Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rules 104 and 123C To Specify That Closings May Be Effectuated Manually or Electronically, 77186-77188 [2013-30271]
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77186
Federal Register / Vol. 78, No. 245 / Friday, December 20, 2013 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 5 and Rule 19b–4(f)(6)(iii)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing.6 However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requested that the
Commission waive the 30-day operative
delay, as specified in Rule 19b–
4(f)(6)(iii),7 which would make the rule
change effective and operative upon
filing.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because doing so will allow BOX to
immediately delete an obsolete rule and
update its rule book, which in turn will
avoid potential confusion. Accordingly,
the Commission designates the
proposed rule change as operative upon
filing with the Commission.8
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
5 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
7 17 CFR 240.19b–4(f)(6)(iii).
8 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
emcdonald on DSK4SPTVN1PROD with NOTICES
6 17
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Jkt 232001
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 rule-comments@
sec.gov. Please include File Number SR–
BOX–2013–58 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BOX–2013–58. 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 at 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices 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–BOX–
2013–58, and should be submitted on or
before January 10, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–30269 Filed 12–19–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71086; File No. SR–NYSE–
2013–79]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending
Rules 104 and 123C To Specify That
Closings May Be Effectuated Manually
or Electronically
December 16, 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 December
3, 2013, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rules 104 and 123C to specify that
closings may be effectuated manually or
electronically. 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,
1 15
9 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00093
Fmt 4703
2 17
Sfmt 4703
E:\FR\FM\20DEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
20DEN1
Federal Register / Vol. 78, No. 245 / Friday, December 20, 2013 / Notices
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
emcdonald on DSK4SPTVN1PROD with NOTICES
1. Purpose
The Exchange proposes to amend
Rules 104 and 123C to specify that
closings may be effectuated manually or
electronically.3 Rule 104(a)(3) currently
provides that designated market makers
(‘‘DMM’’) have the responsibility,
among other things, to facilitate the
close of trading for each of the securities
in which the DMM is registered as
required by Exchange rules (including
Rule 123C), which may include
supplying liquidity as needed. Rule
104(b) further provides that DMM units
shall have the ability to employ
algorithms for quoting and trading
consistent with NYSE and SEC
regulations. As such, DMM units at the
Exchange all use algorithms to engage in
quoting and trading activity at the
Exchange.
Rule 123D(1) specifies that openings
may be effectuated manually or
electronically. Accordingly, the
Exchange currently provides DMM units
with functionality to open a security,
either on a trade or on a quote,
algorithmically. The Exchange is in the
process of making a technological
change to enable DMM units to use
algorithms to close a security as well,
i.e., to effectuate a close electronically.
The Exchange believes that such
functionality would be consistent with
current Rule 104(b) because the rule
already permits algorithms to engage in
quoting or trading activity. However, for
the avoidance of doubt, the Exchange
proposes to amend Rule 123C to add
supplementary material that parallels
the current Rule 123D(1) rule provision
governing the manner by which
openings are effectuated to similarly
provide that closings may be effectuated
manually or electronically.
To assure that certain non-displayed
interest that is eligible to participate in
manual transactions is included in the
opening transaction, Rule 104(a)(2)
currently provides that the DMM and
DMM unit algorithms will have access
to aggregate order information in order
to comply with their requirement to
facilitate the opening.4 Because such
3 Rule 104 is operating on a pilot basis as part of
the Exchange’s New Market Model pilot and is in
effect until January 31, 2014. See Securities
Exchange Act Release No. 69813 (June 20, 2013), 78
FR 38753 (June 27, 2013) (SR–NYSE–2013–43).
4 Minimum Display Reserve interest, which
includes Minimum Display Reserve Orders
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16:44 Dec 19, 2013
Jkt 232001
non-displayed interest is also eligible to
participate in the closing transaction,
the Exchange would similarly provide
aggregate order information to the DMM
and DMM unit algorithm in order for
the DMM algorithm to close the security
electronically. Accordingly, the
Exchange proposes to amend Rule
104(a)(3) to add that DMM and DMM
unit algorithms will have access to
aggregate order information in order to
comply with their requirement to
facilitate the close of trading as required
by Exchange rules. The proposed
additional rule text mirrors the current
rule text in Rule 104(a)(2).
Rule 104(b)(iii) provides that the
DMM unit’s system employing
algorithms will have access only to
publicly-available information.
However, as noted above, certain nondisplayed interest must be included in
the opening or closing transaction.
