Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 900.2NY To Codify the Terms Complex BBO and Complex NBBO and To Amend Exchange Rule 900.3NY(w) To Revise the Definition of a PNP Plus Order, 60560-60563 [2014-23848]

Download as PDF 60560 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices Institution of such proceedings appears appropriate at this time in view of the legal and policy issues raised by the proposal. As noted above, institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to comment on the issues presented by the proposed rule change and provide the Commission with arguments to support the Commission’s analysis as to whether to approve or disapprove the proposal. Pursuant to Section 19(b)(2)(B) of the Act,57 the Commission is providing notice of the grounds for disapproval under consideration. In particular, Section 15A(b)(6) of the Act 58 requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. In addition, Section 15A(b)(9) of the Act 59 requires that FINRA rules not impose any unnecessary or inappropriate burden on competition. The Commission believes FINRA’s proposed rule change raises questions as to whether it is consistent with the requirements of Sections 15A(b)(6) and 15A(b)(9) of the Act. V. Request for Written Comments asabaliauskas on DSK5VPTVN1PROD with NOTICES The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues raised by the proposed rule change. In particular, the Commission invites the written views of interested persons on whether the proposed rule change is inconsistent with Sections 15A(b)(6) and 15A(b)(9), or any other provision, of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. The time for conclusion of the proceedings may be extended for up to an additional 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding or if the self-regulatory organization consents to the extension. 57 15 U.S.C. 78s(b)(2)(B). 58 15 U.S.C. 78o–3(b)(6). 59 15 U.S.C. 78o–3(b)(9). VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 request for an opportunity to make an oral presentation.60 Interested persons are invited to submit written data, views, and arguments by November 6, 2014 concerning whether the proposed rule change should be approved or disapproved. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by November 21, 2014. 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– FINRA–2014–028 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2014–028. 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 principle office of FINRA. All comments received will be posted without change. The Commission does not edit personal 60 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Pub. L. 94– 29, 89 Stat. 97 (1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR–FINRA– 2014–028 and should be submitted on or before November 6, 2014. If comments are received, any rebuttal comments should be submitted by November 21, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.61 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–23836 Filed 10–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73284; File No. SR– NYSEMKT–2014–84] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 900.2NY To Codify the Terms Complex BBO and Complex NBBO and To Amend Exchange Rule 900.3NY(w) To Revise the Definition of a PNP Plus Order October 1, 2014. 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 September 24, 2014, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Exchange Rule 900.2NY to codify the terms Complex BBO and Complex NBBO and to amend Exchange Rule 900.3NY(w) to revise the definition of a PNP Plus order. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, 61 17 CFR 200.30–3(a)(12); 17 CFR 200.30– 3(a)(57). 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 900.2NY to adopt definitions for the terms Complex BBO and Complex NBBO. Additionally, the Exchange proposes to amend Rule 900.3NY(w) by revising the definition of PNP Plus orders, to specify that the order type is available solely for Electronic Complex Orders,4 and describe the processing of an Electronic Complex Order designated as PNP Plus. asabaliauskas on DSK5VPTVN1PROD with NOTICES Complex BBO and Complex NBBO The term BBO is defined in Exchange Rule 900.2NY(7) as the best bid or offer on the System,5 and the term NBBO is defined in Exchange Rule 900.2NY(41) as the national best bid or offer. In both cases the best bid and offer represents the best price available in an individual option series as disseminated by either the Exchange (in the case of the BBO) or the Options Price Reporting Authority (‘‘OPRA’’) (in the case of the NBBO). Unlike bids and offers for each individual option series, derived bids and offers for Complex Orders are not disseminated by either the Exchange or OPRA. Even though there is not a published bid or offer for every complex order strategy, there are situations where it is necessary to derive a (theoretical) bid or offer for a particular strategy.6 In order 4 See Rule 980NY refers to the Exchange’s electronic order delivery, execution and reporting system for options through which orders and quotes are consolidated for execution and/or display. 