Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adding a New Rule To Adopt Price Protection Filters for Electronic Complex Orders, 62917-62921 [2013-24666]

Download as PDF Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 13 of the Act to determine whether the proposed rule change should be approved or disapproved. submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE– 2013–66 and should be submitted on or before November 12, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–24647 Filed 10–21–13; 8:45 am] 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– NYSE–2013–66 on the subject line. sroberts on DSK5SPTVN1PROD with FRONT MATTER 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: Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adding a New Rule To Adopt Price Protection Filters for Electronic Complex Orders 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–NYSE–2013–66. 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 inspection and copying in the Commission’s Public Reference Section, 100 F Street NE., Washington, DC 20549–1090. Copies of the filing will also be available for Web site viewing and printing at the NYSE’s principal office and on its Internet Web site at www.nyse.com. All comments received will be posted without change; the Commission does not edit personal identifying information from 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 October 3, 2013, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) 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. 13 15 U.S.C. 78s(b)(2)(B). VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70674; File No. SR–NYSEMKT–2013–80] October 11, 2013. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to add a new rule to adopt price protection filters for Electronic Complex Orders. 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 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00335 Fmt 4703 Sfmt 4703 62917 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 is proposing to amend Rule 980NY-Electronic Complex Order Trading by establishing new Commentary .05 governing price protections filters applicable to electronically entered Complex Orders.4 As defined in Exchange Rule 980NY, which governs Electronic Complex Order trading, an ‘‘Electronic Complex Order’’ is a Complex Order that has been entered into the NYSE Amex Options System (‘‘System’’), which is routed to the Complex Matching Engine (‘‘CME’’) for possible execution. As set forth in Rule 980NY, the CME is the mechanism in which Electronic Complex Orders are executed against each other or against individual quotes and orders in the Consolidated Book. Electronic Complex Orders that are not immediately executed by the CME are routed to the Consolidated Book. Electronic Complex Orders are entered into the System at a net debit/ credit price for the entire strategy. Electronic Complex Orders do not include specified prices for any single series component (‘‘leg’’) of the Electronic Complex Order. Bids and offers on Electronic Complex Orders may be expressed in any decimal price, and the legs(s) of an Electronic Complex Order may be executed in one cent increments regardless of the minimum price variation (‘‘MPV’’) 5 otherwise applicable to the individual legs of the order. No leg of an Electronic Complex Order submitted to the System will be executed at a price outside the NYSE Amex Options best bid/offer for that leg. However Electronic Complex Orders may be executed without consideration of prices of the same Electronic Complex Order that might be available 4 Exchange Rule 900.3NY(e) defines a Complex Order as any order involving the simultaneous purchase and/or sale of two or more different option series in the same underlying security, for the same account, 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) and for the purpose of executing a particular investment strategy. 5 The minimum price variations (‘‘MPV’’) are equivalent to the Trading Differentials as prescribed in Rule 960NY(a). E:\FR\FM\22OCN1.SGM 22OCN1 62918 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices on other exchanges. Individual legs of an Electronic Complex Order may be executed at a price without regard to the National Best Bid or Offer (‘‘NBBO’’) as disseminated by the Options Price Reporting Authority (‘‘OPRA’’) for that same leg.6 In additional, neither Electronic Complex Orders nor the individual legs that comprise an Electronic Complex Order are eligible for routing to other exchanges. The Exchange believes that while it is appropriate to exempt individual leg prices of Electronic Complex Orders from NBBO trade through liability, there is still need for some level of price protection for Complex Orders that are entered at a net debit/credit price that is greater (less) than the contra-side NBBO market for the Electronic Complex Order as a whole. The Exchange now proposes to enhance Complex Order processing by introducing a Price Protection Filter for Complex Orders (‘‘Filter’’) that will automatically reject an incoming Electronic Complex Order if the net debit/credit limit price of the order is greater (less) than the derived net debit/ credit NBBO 7 for the contra-side of the same strategy by a set amount as specified by the Exchange (‘‘Specified Amount’’). Electronic Complex Orders will be subject to the Filter, and thus afforded price protection, provided OPRA is disseminating an NBBO market for each series component of the Electronic Complex Order at the time the order is received by the Exchange. The Exchange believes that the proposed price protection filters will help to prevent the execution of an incoming Electronic Complex Order which is priced so far away from the prevailing contra-side NBBO market for the same strategy, that the execution of such order could cause significant price dislocation in the market. The Specified Amount is applicable to the net debit/credit price of the Electronic Complex Order and is not applicable to any single leg of the order. The Exchange proposes to specify the following amounts as the price protection settings for the Filter. sroberts on DSK5SPTVN1PROD with FRONT MATTER .10 for orders where the smallest MPV of any leg of the Electronic Complex Order is .01; 6 OPRA collects and disseminates the best bid and the best offer for all option series as submitted by each options exchange. The NBBO represents the consolidated best bid and the best offer for each series, as disseminated by OPRA. Pursuant to Rule 991NY(b)(7) Complex Trades are exempt from NBBO trade through liability. 7 The Exchange will calculate the derived contraside NBBO for a Complex Order using the prevailing markets for all individual legs of the order as disseminated by OPRA at the time the order is received by the Exchange. VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 .15 for orders where the smallest MPV of any leg of the Electronic Complex Order is .05; and .30 for orders where the smallest MPV of any leg of the Electronic Complex Order is .10. For Electronic Complex Orders that are entered on a 1×1 ratio, the Filter will be applied by the Specified Amounts above (.10, .15, or .30). For Electronic Complex Orders that are entered on an uneven ratio (2×3 for example) where the MPV on all legs is the same, the Filter will be applied by the Specified Amount multiplied by the smallest contract size leg of the ratio (.20, .30, or .60 on the 2×3 example). For Electronic Complex Orders that are entered on an uneven ratio (2×3 for example) where the MPV of the legs are not the same (.10 and .05 for example), the Filter will be applied by taking the lesser of; the Specified Amount applicable to the smallest leg of the Electronic Complex Order and multiplied by the contract size of that leg (.60 in this example), or the Specified Amount of the largest leg of the Complex Order multiplied by the contract size of that leg (.45 in this example). The price protection filter will work as described below. Upon receipt by the Exchange of an Electronic Complex Order, the Filter will check the net debit/credit price of the order against the derived contra-side NBBO for the same strategy at the time of order entry to determine whether the order’s limit price is within the specified price. The contra-side NBBO will be derived from the net debit/credit market for the same strategy by using the NBBO prices for the individual leg markets as disseminated by OPRA, that when aggregated create a derived NBBO for that same strategy.8 The bid/ask of the individual leg markets comprising the derived contra-side NBBO may be as disseminated by one exchange, or comprised of a bid from one exchange and an offer from a different exchange. The Filter will always use the best bid and offer for each leg of the Electronic Complex Order when determining what the derived NBBO is for the contra-side of the same strategy. If the incoming Electronic Complex Order is priced at a net debit/credit such that an execution could occur on NYSE Amex Options at a price that was greater (less) than the derived NBBO by any amount exceeding the Specified Amount for that same strategy, the order would be rejected back to the ATP Holder with a reject code explaining the reason for the reject. 