Currently, in order to both include such
interest in an opening that is effectuated
electronically and meet the Rule
104(b)(iii) requirements, the Exchange
delivers aggregate order information that
includes such non-displayed interest to
DMM unit algorithms in a format that is
accessible only for the purpose of the
opening transaction. Stated otherwise,
such information is not made available
to the DMM algorithms that engage in
intraday quoting and trading activity.
The Exchange proposes to use similar
mechanisms to deliver aggregate order
information necessary for DMM units to
effectuate a closing transaction
electronically so that it is similarly
restricted in its use and availability. In
order to provide additional transparency
in Exchange rules, the Exchange
proposes to amend Rule 104(b)(iii) to
add a qualifying statement that except
as provided for in Rule 104(a)(2) and
proposed Rule 104(a)(3), which as
described above are of limited purpose,
the DMM unit’s system employing
algorithms will not have access to order
information that is not publicly
available.
The Exchange notes that Rules
104(b)(i) and (v) require all functions
performed by a DMM unit’s algorithm
pursuant to Rule 13 and Floor broker interest
designated as reserve interest pursuant to Rule 70,
is eligible to participate in manual executions,
which include the open and close. Exchange
systems include all interest eligible to participate in
the opening transaction in the aggregate order
information available for execution at a price point
when the DMM facilitates a manual transaction. See
Securities Exchange Act Release No. 34–58184 (July
17, 2008), 73 FR 42853 at 42868 (July 23, 2008)
(SR–NYSE–2008–45). See also Rule 115 (providing
that the aggregated interest of Minimum Display
Reserve Orders may be included in the information
a DMM may provide to an inquiry from a Floor
broker conducting a market probe in the normal
course of business).
PO 00000
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Sfmt 4703
77187
operate consistent with NYSE and SEC
regulations and this proposed rule
change maintains that requirement. For
example, if there is interest represented
in the trading crowd that must be
included in the closing transaction
pursuant to Rule 123C(7)(a)(iii), the
DMM would need to use a manner of
closing the security that assures that
such interest is properly represented in
the closing transaction.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act,5
in general, and furthers the objectives of
Section 6(b)(5) of the Act,6 in particular,
in that it is 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,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. The Exchange believes that the
proposed rule change would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
provides clarity of under what
circumstances a DMM unit may employ
algorithms. The current rule already
specifies that a DMM unit may use
algorithms to engage in quoting and
trading activity. Exchange rules also
specify that such algorithms may be
used to effectuate an opening
electronically. The proposed rule
change will provide transparency that
DMM unit algorithms may also be used
to effectuate a closing electronically.
The Exchange further believes that the
proposed rule changes to Rules 104(a)(3)
and 104(b)(iii) provide further
transparency regarding the manner by
which information is made available to
DMM units for the purpose of
facilitating a closing transaction, which
is consistent with current rules and
practice regarding what information is
made available to DMM units for the
purpose of facilitating an opening
transaction electronically. The Exchange
believes that the proposed changes
promote just and equitable principles of
trade because the provision of such
order information to DMM units assures
that all electronically-entered interest
that is eligible to participate in an
opening or closing transaction would
participate if such a transaction were to
be effectuated electronically, while at
the same time maintaining protections
5 15
6 15
E:\FR\FM\20DEN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
20DEN1
77188
Federal Register / Vol. 78, No. 245 / Friday, December 20, 2013 / Notices
afforded to non-public order
information.
The Exchange further notes that the
proposed change removes impediments
to and perfects the mechanism of a free
and open market and a national market
system because it provides greater
flexibility for DMMs to operate remotely
if the Exchange cannot open its lower
Manhattan physical location. Currently,
if the Exchange needs to close its
physical location, as it did on October
29 and 30, 2012 during Superstorm
Sandy, the Exchange cannot operate
because the opening and closing
transactions require manual
intervention by a DMM located on the
Trading Floor, even when opening a
security electronically. The Exchange is
currently in the process of developing
technology for such functions to be
performed remotely by DMM units. The
Exchange believes that the proposed
rule change, which provides DMM units
with the authority to effectuate a closing
transaction either manually or
electronically, will enable the Exchange
to proceed with its disaster recovery
plans to enable full remote access
operations of the Exchange.
emcdonald on DSK4SPTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to specify in
Exchange rules that a DMM unit may
use algorithms to effectuate a closing
transaction electronically. Because there
are no other market participants on the
Exchange with the responsibilities and
duties specified in Rule 104 to facilitate
a closing transaction, the manner by
which such responsibility is discharged
does not create a competitive issue with
any other market participant. The
Exchange further notes that the manner
by which information would be
provided to the DMM unit in order to
facilitate a closing transaction
electronically is consistent with current
rules and practice regarding what
information is made available to DMM
units for the purpose of facilitating an
opening transaction electronically,
including that such information would
be restricted in its use and availability
for intraday trading by the DMM unit.