6 For example, the Complex Matching Engine utilizes a Complex NBBO when establishing the acceptable price range applicable to the opening 5 ‘‘System’’ VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 to derive the best bid or best offer for a given complex order strategy the Exchange takes the best bid and best offer in the individual leg markets comprising the complex order strategy, that when aggregated create either a derived Complex BBO or derived Complex NBBO for that same strategy. The Exchange uses the best quotes available on the Exchange in each component series (as shown in the System) to create the Complex BBO and the best quotes available nationally in each component series (as disseminated by OPRA) to establish the Complex NBBO. When deriving the Complex BBO or Complex NBBO the Exchange only factors in the best prices available in the individual leg markets and does not take into consideration prices of individual Complex Orders that may be resting on the Exchange or in another exchange’s complex order book (spread book, contingency book). The Exchange proposes to add definitions of the terms Complex BBO and Complex NBBO in Rule 900.2NY. The term ‘‘Complex BBO’’ would be defined in Rule 900.2NY(7)(ii) as the BBO for a given complex order strategy as derived from the best bid on the System and best offer on the System for each individual component series of a Complex Order. The term ‘‘Complex NBBO’’ would be defined in Rule 900.2NY(41)(ii) as the NBBO for a given complex order strategy as derived from the national best bid and national best offer for each individual component series of a Complex Order. An example of how the Complex BBO and Complex NBBO is derived for a given strategy is shown below; Jan 20 calls BBO 2.00 × 2.20 NBBO 2.05¥2.20 Jan 25 calls BBO 1.00 × 1.20 NBBO 1.05¥1.20 To derive the bid side of the Complex BBO for the Jan 20/25 call spread using the markets available on the Exchange, the Exchange takes the best bid in the Jan 20 calls coupled with the best offer in the Jan 25 calls. The result is an .80 bid (2.00¥1.20 = .80). To derive the offer side of the Complex BBO for the same call spread the Exchange take [sic] the best offer in the Jan 20 calls coupled with the best bid in the Jan 25 calls. The result is an offer of 1.20 (2.20¥1.00 = 1.20). In this example, the resulting Complex BBO is .80¥1.20. To derive the bid side of the Complex NBBO for the Jan 20/25 call spread using the markets as disseminated by OPRA, the Exchange takes the national best bid in the Jan 20 calls coupled with auction process for Electronic Complex Orders. See Rule 980NY(c)(i)(B). PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 60561 the national best offer in the Jan 25 calls. This results in an .85 bid (2.05¥1.20 = .85). To derive the offer side of the Complex NBBO for the same call spread the Exchange take [sic] the national best offer in the Jan 20 calls coupled with the national best bid in the Jan 25 calls. This results in an offer of 1.15 (2.20¥1.05 = 1.15). In this example, the resulting Complex NBBO is .85¥1.15. PNP Plus As defined in Rule 900.3NY(w) an order designated as PNP Plus is a limit order that is automatically re-priced by the Exchange to a price that is one minimum price variation (‘‘MPV’’) higher (lower) than the NBBO bid (offer) if it were to lock or cross the NBBO. The re-priced order is then posted in the Consolidated Book. PNP Plus orders continue to be re-priced and re-posted in the Consolidated Book, with each change in the NBBO, until such time as the NBBO has moved to a price where the original limit price of the PNP Plus order no longer locks or crosses the NBBO, at which time the PNP Plus order will revert to the original limit price of such order. Orders designated as PNP Plus are ranked in the Consolidated Book pursuant to Rule 964NY and assigned a new price time priority as of the time of each reposting. Because an order designated as PNP Plus would be posted at a price that is higher (lower) that [sic] the best contraside market, by designating an order as PNP Plus, a market participant could guarantee that if its order were to be executed, it would be executed at a price that is better than the disseminated contra-side market Complex BBO. Accordingly, PNP Plus provides ATP Holders with additional processing capability to control the circumstances under which their orders are executed. The Exchange notes that the PNP Plus designation is currently not operable for single-leg orders nor does the Exchange intend to introduce such functionality in the near future. However, ATP Holders are able to and do use the PNP Plus designation when submitting Electronic Complex Orders. Accordingly, the Exchange is proposing to amend the definition of the PNP Plus order type and to make it applicable solely to Electronic Complex Orders. In addition, the revised rule would explain that the net debit/credit price 7 of an Electronic Complex Order designated as PNP Plus is