8 Markets for Complex Orders that may be available in the NYSE Amex Options Complex Order Book (‘‘COB’’) or in a competing exchanges complex order book, or spread book, are not disseminated by OPRA or included in NBBO calculations and will not be used by the Exchange to derive at the contra-side NBBO market for an Electronic Complex Order. PO 00000 Frm 00336 Fmt 4703 Sfmt 4703 This would hold true even if the proposed execution was within the Exchange’s BBO. By rejecting the aggressively priced Electronic Complex Order, the Filter prevents a possible execution from occurring at a price significantly worse than the derived NBBO. Examples of Price Protection Filter Example #1 This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having the same MPV. Assume the following: MPV = .05 Jan 20 calls NBBO 2.00–2.10 Jan 25 calls NBBO 1.05–1.20 The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls on a 1×1 ratio, priced at a 1.25 debit. This would imply that the buyer would be willing to pay 1.25 for the strategy as a whole without regard to the prices of the individual leg markets. Upon receipt, this order would be sent to the CME for processing. Pursuant to this proposal, before routing the order to the CME the Filter will first check the derived NBBO net debit/ credit market for the contra-side of the same strategy. In this case the contraside NBBO market is offered at 1.05 (this price is established by selling one Jan 20 for 2.10 and buying one Jan 25 for 1.05). The Filter will then look at the NBBO price of smallest-priced leg of the Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .15. Because the derived contra-side NBBO price of 1.05 is better than the limit price of the Complex Order by .20, which exceeds the Filter setting of .15, the System will not route the order to the CME for processing but will automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection. Example #2 This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having different MPVs. Assume the following: MPV = .10 and .05 Jan 20 calls NBBO 5.00–5.30 Jan 25 calls NBBO 2.10–2.20 The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls on a 1x1 ratio, priced at a 3.60 debit. (This would imply that the buyer would be willing to pay 3.60 for the strategy as a whole without regard to the prices of the E:\FR\FM\22OCN1.SGM 22OCN1 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices individual leg markets). Upon receipt, this order would be sent to the CME for processing. As proposed, before routing the Electronic Complex Order to the CME, the Filter will first check the derived NBBO net debit/credit market for the contra side of the same strategy. In this case, the contra-side NBBO market is offered at 3.20 (this price is established by selling one Jan 20 for 5.30 and buying one Jan 25 for 2.10). The Filter will then look at the NBBO price of smallest priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .15. Because the derived contra-side NBBO price of 3.20 is better than the limit price of the Electronic Complex Order by .40, which exceeds the Filter setting of .15, the System would automatically reject the order back to the entering OTP Holder with a reject code explaining the reason for the rejection. sroberts on DSK5SPTVN1PROD with FRONT MATTER Example #3 This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit with leg markets having the same MPV. Assume the following: MPV = .01 Jan 20 calls NBBO 2.03–2.08 Jan 25 calls NBBO 1.00–1.01 The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls on a 1x1 ratio, priced at a .90 credit. (This would imply that the seller would be willing to receive .90 for the strategy as a whole without regard to the individual leg markets). Upon receipt, this order would be sent to the CME for processing. Pursuant to this proposal however, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/ credit market for the contra-side of the same strategy. In this case the contraside NBBO market is priced at 1.02 (this price is established by buying one Jan 20 for 2.03 and selling one Jan 25 for 1.01). The Filter will then look at the NBBO price of smallest priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .10. Because the derived contra-side NBBO price of 1.02 is better than the limit price of the Electronic Complex Order by .12, which exceeds the Filter setting of .10, the System would automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection. VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 Example #4 This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having the same MPV. Assume the following: MPV = .01 Jan 20 calls NBBO 2.03–2.08 Jan 25 calls NBBO 1.00–1.02 The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2x3 ratio, priced at a .75 credit. This would imply that the seller would be willing to receive .75 for the strategy as a whole without regard to the prices of the individual leg markets. As proposed, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/credit market for the contra-side of the same strategy. In this case the contra-side NBBO market is priced at 1.00 (this price is established by buying two Jan 20s for 2.03 each and selling three Jan 25s for 1.02 each (4.06¥3.06 = 1.00)). The Filter will then look at the NBBO price of smallestpriced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above, which for this example would be .10. However, because this order was entered on a ratio where the smallest contract sized leg is greater than one contract, the Filter is applied to the aggregate of the small sized leg of the ratio, which in this case is .20 (.10 × 2 contracts). Because the derived contraside NBBO price of 1.00 is better than the limit price of the Electronic Complex Order by .25, which exceeds the Filter setting of .20, the Filter will automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection. Example #5 This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having a different MPV. Assume the following: MPV = .10 and .05 Jan 20 calls NBBO 4.10–4.20 Jan 25 calls NBBO 1.90–2.00 The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2 × 3 ratio, priced at a 1.50 credit. (This would imply that the seller would be willing to receive 1.50 for the strategy as a whole without regard to the prices of the individual leg markets). As proposed, before routing the Electronic Complex Order to the CME, the Filter will first check the derived PO 00000 Frm 00337 Fmt 4703 Sfmt 4703 62919 NBBO net debit/credit market for the contra side of same strategy. In this case the contra-side NBBO market is priced at 2.20 (this price is established by buying two Jan 20s for 4.10 each and selling three Jan 25s for 2.00 each (8.20¥6.00 = 2.20)). The Filter will then look at two scenarios to determine what price protection level would apply. First, the Filter will look at the contraside NBBO price of the leg of the Electronic Complex Order with the smallest contract size (Jan 20 leg) and determine the appropriate price protection amount. Which in this example would be .30. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size (2 contracts), which in this case would establish a Filter setting of .60 (.30 × 2 contracts). Next, the Filter will look at the contraside NBBO price of the leg of the order with the largest contract size (Jan 25 leg) and determine the appropriate price protection amount, which in this case would be .15. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size of the leg (3 contracts), which in this case would establish a Filter setting of .45 (.15 × 3). The Filter will always apply the more conservative setting, which in this case is .45. Because the derived contra-side NBBO price of 2.20 is better than the limit price of the Electronic Complex Order by .70, which exceeds the Filter setting of .45, the Filter would automatically reject the order back to the entering ATP Holder. The Filter is not intended to offer price protection to bids and offers at away markets, or to offer NBBO guaranteed pricing to Electronic Complex Orders submitted to NYSE Amex Options. Rather the proposed Filter would provide a level of protection to incoming Electronic Complex Orders that are entered at a price so far away from the prevailing contra-side NBBO market for the same strategy, that the execution of such order could cause price dislocation in the market. Accordingly, the Exchange does not propose to reject all orders with a limit price greater (less) than the contra-side NBBO, just those that are greater (less) by an amount as prescribed by the Exchange. The Exchange believes that rejecting such aggressively priced Electronic Complex Orders will help to ensure that market participants do not receive an execution at a price significantly inferior to the contra-side NBBO. E:\FR\FM\22OCN1.SGM 22OCN1 62920 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices The Exchange recognizes that under certain market conditions the specified amounts prescribed by the Exchange, and applicable to the Filter, may be overly restrictive at times and there could be situations where the Exchange may need to temporarily widen the Filter settings to accommodate market conditions in a given class. This could happen because of, but not limited to, instances of extreme volatility, the dissemination of non-firm markets by competing exchanges, or some other condition that would lead the Exchange to believe that it would not be reasonable to expect that a market participant could receive an execution of an Electronic Complex Order at, or close to, the prevailing contra-side NBBO market for a given strategy. Therefore, the Exchange proposes that in the interest of a fair and orderly market, the Filter settings may be temporarily modified by a Trading Official to an amount greater than prescribed, on a class-by-class basis. Trading Officials are presently authorized to make similar determinations regarding such matters as position limits,9 and quote-width differentials.10 Permitting a Trading Official to temporarily modify the prescribed settings within the Filter is consistent with their ability to recommend and enforce rules and regulations relating to trading, access, order, decorum, health, safety and welfare on the Exchange which contributes to the Exchange’s obligation to maintain a fair and orderly market. In the event a Trading Official were to temporarily modify the Filter setting, the Exchange will contemporaneously announce the new settings to all ATP Holders via a Trader Update.11 Temporary modifications to Filter settings would be completed at the Exchange level. ATP Holders would not have to make any adjustments to proprietary systems to accommodate such modifications. sroberts on DSK5SPTVN1PROD with FRONT MATTER 2. Statutory Basis The statutory basis for the proposed rule change is Section 6(b)(5) of the Securities Exchange Act of 1934 (the ‘‘Act’’), in general, and furthers the objectives of Section 6(b)(5) 12 which requires the rules of an exchange to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and 9 See Exchange Rule 904.05. Exchange Rules 925NY(b)(5) and 925NY(c). 11 Trader Updates are disseminated electronically to all ATP Holders and are posted on the Exchange’s Web site. 12 15 U.S.C. 78f(b)(5). 10 See VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 open market and a national market system and, in general, to protect investors and the public interest. The proposed rule change also is designed to support the principles of Section 11A(a)(1) 13 of the Act in that it seeks to assure fair competition among brokers and dealers and among exchange markets. The Exchange believes that this proposal meets these requirements in that the proposed rule assists with the maintenance of fair and orderly market by helping to mitigate the potential risks associated with the entry of Electronic Complex Orders that are entered at a price greater than the prevailing NBBO market for the contra-side of same strategy, potentially resulting in executions at prices that are away from the best bid or offer, thereby protecting investors from receiving executions at inferior prices to what may be available at other market centers. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange is proposing a market enhancement that provides greater protections from potentially erroneous executions and the attendant risks of such executions to market participants. Therefore, the Exchange believes that the proposal should provide an incentive for market participants to enter executable interest in the CME that can help foster price discovery and transparency thereby benefiting all market participants. The proposal is structured to offer the same enhancement to all market participants, regardless of account type, and will not impose a competitive burden on any participant. The Exchange does not believe that the proposed mechanism will impose a burden on competing options exchanges. Rather, the availability of this mechanism may foster more competition. Specifically, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. When an exchange offers enhanced functionality that distinguishes it from the competition and participants find it useful, it has been the Exchange’s experience that competing exchanges will move to adopt similar functionality. Thus, the Exchange believes that this type of competition amongst exchanges is beneficial to the market place as a whole 13 15 PO 00000 U.S.C. 78k–1(a)(1). Frm 00338 Fmt 4703 Sfmt 4703 as it can result in enhanced processes, functionality, and technologies. 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) 14 of the Act and Rule 19b–4(f)(6) 15 thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 16 of the Act to determine whether the proposed rule change should be approved or disapproved.17 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– NYSEMKT–2013–80 on the subject line. 14 15 U.S.C. 78s(b)(3)(A). 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, along with a brief description and text of 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. 16 15 U.S.C. 78s(b)(2)(B). 17 15 U.S.C. 78s(b)(3)(C). 15 17 E:\FR\FM\22OCN1.SGM 22OCN1 Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices 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–NYSEMKT–2013–80. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEMKT–2013–80, and should be submitted on or before November 12, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–24666 Filed 10–21–13; 8:45 am] [Release No. 34–70687; File No. SR–BATS– 2013–055] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. October 15, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 1, 2013, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) 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 Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. 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 Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-members of the Exchange pursuant to BATS Rules 15.1(a) and (c). Changes to the fee schedule pursuant to this proposal will be effective upon filing. The text of the proposed rule change is available at the Exchange’s Web site at https://www.batstrading.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 BILLING CODE 8011–01–P sroberts on DSK5SPTVN1PROD with FRONT MATTER SECURITIES AND EXCHANGE COMMISSION 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 A Member is any registered broker or dealer that has been admitted to membership in the Exchange. 2 17 18 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 21:08 Oct 21, 2013 Jkt 232001 PO 00000 Frm 00339 Fmt 4703 Sfmt 4703 62921 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 filed a proposal to establish a revenue sharing program with Interactive Data Corporation, acting by and through its division, Interactive Desktop Solutions, and its subsidiary, Interactive Data Online Properties, Inc. (collectively, ‘‘IDC’’), whereby the Exchange will make available, through IDC, private labeled versions of IDC’s Market-Q and LiveCharts products.6 In this proposal, the Exchange proposes to modify its fee schedule applicable to use of the Exchange effective October 1, 2013, in order to establish fees for these products. Pursuant to a revenue sharing agreement between IDC and the Exchange, the private labeled products will be marketed by the Exchange by featuring and advertising them on the Exchange’s Web site. Market–Q will be marketed under the private label name ‘‘BATS Investor Pro’’ and LiveCharts will be marketed under the private label name ‘‘BATS Investor RT’’ (BATS Investor Pro and BATS Investor RT, collectively, the ‘‘Private Labeled Products’’). Under the agreement, IDC determines the price schedule for the Private Labeled Products, and has the right to change the price schedule at any time in its sole discretion upon prior notice to BATS; provided, however, that such changes to the price schedule will not become effective unless and until the applicable fees set forth in the price schedule have been filed with and/or approved by the Commission through a proposed rule change submitted by the Exchange in accordance with the Act. The current price schedule charges subscribers a $125 monthly fee for BATS Investor Pro and a $24.95 monthly fee for BATS Investor RT. Subscribers of BATS Investor Pro and BATS Investor RT may, for an additional fee, supplement their subscriptions to include market data in addition to Exchange data. This fee is not included as part of the Exchange’s revenue sharing program with IDC. As 6 See Securities Exchange Act Release No. 70264 (August 27, 2013), 78 FR 54338 (September 3, 2013) (SR–BATS–2013–045). E:\FR\FM\22OCN1.SGM 22OCN1

