers
are far removed from the execution of
the trade, it believes that it is
appropriate to give Customers more
time for their requests for review to pass
from their broker-dealer to the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 68927
(February 14, 2013), 78 FR 12117 (‘‘Notice’’).
4 In Amendment No. 1, NYSE Arca deleted an
erroneous reference to ‘‘Professional Customers’’ in
the proposal because the Exchange’s rules do not
include ‘‘Professional Customer’’ as a defined
category. The Commission believes the amendment
is technical in nature and not subject to notice and
comment.
5 The Commission notes that NYSE Arca Rule
6.87, Commentary .06 states that ‘‘for the purposes
of Rule 6.87, the term Customer, as defined in Rule
6.1(b)(29) or Rule 6.1A(a)(4), shall not include a
broker or dealer.’’
mstockstill on DSK4VPTVN1PROD with NOTICES
2 17
VerDate Mar<15>2010
21:14 May 23, 2013
Jkt 229001
Exchange. In contrast, the Exchange
notes that other market participants,
such as firms and non-member Market
Makers tend to route their own order
flow directly to the Exchange and are
not as far removed from the actual
execution. The Exchange further
explains that it is fairly common for
broker-dealers that receive a Customer
order to route that order to another
broker-dealer that uses a router that
evaluates best execution factors to
determine where to ultimate route the
order. In these situations, if a Customer
chooses to request an Obvious Error
review, Customers may need more than
20 minutes for their requests for review
to reach the Exchange. The Exchange
acknowledges that extending the
notification period can increase the
uncertainty of the standing of the trade,
however, it believes that such
uncertainty will be limited to trades that
are so outside the bounds of normal
trading that they might qualify for
Obvious Error treatment.
Finally, the Exchange is proposing to
add a new section to Rule 6.87 to
address Complex Orders in the Obvious
Error context, as its current rule is silent
on how such Complex Orders are
handled. According to the Exchange,
Complex Orders are often used by
market participants to enter positions
known as spreads that entail limited
risk relative to an outright naked sale of
a put or call. The Exchange believes that
the best approach for dealing with
Complex Orders in the Obvious Error
context is to preserve the spread
whenever possible to mitigate the risk of
such trades. Therefore, in the situation
where a Complex Order trades with
another Complex Order in the Complex
Order Book, and one of the legs qualifies
for Obvious Error treatment under Rule
6.87, then all legs of the Complex Order
will be busted unless both parties
mutually agree to an adjustment price.
The Exchange also believes that it is
appropriate not to permit Obvious Error
treatment in situations where the only
error in the trade occurred in a no-bid
series. Therefore, in situations where a
Complex Order trades with another
Complex Order in the Complex Order
Book where one leg qualifies for the nobid provision of Rule 6.87, the trade will
stand as executed, unless both parties to
the trade mutually agree otherwise. The
Exchange believes that this provision
will prevent manipulation and a
potential increase in nullified trades,
particularly because it prevents parties
from being able to enter a spread price
slightly away from the market, thus
increasing the chance that one of the
legs will qualify for no-bid treatment,
and providing the party entering the
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
order with a window of time to evaluate
the market and decide if it would be to
its benefit to nullify the trade.
Finally, the Exchange is codifying its
current practice for handling situations
in which a Complex Order trades with
individual orders or quotes in the
Consolidated Book. Pursuant to the
proposed Rule, each executed leg will
be reviewed separately under Rule 6.87.
The Exchange notes that while it prefers
to avoid the partial execution of a
Complex Order, pursuant to this
provision, it is possible that after a
Complex Order trade, only one leg
qualifies for Obvious Error treatment,
resulting in the residual position of a
single leg. The Exchange explains that is
will not seek to nullify a valid execution
in the Consolidated Order Book of an
OTP Holder who unknowingly
interacted with a leg of a Complex
Order.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
amended, is consistent with the
requirements of the Act 6 and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission finds that
the proposed rule change, as amended,
is consistent with Section 6(b)(5) of the
Act,8 which requires, among other
things, that the Exchange’s rules be
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
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Exchange is replacing reference
to ‘‘series quoted no bid on the
Exchange’’ with ‘‘series where the
NBBO bid is zero’’ because it believes
that the NBBO provides greater accuracy
in determining the value of an option
because it takes into account interest
from participants across all markets, not
just those active on the Exchange. The
Exchange also believes that this change
will promote just and equitable
principles of trade by adding more
certainty and consistency to the
Exchange’s Obvious Error rule. This
consistency, according to the Exchange,
6 15
U.S.C. 78f.