re-priced 7 Bids and offers for Electronic Complex Orders are entered based on the net debit/credit of prices of the individual component series comprising the complex order strategy. E:\FR\FM\07OCN1.SGM 07OCN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES 60562 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices based on the Complex BBO for the same complex order strategy. An Electronic Complex Order designated as PNP Plus would follow existing PNP Plus processing in that the order will be automatically be [sic] re-priced by the Exchange to a price that is one MPV lower (higher) than the displayed contra-side market for buy (sell) orders if it were to lock or cross that market. However, because the leg prices of an Electronic Complex Order are bound by the best bid or offer on the Exchange and not the national best bid or offer 8 as is the case with single-leg orders, when re-pricing an Electronic Complex Order designated as PNP Plus, the order would be re-priced one MPV lower (higher) than the Complex BBO if it were to lock or cross the Complex BBO. Accordingly, as amended, Rule 900.3NY(w) would state that an Electronic Complex Order designated as PNP Plus is automatically re-priced by the Exchange to an MPV higher (for sell orders) than the Complex BBO bid for that same Complex Order strategy or at an MPV lower (for buy orders) than the Complex BBO offer for that same Complex Order strategy for any unexecuted portion of the order that would otherwise lock or cross the Complex BBO. The Exchange notes that because bids and offers for Electronic Complex Orders are priced on a net debit/credit basis and 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 MPV otherwise applicable to the individual legs of the order,9 the MPV applicable to Electronic Complex Order designated as PNP Plus will always be .01 cent. The re-priced order would then be posted in the Consolidated Book pursuant to Rule 980NY(b). Finally, the Exchange proposes to change the existing cross reference in Rule 900.3NY(w) from Rule 964NY to 980NY(b). This is a non-substantive change as both rules call for orders to be ranked according to price/time priority with orders on behalf of Customers being ranked ahead of same price orders for non-Customers. The Exchange believes Rule 980NY(b) is the more appropriate rule to reference because it is specific to Electronic Complex Orders. For the purposes of ranking in the Consolidated Book, Electronic Complex Order designated as PNP Plus shall initially be ranked based on their original time of entry and will be assigned a new price time priority as of the time of each reposting. From 8 See 9 See Rule 980NY(c). Rule 980NY Commentary .01. VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 there, with the exception of the use of the Complex BBO as opposed to the NBBO, all other PNP Plus functionality remains unchanged. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b)(5) of the Securities Exchange Act of 1934 (the ‘‘Act’’),10 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 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 would provide transparency in Exchange rules that the PNP Plus is a designation applicable to Electronic Complex Orders. The Exchange further believes that revising the PNP Plus definition to describe how an Electronic Complex Order designated as PNP Plus is re-price [sic] based off the Complex BBO and not the NBBO would align the rule with existing functionality and rules governing Electronic Complex Orders. The Exchange also believes that [sic] proposed rule change would perfect the mechanism of a free and open market because by revising the PNP Plus order type to make the designation available solely for Electronic Complex Orders, and not for single leg orders, the rule would clearly describe the applicability of the PNP Plus order type and eliminate any suggestion of an order type for which there is no demonstrated demand and is not supported by Exchange systems. The Exchange also believes that defining the terms Complex BBO and Complex NBBO will help to remove impediments to and perfect the mechanism of a free and open market and a national market system, in general because it would provide all market participants with additional clarity in how the Exchange calculates the Complex BBO and Complex NBBO in connection with the processing of Complex Orders In addition, the Exchange further believes that the proposal removes impediments to and perfects the mechanism of a free and open market by ensuring that members, regulators and the public can more easily navigate the Exchange’s rulebook and better understand the orders types available for trading on the Exchange. 10 15 PO 00000 U.S.C. 78f(b). Frm 00119 Fmt 4703 Sfmt 4703 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 change is not designed to address any competitive issue but rather revise an existing a [sic] rule, that can be seen as inaccurate or incomplete, by accurately describing functionality applicable to the PNP Plus order type and describing the processing of an Electronic Complex Order designated as PNP Plus, thereby reducing confusion and making the Exchange’s rules easier to understand and navigate. Also, adopting Complex BBO and Complex NBBO as defined terms is intended to add clarity into Exchange rules regarding the methodology of how a Complex BBO and a Complex NBBO is derived and therefore does not raise any competitive concerns. 