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SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62917-62921]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24666]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70674; File No. SR-NYSEMKT-2013-80]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Adding a New Rule To
Adopt Price Protection Filters for Electronic Complex Orders

October 11, 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 October 3, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') 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 add a new rule to adopt price protection
filters for Electronic Complex Orders. 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 is proposing to amend Rule 980NY-Electronic Complex
Order Trading by establishing new Commentary .05 governing price
protections filters applicable to electronically entered Complex
Orders.\4\
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\4\ Exchange Rule 900.3NY(e) defines a Complex Order as any
order involving the simultaneous purchase and/or sale of two or more
different option series in the same underlying security, for the
same account, 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) and for
the purpose of executing a particular investment strategy.
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As defined in Exchange Rule 980NY, which governs Electronic Complex
Order trading, an ``Electronic Complex Order'' is a Complex Order that
has been entered into the NYSE Amex Options System (``System''), which
is routed to the Complex Matching Engine (``CME'') for possible
execution. As set forth in Rule 980NY, the CME is the mechanism in
which Electronic Complex Orders are executed against each other or
against individual quotes and orders in the Consolidated Book.
Electronic Complex Orders that are not immediately executed by the CME
are routed to the Consolidated Book.
Electronic Complex Orders are entered into the System at a net
debit/credit price for the entire strategy. Electronic Complex Orders
do not include specified prices for any single series component
(``leg'') of the Electronic Complex Order. Bids and offers on
Electronic Complex Orders may be expressed in any decimal price, and
the legs(s) of an Electronic Complex Order may be executed in one cent
increments regardless of the minimum price variation (``MPV'') \5\
otherwise applicable to the individual legs of the order. No leg of an
Electronic Complex Order submitted to the System will be executed at a
price outside the NYSE Amex Options best bid/offer for that leg.
However Electronic Complex Orders may be executed without consideration
of prices of the same Electronic Complex Order that might be available