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
7 In
E:\FR\FM\24MYN1.SGM
24MYN1
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Federal Register / Vol. 78, No. 101 / Friday, May 24, 2013 / Notices
is important to help avoid investor
confusion.
The Exchange believes that the
change to increase the time limit for
Market Makers to request review of
transactions protects investors and the
public interest because it will ensure
they are comfortable meeting the
deadline, thereby allowing Market
Makers to continue to aggressively
provide liquidity in a transparent and
nondiscriminatory manner to all
participants. Further, the Exchange
notes that increasing the time limit for
OTP Holders acting as agent for
Customers to request review of
transactions should give Customers
sufficient time to request a review for
trades, which is also consistent with
investor protection and furthering the
public interest as it allows those market
participants furthest removed from the
point of execution time to evaluate each
trade and have adequate time to notify
the Exchange of a potential error.
The Exchange believes that the
proposed rule changes that address the
handling of Complex Orders under the
Obvious Error rule are 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 Exchange notes that
detailing the treatment of Complex
Orders involved in Obvious Errors
provides investors with greater
certainty. The Exchange also believes
that the best approach for dealing with
Complex Orders in the context of the
Obvious Error rule is to preserve the
spread whenever possible. Second, the
Exchange believes that preventing
market participants from busting trades
solely the result of a leg(s) of a Complex
Order executing in a no-bid series
furthers the protection of investors and
the public interest by preventing
potential abuse. Finally, the Exchange
believes that the proposed rule change
provides objective guidelines for the
determination of whether an obvious
price error has occurred, as it notes that
the determination of whether an
‘‘Obvious Error’’ has occurred should be
based on specific and objective criteria
and subjective to specific and objective
procedures.
The Commission notes that, in
approving past proposals relating to
Obvious Errors, it has emphasized the
importance of specific and objective
criteria to determine how and when to
nullify or adjust trades involving
Obvious Errors.9 The Commission
9 See, e.g., Securities Exchange Release Nos.
54228 (July 27, 2006), 71 FR 44066 (August 3, 2006)
(SR–CBOE–2006–14) and 58778 (October 14, 2008),
VerDate Mar<15>2010
21:14 May 23, 2013
Jkt 229001
believes the changes that comprise this
current proposal further this objective.
For the reasons noted above, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,10 which requires,
among other things, that the Exchange’s
rules be 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
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–NYSEArca2013–15), as modified by Amendment
No. 1, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–12438 Filed 5–23–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
Bloggerwave, Inc., Cardima, Inc. (n/k/a
CLI Liquidating Corporation), Innuity,
Inc., Kaleidoscope Venture Capital,
Inc., Lipid Sciences, Inc., Radix Marine,
Inc., SBS Interactive Co., and
VersaTech, Inc. (n/k/a VersaTech USA),
Order of Suspension of Trading
May 22, 2013.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of
Bloggerwave, Inc. because it has not
filed any periodic reports since the
period ended September 30, 2010.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Cardima,
Inc. (n/k/a CLI Liquidating Corporation)
because it has not filed any periodic
reports since the period ended June 30,
2010.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Innuity, Inc.
because it has not filed any periodic
reports since the period ended
September 30, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of
Kaleidoscope Venture Capital, Inc.
because it has not filed any periodic
reports since the period ended
September 30, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Lipid
Sciences, Inc. because it has not filed
any periodic reports since the period
ended June 30, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Radix
Marine, Inc. because it has not filed any
periodic reports since the period ended
March 31, 2005.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of SBS
Interactive Co. because it has not filed
any periodic reports since the period
ended June 30, 2005.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of VersaTech,
Inc. (n/k/a VersaTech USA) because it
has filed only one periodic report since
the period ended September 30, 2005.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
companies. Therefore, it is ordered,
pursuant to Section 12(k) of the
Securities Exchange Act of 1934, that
trading in the securities of the abovelisted companies is suspended for the
period from 9:30 a.m. EDT on May 22,
2013, through 11:59 p.m. EDT on June
5, 2013.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2013–12555 Filed 5–22–13; 11:15 am]
BILLING CODE 8011–01–P
73 FR 62577 (October 21, 2008) (SR–CBOE–2008–
90) (both approving revisions to CBOE’s Obvious
Error Rules).
10 15 U.S.C. 78f(b)(5).