VerDate Mar<15>2010
16:44 Dec 19, 2013
Jkt 232001
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 7 and Rule
19b–4(f)(6) thereunder.8 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b-4(f)(6)(iii)
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) 9 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2013–79 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
7 15
U.S.C. 78s(b)(3)(A)(iii).
8 17 CFR 240.19b–4(f)(6).
9 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2013–79. 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
publicly available. All submissions
should refer to File Number SR–NYSE–
2013–79 and should be submitted on or
before January 10, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–30271 Filed 12–19–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71079; File No. SR–CBOE–
2013–121]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Short
Term Option Series Program
December 16, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
10 17
E:\FR\FM\20DEN1.SGM
CFR 200.30–3(a)(12).
20DEN1
]]>Agencies
[Federal Register Volume 78, Number 245 (Friday, December 20, 2013)]
[Notices]
[Pages 77186-77188]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30271]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71086; File No. SR-NYSE-2013-79]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Rules 104 and 123C To Specify That Closings May Be Effectuated
Manually or Electronically
December 16, 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 December 3, 2013, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rules 104 and 123C to specify that
closings may be effectuated manually or electronically. 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,
[[Page 77187]]
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 proposes to amend Rules 104 and 123C to specify that
closings may be effectuated manually or electronically.\3\ Rule
104(a)(3) currently provides that designated market makers (``DMM'')
have the responsibility, among other things, to facilitate the close of
trading for each of the securities in which the DMM is registered as
required by Exchange rules (including Rule 123C), which may include
supplying liquidity as needed. Rule 104(b) further provides that DMM
units shall have the ability to employ algorithms for quoting and
trading consistent with NYSE and SEC regulations. As such, DMM units at
the Exchange all use algorithms to engage in quoting and trading
activity at the Exchange.
---------------------------------------------------------------------------
\3\ Rule 104 is operating on a pilot basis as part of the
Exchange's New Market Model pilot and is in effect until January 31,
2014. See Securities Exchange Act Release No. 69813 (June 20, 2013),
78 FR 38753 (June 27, 2013) (SR-NYSE-2013-43).
---------------------------------------------------------------------------
Rule 123D(1) specifies that openings may be effectuated manually or
electronically. Accordingly, the Exchange currently provides DMM units
with functionality to open a security, either on a trade or on a quote,
algorithmically. The Exchange is in the process of making a
technological change to enable DMM units to use algorithms to close a
security as well, i.e., to effectuate a close electronically. The
Exchange believes that such functionality would be consistent with
current Rule 104(b) because the rule already permits algorithms to
engage in quoting or trading activity. However, for the avoidance of
doubt, the Exchange proposes to amend Rule 123C to add supplementary
material that parallels the current Rule 123D(1) rule provision
governing the manner by which openings are effectuated to similarly
provide that closings may be effectuated manually or electronically.
To assure that certain non-displayed interest that is eligible to
participate in manual transactions is included in the opening
transaction, Rule 104(a)(2) currently provides that the DMM and DMM
unit algorithms will have access to aggregate order information in
order to comply with their requirement to facilitate the opening.\4\
Because such non-displayed interest is also eligible to participate in
the closing transaction, the Exchange would similarly provide aggregate
order information to the DMM and DMM unit algorithm in order for the
DMM algorithm to close the security electronically. Accordingly, the
Exchange proposes to amend Rule 104(a)(3) to add that DMM and DMM unit
algorithms will have access to aggregate order information in order to
comply with their requirement to facilitate the close of trading as
required by Exchange rules. The proposed additional rule text mirrors
the current rule text in Rule 104(a)(2).
---------------------------------------------------------------------------
\4\ Minimum Display Reserve interest, which includes Minimum
Display Reserve Orders pursuant to Rule 13 and Floor broker interest
designated as reserve interest pursuant to Rule 70, is eligible to
participate in manual executions, which include the open and close.
Exchange systems include all interest eligible to participate in the
opening transaction in the aggregate order information available for
execution at a price point when the DMM facilitates a manual
transaction. See Securities Exchange Act Release No. 34-58184 (July
17, 2008), 73 FR 42853 at 42868 (July 23, 2008) (SR-NYSE-2008-45).