[[Page 62918]]

on other exchanges. Individual legs of an Electronic Complex Order may
be executed at a price without regard to the National Best Bid or Offer
(``NBBO'') as disseminated by the Options Price Reporting Authority
(``OPRA'') for that same leg.\6\ In additional, neither Electronic
Complex Orders nor the individual legs that comprise an Electronic
Complex Order are eligible for routing to other exchanges.
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\5\ The minimum price variations (``MPV'') are equivalent to the
Trading Differentials as prescribed in Rule 960NY(a).
\6\ OPRA collects and disseminates the best bid and the best
offer for all option series as submitted by each options exchange.
The NBBO represents the consolidated best bid and the best offer for
each series, as disseminated by OPRA. Pursuant to Rule 991NY(b)(7)
Complex Trades are exempt from NBBO trade through liability.
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The Exchange believes that while it is appropriate to exempt
individual leg prices of Electronic Complex Orders from NBBO trade
through liability, there is still need for some level of price
protection for Complex Orders that are entered at a net debit/credit
price that is greater (less) than the contra-side NBBO market for the
Electronic Complex Order as a whole. The Exchange now proposes to
enhance Complex Order processing by introducing a Price Protection
Filter for Complex Orders (``Filter'') that will automatically reject
an incoming Electronic Complex Order if the net debit/credit limit
price of the order is greater (less) than the derived net debit/credit
NBBO \7\ for the contra-side of the same strategy by a set amount as
specified by the Exchange (``Specified Amount''). Electronic Complex
Orders will be subject to the Filter, and thus afforded price
protection, provided OPRA is disseminating an NBBO market for each
series component of the Electronic Complex Order at the time the order
is received by the Exchange. The Exchange believes that the proposed
price protection filters will help to prevent the execution of an
incoming Electronic Complex Order which is priced so far away from the
prevailing contra-side NBBO market for the same strategy, that the
execution of such order could cause significant price dislocation in
the market.
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\7\ The Exchange will calculate the derived contra-side NBBO for
a Complex Order using the prevailing markets for all individual legs
of the order as disseminated by OPRA at the time the order is
received by the Exchange.
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The Specified Amount is applicable to the net debit/credit price of
the Electronic Complex Order and is not applicable to any single leg of
the order. The Exchange proposes to specify the following amounts as
the price protection settings for the Filter.