11 15 U.S.C. 78s(b)(2).
12 17 CFR 200.30–3(a)(12).
PO 00000
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E:\FR\FM\24MYN1.SGM
24MYN1
]]>Agencies
[Federal Register Volume 78, Number 101 (Friday, May 24, 2013)]
[Notices]
[Pages 31623-31625]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12438]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69609; File No. SR-NYSEArca-2013-15]
Self-Regulatory Organizations; NYSE Arca Inc.; Order Granting
Approval of Proposed Rule Change, Modified by Amendment No. 1, Amending
Rule 6.87 In Part and Adding a New Section To Address Errors That
Involve Complex Orders
May 20, 2013.
I. Introduction
On February 1, 2013, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange
[[Page 31624]]
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 the Exchange's Obvious
Error Rule in part and add a new section to address errors that involve
Complex Orders. The proposed rule change was published for comment in
the Federal Register on February 21, 2013.\3\ The Commission received
no comment letters on the proposal. On April 23, 2013, the Exchange
filed Amendment No. 1 to the proposed rule change.\4\ This order
approves the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 68927 (February 14,
2013), 78 FR 12117 (``Notice'').
\4\ In Amendment No. 1, NYSE Arca deleted an erroneous reference
to ``Professional Customers'' in the proposal because the Exchange's
rules do not include ``Professional Customer'' as a defined
category. The Commission believes the amendment is technical in
nature and not subject to notice and comment.
---------------------------------------------------------------------------
II. Description of Proposal
The Exchange proposes several changes to its Obvious Error Rule,
Rule 6.87. First, the Exchange is proposing to change the portion of
the rule that addresses errors in series with zero or no bid.
Specifically, the Exchange proposes replacing reference to ``series
quoted no bid on the Exchange'' with ``series where the NBBO bid is
zero.'' The Exchange believes that this change ensures consistency with
other relevant parts of the rule.
Second, the Exchange proposes to increase the amount of time in
which Market Makers are required to notify the Exchange in order to
have transactions reviewed under Rule 6.87. Under the proposal, the
time would increase from five minutes to ten minutes. The Exchange
represents that this additional time accommodates the potential need
for Market Makers to call multiple exchanges to have transactions
reviewed.
Third, the Exchange proposes to extend the time OTP Holders acting
as agent for Customer orders have to notify the Exchange of a potential
error from twenty minutes to thirty minutes.\5\ The Exchange states
that because Customers are far removed from the execution of the trade,
it believes that it is appropriate to give Customers more time for
their requests for review to pass from their broker-dealer to the
Exchange. In contrast, the Exchange notes that other market
participants, such as firms and non-member Market Makers tend to route
their own order flow directly to the Exchange and are not as far
removed from the actual execution. The Exchange further explains that
it is fairly common for broker-dealers that receive a Customer order to
route that order to another broker-dealer that uses a router that
evaluates best execution factors to determine where to ultimate route
the order. In these situations, if a Customer chooses to request an
Obvious Error review, Customers may need more than 20 minutes for their
requests for review to reach the Exchange. The Exchange acknowledges
that extending the notification period can increase the uncertainty of
the standing of the trade, however, it believes that such uncertainty
will be limited to trades that are so outside the bounds of normal
trading that they might qualify for Obvious Error treatment.
---------------------------------------------------------------------------
\5\ The Commission notes that NYSE Arca Rule 6.87, Commentary
.06 states that ``for the purposes of Rule 6.87, the term Customer,
as defined in Rule 6.1(b)(29) or Rule 6.1A(a)(4), shall not include
a broker or dealer.''
---------------------------------------------------------------------------
Finally, the Exchange is proposing to add a new section to Rule
6.87 to address Complex Orders in the Obvious Error context, as its
current rule is silent on how such Complex Orders are handled.
According to the Exchange, Complex Orders are often used by market
participants to enter positions known as spreads that entail limited
risk relative to an outright naked sale of a put or call. The Exchange
believes that the best approach for dealing with Complex Orders in the
Obvious Error context is to preserve the spread whenever possible to
mitigate the risk of such trades. Therefore, in the situation where a
Complex Order trades with another Complex Order in the Complex Order
Book, and one of the legs qualifies for Obvious Error treatment under
Rule 6.87, then all legs of the Complex Order will be busted unless
both parties mutually agree to an adjustment price.