See also Rule 115 (providing that the aggregated interest of Minimum
Display Reserve Orders may be included in the information a DMM may
provide to an inquiry from a Floor broker conducting a market probe
in the normal course of business).
---------------------------------------------------------------------------
Rule 104(b)(iii) provides that the DMM unit's system employing
algorithms will have access only to publicly-available information.
However, as noted above, certain non-displayed interest must be
included in the opening or closing transaction. Currently, in order to
both include such interest in an opening that is effectuated
electronically and meet the Rule 104(b)(iii) requirements, the Exchange
delivers aggregate order information that includes such non-displayed
interest to DMM unit algorithms in a format that is accessible only for
the purpose of the opening transaction. Stated otherwise, such
information is not made available to the DMM algorithms that engage in
intraday quoting and trading activity. The Exchange proposes to use
similar mechanisms to deliver aggregate order information necessary for
DMM units to effectuate a closing transaction electronically so that it
is similarly restricted in its use and availability. In order to
provide additional transparency in Exchange rules, the Exchange
proposes to amend Rule 104(b)(iii) to add a qualifying statement that
except as provided for in Rule 104(a)(2) and proposed Rule 104(a)(3),
which as described above are of limited purpose, the DMM unit's system
employing algorithms will not have access to order information that is
not publicly available.
The Exchange notes that Rules 104(b)(i) and (v) require all
functions performed by a DMM unit's algorithm operate consistent with
NYSE and SEC regulations and this proposed rule change maintains that
requirement. For example, if there is interest represented in the
trading crowd that must be included in the closing transaction pursuant
to Rule 123C(7)(a)(iii), the DMM would need to use a manner of closing
the security that assures that such interest is properly represented in
the closing transaction.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\5\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\6\ in particular, in that it is 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that the
proposed rule change would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because it provides clarity of under what circumstances a DMM unit may
employ algorithms. The current rule already specifies that a DMM unit
may use algorithms to engage in quoting and trading activity. Exchange
rules also specify that such algorithms may be used to effectuate an
opening electronically. The proposed rule change will provide
transparency that DMM unit algorithms may also be used to effectuate a
closing electronically. The Exchange further believes that the proposed
rule changes to Rules 104(a)(3) and 104(b)(iii) provide further
transparency regarding the manner by which information is made
available to DMM units for the purpose of facilitating a closing
transaction, which is consistent with current rules and practice
regarding what information is made available to DMM units for the
purpose of facilitating an opening transaction electronically. The
Exchange believes that the proposed changes promote just and equitable
principles of trade because the provision of such order information to
DMM units assures that all electronically-entered interest that is
eligible to participate in an opening or closing transaction would
participate if such a transaction were to be effectuated
electronically, while at the same time maintaining protections
[[Page 77188]]
afforded to non-public order information.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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The Exchange further notes that the proposed change removes
impediments to and perfects the mechanism of a free and open market and
a national market system because it provides greater flexibility for
DMMs to operate remotely if the Exchange cannot open its lower
Manhattan physical location. Currently, if the Exchange needs to close
its physical location, as it did on October 29 and 30, 2012 during
Superstorm Sandy, the Exchange cannot operate because the opening and
closing transactions require manual intervention by a DMM located on
the Trading Floor, even when opening a security electronically. The
Exchange is currently in the process of developing technology for such
functions to be performed remotely by DMM units. The Exchange believes
that the proposed rule change, which provides DMM units with the
authority to effectuate a closing transaction either manually or
electronically, will enable the Exchange to proceed with its disaster
recovery plans to enable full remote access operations of the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to specify in Exchange rules that a DMM unit may use algorithms to
effectuate a closing transaction electronically. Because there are no
other market participants on the Exchange with the responsibilities and
duties specified in Rule 104 to facilitate a closing transaction, the
manner by which such responsibility is discharged does not create a
competitive issue with any other market participant. The Exchange
further notes that the manner by which information would be provided to
the DMM unit in order to facilitate a closing transaction
electronically is consistent with current rules and practice regarding
what information is made available to DMM units for the purpose of
facilitating an opening transaction electronically, including that such
information would be restricted in its use and availability for
intraday trading by the DMM unit.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(6).
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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) \9\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\9\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2013-79 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2013-79. 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 publicly available. All
submissions should refer to File Number SR-NYSE-2013-79 and should be
submitted on or before January 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30271 Filed 12-19-13; 8:45 am]
BILLING CODE 8011-01-P