.10 for orders where the smallest MPV of any leg of the
Electronic Complex Order is .01;
.15 for orders where the smallest MPV of any leg of the
Electronic Complex Order is .05;
and .30 for orders where the smallest MPV of any leg of the
Electronic Complex Order is .10.
For Electronic Complex Orders that are entered on a 1x1 ratio,
the Filter will be applied by the Specified Amounts above (.10, .15,
or .30).
For Electronic Complex Orders that are entered on an uneven
ratio (2x3 for example) where the MPV on all legs is the same, the
Filter will be applied by the Specified Amount multiplied by the
smallest contract size leg of the ratio (.20, .30, or .60 on the 2x3
example).
For Electronic Complex Orders that are entered on an uneven
ratio (2x3 for example) where the MPV of the legs are not the same
(.10 and .05 for example), the Filter will be applied by taking the
lesser of; the Specified Amount applicable to the smallest leg of
the Electronic Complex Order and multiplied by the contract size of
that leg (.60 in this example), or the Specified Amount of the
largest leg of the Complex Order multiplied by the contract size of
that leg (.45 in this example).
The price protection filter will work as described below.

Upon receipt by the Exchange of an Electronic Complex Order, the
Filter will check the net debit/credit price of the order against the
derived contra-side NBBO for the same strategy at the time of order
entry to determine whether the order's limit price is within the
specified price. The contra-side NBBO will be derived from the net
debit/credit market for the same strategy by using the NBBO prices for
the individual leg markets as disseminated by OPRA, that when
aggregated create a derived NBBO for that same strategy.\8\ The bid/ask
of the individual leg markets comprising the derived contra-side NBBO
may be as disseminated by one exchange, or comprised of a bid from one
exchange and an offer from a different exchange. The Filter will always
use the best bid and offer for each leg of the Electronic Complex Order
when determining what the derived NBBO is for the contra-side of the
same strategy. If the incoming Electronic Complex Order is priced at a
net debit/credit such that an execution could occur on NYSE Amex
Options at a price that was greater (less) than the derived NBBO by any
amount exceeding the Specified Amount for that same strategy, the order
would be rejected back to the ATP Holder with a reject code explaining
the reason for the reject. This would hold true even if the proposed
execution was within the Exchange's BBO.
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\8\ Markets for Complex Orders that may be available in the NYSE
Amex Options Complex Order Book (``COB'') or in a competing
exchanges complex order book, or spread book, are not disseminated
by OPRA or included in NBBO calculations and will not be used by the
Exchange to derive at the contra-side NBBO market for an Electronic
Complex Order.
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By rejecting the aggressively priced Electronic Complex Order, the
Filter prevents a possible execution from occurring at a price
significantly worse than the derived NBBO.

Examples of Price Protection Filter

Example 1
This example shows how the Filter is applied to an Electronic
Complex Order priced at a net debit with leg markets having the same
MPV. Assume the following:

MPV = .05
Jan 20 calls NBBO 2.00-2.10
Jan 25 calls NBBO 1.05-1.20

The Exchange receives an incoming Electronic Complex Order to buy
Jan 20 calls and sell Jan 25 calls on a 1x1 ratio, priced at a 1.25
debit. This would imply that the buyer would be willing to pay 1.25 for
the strategy as a whole without regard to the prices of the individual
leg markets. Upon receipt, this order would be sent to the CME for
processing. Pursuant to this proposal, before routing the order to the
CME the Filter will first check the derived NBBO net debit/credit
market for the contra-side of the same strategy. In this case the
contra-side NBBO market is offered at 1.05 (this price is established
by selling one Jan 20 for 2.10 and buying one Jan 25 for 1.05). The
Filter will then look at the NBBO price of smallest-priced leg of the
Complex Order and apply the appropriate price protection amount as
described above. Which for this example would be .15. Because the
derived contra-side NBBO price of 1.05 is better than the limit price
of the Complex Order by .20, which exceeds the Filter setting of .15,
the System will not route the order to the CME for processing but will
automatically reject the order back to the entering ATP Holder with a
reject code explaining the reason for the rejection.
Example 2
This example shows how the Filter is applied to an Electronic
Complex Order priced at a net debit with leg markets having different
MPVs. Assume the following:

MPV = .10 and .05
Jan 20 calls NBBO 5.00-5.30
Jan 25 calls NBBO 2.10-2.20

The Exchange receives an incoming Electronic Complex Order to buy
Jan 20 calls and sell Jan 25 calls on a 1x1 ratio, priced at a 3.60
debit. (This would imply that the buyer would be willing to pay 3.60
for the strategy as a whole without regard to the prices of the