The Exchange also believes that it is appropriate not to permit
Obvious Error treatment in situations where the only error in the trade
occurred in a no-bid series. Therefore, in situations where a Complex
Order trades with another Complex Order in the Complex Order Book where
one leg qualifies for the no-bid provision of Rule 6.87, the trade will
stand as executed, unless both parties to the trade mutually agree
otherwise. The Exchange believes that this provision will prevent
manipulation and a potential increase in nullified trades, particularly
because it prevents parties from being able to enter a spread price
slightly away from the market, thus increasing the chance that one of
the legs will qualify for no-bid treatment, and providing the party
entering the order with a window of time to evaluate the market and
decide if it would be to its benefit to nullify the trade.
Finally, the Exchange is codifying its current practice for
handling situations in which a Complex Order trades with individual
orders or quotes in the Consolidated Book. Pursuant to the proposed
Rule, each executed leg will be reviewed separately under Rule 6.87.
The Exchange notes that while it prefers to avoid the partial execution
of a Complex Order, pursuant to this provision, it is possible that
after a Complex Order trade, only one leg qualifies for Obvious Error
treatment, resulting in the residual position of a single leg. The
Exchange explains that is will not seek to nullify a valid execution in
the Consolidated Order Book of an OTP Holder who unknowingly interacted
with a leg of a Complex Order.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act \6\
and the rules and regulations thereunder applicable to a national
securities exchange.\7\ In particular, the Commission finds that the
proposed rule change, as amended, is consistent with Section 6(b)(5) of
the Act,\8\ which requires, among other things, that the Exchange's
rules be 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 facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f.
\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange is replacing reference to ``series quoted no bid on
the Exchange'' with ``series where the NBBO bid is zero'' because it
believes that the NBBO provides greater accuracy in determining the
value of an option because it takes into account interest from
participants across all markets, not just those active on the Exchange.
The Exchange also believes that this change will promote just and
equitable principles of trade by adding more certainty and consistency
to the Exchange's Obvious Error rule. This consistency, according to
the Exchange,
[[Page 31625]]
is important to help avoid investor confusion.
The Exchange believes that the change to increase the time limit
for Market Makers to request review of transactions protects investors
and the public interest because it will ensure they are comfortable
meeting the deadline, thereby allowing Market Makers to continue to
aggressively provide liquidity in a transparent and nondiscriminatory
manner to all participants. Further, the Exchange notes that increasing
the time limit for OTP Holders acting as agent for Customers to request
review of transactions should give Customers sufficient time to request
a review for trades, which is also consistent with investor protection
and furthering the public interest as it allows those market
participants furthest removed from the point of execution time to
evaluate each trade and have adequate time to notify the Exchange of a
potential error.
The Exchange believes that the proposed rule changes that address
the handling of Complex Orders under the Obvious Error rule are
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 Exchange notes that
detailing the treatment of Complex Orders involved in Obvious Errors
provides investors with greater certainty. The Exchange also believes
that the best approach for dealing with Complex Orders in the context
of the Obvious Error rule is to preserve the spread whenever possible.
Second, the Exchange believes that preventing market participants from
busting trades solely the result of a leg(s) of a Complex Order
executing in a no-bid series furthers the protection of investors and
the public interest by preventing potential abuse. Finally, the
Exchange believes that the proposed rule change provides objective
guidelines for the determination of whether an obvious price error has
occurred, as it notes that the determination of whether an ``Obvious
Error'' has occurred should be based on specific and objective criteria
and subjective to specific and objective procedures.
The Commission notes that, in approving past proposals relating to
Obvious Errors, it has emphasized the importance of specific and
objective criteria to determine how and when to nullify or adjust
trades involving Obvious Errors.\9\ The Commission believes the changes
that comprise this current proposal further this objective. For the
reasons noted above, the Commission finds that the proposed rule change
is consistent with Section 6(b)(5) of the Act,\10\ which requires,
among other things, that the Exchange's rules be 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 facilitating transactions in securities, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
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\9\ See, e.g., Securities Exchange Release Nos. 54228 (July 27,
2006), 71 FR 44066 (August 3, 2006) (SR-CBOE-2006-14) and 58778
(October 14, 2008), 73 FR 62577 (October 21, 2008) (SR-CBOE-2008-90)
(both approving revisions to CBOE's Obvious Error Rules).
\10\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-NYSEArca-2013-15), as
modified by Amendment No. 1, is hereby approved.
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\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12438 Filed 5-23-13; 8:45 am]
BILLING CODE 8011-01-P