[[Page 62919]]

individual leg markets). Upon receipt, this order would be sent to the
CME for processing. As proposed, before routing the Electronic Complex
Order to the CME, the Filter will first check the derived NBBO net
debit/credit market for the contra side of the same strategy. In this
case, the contra-side NBBO market is offered at 3.20 (this price is
established by selling one Jan 20 for 5.30 and buying one Jan 25 for
2.10). The Filter will then look at the NBBO price of smallest priced
leg of the Electronic Complex Order and apply the appropriate price
protection amount as described above. Which for this example would be
.15. Because the derived contra-side NBBO price of 3.20 is better than
the limit price of the Electronic Complex Order by .40, which exceeds
the Filter setting of .15, the System would automatically reject the
order back to the entering OTP Holder with a reject code explaining the
reason for the rejection.
Example 3
This example shows how the Filter is applied to an Electronic
Complex Order priced at a net credit with leg markets having the same
MPV. Assume the following:

MPV = .01
Jan 20 calls NBBO 2.03-2.08
Jan 25 calls NBBO 1.00-1.01

The Exchange receives an incoming Electronic Complex Order to sell
Jan 20 calls and buy Jan 25 calls on a 1x1 ratio, priced at a .90
credit. (This would imply that the seller would be willing to receive
.90 for the strategy as a whole without regard to the individual leg
markets). Upon receipt, this order would be sent to the CME for
processing.
Pursuant to this proposal however, before routing the Electronic
Complex Order to the CME the Filter will first check the derived NBBO
net debit/credit market for the contra-side of the same strategy. In
this case the contra-side NBBO market is priced at 1.02 (this price is
established by buying one Jan 20 for 2.03 and selling one Jan 25 for
1.01). The Filter will then look at the NBBO price of smallest priced
leg of the Electronic Complex Order and apply the appropriate price
protection amount as described above. Which for this example would be
.10. Because the derived contra-side NBBO price of 1.02 is better than
the limit price of the Electronic Complex Order by .12, which exceeds
the Filter setting of .10, the System would automatically reject the
order back to the entering ATP Holder with a reject code explaining the
reason for the rejection.
Example 4
This example shows how the Filter is applied to an Electronic
Complex Order priced at a net credit on an uneven ratio with leg
markets having the same MPV. Assume the following:

MPV = .01
Jan 20 calls NBBO 2.03-2.08
Jan 25 calls NBBO 1.00-1.02

The Exchange receives an incoming Electronic Complex Order to sell
Jan 20 calls and buy Jan 25 calls, on a 2x3 ratio, priced at a .75
credit. This would imply that the seller would be willing to receive
.75 for the strategy as a whole without regard to the prices of the
individual leg markets.
As proposed, before routing the Electronic Complex Order to the CME
the Filter will first check the derived NBBO net debit/credit market
for the contra-side of the same strategy. In this case the contra-side
NBBO market is priced at 1.00 (this price is established by buying two
Jan 20s for 2.03 each and selling three Jan 25s for 1.02 each (4.06-
3.06 = 1.00)). The Filter will then look at the NBBO price of smallest-
priced leg of the Electronic Complex Order and apply the appropriate
price protection amount as described above, which for this example
would be .10. However, because this order was entered on a ratio where
the smallest contract sized leg is greater than one contract, the
Filter is applied to the aggregate of the small sized leg of the ratio,
which in this case is .20 (.10 x 2 contracts). Because the derived
contra-side NBBO price of 1.00 is better than the limit price of the
Electronic Complex Order by .25, which exceeds the Filter setting of
.20, the Filter will automatically reject the order back to the
entering ATP Holder with a reject code explaining the reason for the
rejection.
Example 5
This example shows how the Filter is applied to an Electronic
Complex Order priced at a net credit on an uneven ratio with leg
markets having a different MPV. Assume the following:

MPV = .10 and .05
Jan 20 calls NBBO 4.10-4.20
Jan 25 calls NBBO 1.90-2.00

The Exchange receives an incoming Electronic Complex Order to sell
Jan 20 calls and buy Jan 25 calls, on a 2 x 3 ratio, priced at a 1.50
credit. (This would imply that the seller would be willing to receive
1.50 for the strategy as a whole without regard to the prices of the
individual leg markets).
As proposed, before routing the Electronic Complex Order to the
CME, the Filter will first check the derived NBBO net debit/credit
market for the contra side of same strategy. In this case the contra-
side NBBO market is priced at 2.20 (this price is established by buying
two Jan 20s for 4.10 each and selling three Jan 25s for 2.00 each
(8.20-6.00 = 2.20)). The Filter will then look at two scenarios to
determine what price protection level would apply. First, the Filter
will look at the contra-side NBBO price of the leg of the Electronic
Complex Order with the smallest contract size (Jan 20 leg) and
determine the appropriate price protection amount. Which in this
example would be .30. However, because the minimum contract size on the
leg is greater than one, the price protection amount is applied to the
aggregate contract size (2 contracts), which in this case would
establish a Filter setting of .60 (.30 x 2 contracts). Next, the Filter
will look at the contra-side NBBO price of the leg of the order with
the largest contract size (Jan 25 leg) and determine the appropriate
price protection amount, which in this case would be .15. However,
because the minimum contract size on the leg is greater than one, the
price protection amount is applied to the aggregate contract size of
the leg (3 contracts), which in this case would establish a Filter
setting of .45 (.15 x 3). The Filter will always apply the more
conservative setting, which in this case is .45. Because the derived
contra-side NBBO price of 2.20 is better than the limit price of the
Electronic Complex Order by .70, which exceeds the Filter setting of
.45, the Filter would automatically reject the order back to the
entering ATP Holder.
The Filter is not intended to offer price protection to bids and
offers at away markets, or to offer NBBO guaranteed pricing to
Electronic Complex Orders submitted to NYSE Amex Options. Rather the
proposed Filter would provide a level of protection to incoming
Electronic Complex Orders that are entered at a price so far away from
the prevailing contra-side NBBO market for the same strategy, that the
execution of such order could cause price dislocation in the market.
Accordingly, the Exchange does not propose to reject all orders with a
limit price greater (less) than the contra-side NBBO, just those that
are greater (less) by an amount as prescribed by the Exchange. The
Exchange believes that rejecting such aggressively priced Electronic
Complex Orders will help to ensure that market participants do not
receive an execution at a price significantly inferior to the contra-
side NBBO.

[[Page 62920]]

The Exchange recognizes that under certain market conditions the
specified amounts prescribed by the Exchange, and applicable to the
Filter, may be overly restrictive at times and there could be
situations where the Exchange may need to temporarily widen the Filter
settings to accommodate market conditions in a given class. This could
happen because of, but not limited to, instances of extreme volatility,
the dissemination of non-firm markets by competing exchanges, or some
other condition that would lead the Exchange to believe that it would
not be reasonable to expect that a market participant could receive an
execution of an Electronic Complex Order at, or close to, the
prevailing contra-side NBBO market for a given strategy. Therefore, the
Exchange proposes that in the interest of a fair and orderly market,
the Filter settings may be temporarily modified by a Trading Official
to an amount greater than prescribed, on a class-by-class basis.
Trading Officials are presently authorized to make similar
determinations regarding such matters as position limits,\9\ and quote-
width differentials.\10\ Permitting a Trading Official to temporarily
modify the prescribed settings within the Filter is consistent with
their ability to recommend and enforce rules and regulations relating
to trading, access, order, decorum, health, safety and welfare on the
Exchange which contributes to the Exchange's obligation to maintain a
fair and orderly market. In the event a Trading Official were to
temporarily modify the Filter setting, the Exchange will
contemporaneously announce the new settings to all ATP Holders via a
Trader Update.\11\ Temporary modifications to Filter settings would be
completed at the Exchange level. ATP Holders would not have to make any
adjustments to proprietary systems to accommodate such modifications.
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\9\ See Exchange Rule 904.05.
\10\ See Exchange Rules 925NY(b)(5) and 925NY(c).
\11\ Trader Updates are disseminated electronically to all ATP
Holders and are posted on the Exchange's Web site.
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2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Securities Exchange Act of 1934 (the ``Act''), in general, and
furthers the objectives of Section 6(b)(5) \12\ which requires the
rules of an exchange 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. The proposed rule change also is
designed to support the principles of Section 11A(a)(1) \13\ of the Act
in that it seeks to assure fair competition among brokers and dealers
and among exchange markets. The Exchange believes that this proposal
meets these requirements in that the proposed rule assists with the
maintenance of fair and orderly market by helping to mitigate the
potential risks associated with the entry of Electronic Complex Orders
that are entered at a price greater than the prevailing NBBO market for
the contra-side of same strategy, potentially resulting in executions
at prices that are away from the best bid or offer, thereby protecting
investors from receiving executions at inferior prices to what may be
available at other market centers.
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\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange is proposing a
market enhancement that provides greater protections from potentially
erroneous executions and the attendant risks of such executions to
market participants. Therefore, the Exchange believes that the proposal
should provide an incentive for market participants to enter executable
interest in the CME that can help foster price discovery and
transparency thereby benefiting all market participants. The proposal
is structured to offer the same enhancement to all market participants,
regardless of account type, and will not impose a competitive burden on
any participant. The Exchange does not believe that the proposed
mechanism will impose a burden on competing options exchanges. Rather,
the availability of this mechanism may foster more competition.
Specifically, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. When an exchange offers enhanced functionality that
distinguishes it from the competition and participants find it useful,
it has been the Exchange's experience that competing exchanges will
move to adopt similar functionality. Thus, the Exchange believes that
this type of competition amongst exchanges is beneficial to the market
place as a whole as it can result in enhanced processes, functionality,
and technologies.

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) \14\ of the Act and
Rule 19b-4(f)(6) \15\ thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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, along
with a brief description and text of 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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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.\17\
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\16\ 15 U.S.C. 78s(b)(2)(B).
\17\ 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2013-80 on the subject line.

[[Page 62921]]

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-NYSEMKT-2013-80. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2013-80, and should
be submitted on or before November 12, 2013.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24666 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P

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