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 11 and Rule 19b–4(f)(6) thereunder.12 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) thereunder.13 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if 11 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 13 17 CFR 240.19b–4(f)(6). 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. 12 17 E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / 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) 14 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: asabaliauskas on DSK5VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEMKT–2014–84 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2014–84. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the NYSE’s principal office and on its Internet Web site at www.nyse.com. All comments received will be posted without change; 14 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 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–2014–84 and should be submitted on or before October 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Jill M. Peterson, Assistant Secretary. [FR Doc. 2014–23848 Filed 10–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73283; File No. SR–CME– 2014–28] Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; Notice of Designation of Longer Period for Commission Action on Proposed Rule Change, as Modified by Amendment No. 2, Related to Enhancements to Its Risk Model for Credit Default Swaps October 1, 2014. On August 8, 2014, Chicago Mercantile Exchange Inc. (‘‘CME’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change SR–CME–2014–28 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b-4 thereunder.2 The proposed rule change was published for comment in the Federal Register on August 18, 2014.3 On September 2, 2014, CME filed Amendment No. 2 to the proposed rule change.4 Notice of Amendment No. 2 to the proposed rule change was published for comment in the Federal Register on September 08, 2014.5 The Commission did not receive comments on the proposed rule change or Amendment No. 2 thereto. Section 19(b)(2) of the Act 6 provides that within 45 days of the publication of notice of the filing of a proposed rule 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–72834 (Aug. 13, 2014), 79 FR 48805 (Aug. 18, 2014) (SR– CME–2014–28). 4 On August 18, 2014, CME filed Amendment No. 1 to the proposed rule change. CME withdrew Amendment No. 1 on August 29, 2014. 5 Securities Exchange Act Release No. 34–72959 (Sep. 2, 2014), 79 FR 53234 (Sep. 8, 2014) (SR– CME–2014–28). 6 15 U.S.C. 78s(b)(2). 1 15 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 60563 change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day from the publication of notice of filing of this proposed rule change is October 2, 2014. The Commission is extending this 45-day time period. CME is proposing significant changes to its risk model for the clearing of broad-based index credit default swaps (‘‘CDS’’), which share the same Guaranty Fund with single-name CDS in the event CME launches clearing of single-name CDS. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the complex issues under the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,7 designates November 16, 2014, as the date by which the Commission should either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–CME–2014– 28). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Jill M. Peterson, Assistant Secretary. [FR Doc. 2014–23847 Filed 10–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73275; File No. SR–CME– 2014–31] Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 2, Related to Clearing of Certain iTraxx Europe Index Untranched CDS Contracts on Indices Administered by Markit October 1, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule 19b–4 7 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(31). 1 15 U.S.C. 78s(b)(1). 8 17 E:\FR\FM\07OCN1.SGM 07OCN1

Agencies

[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Notices]
[Pages 60560-60563]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23848]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73284; File No. SR-NYSEMKT-2014-84]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Exchange Rule 
900.2NY To Codify the Terms Complex BBO and Complex NBBO and To Amend 
Exchange Rule 900.3NY(w) To Revise the Definition of a PNP Plus Order

October 1, 2014.
    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 September 24, 2014, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 Exchange Rule 900.2NY to codify the 
terms Complex BBO and Complex NBBO and to amend Exchange Rule 
900.3NY(w) to revise the definition of a PNP Plus order. The text of 
the proposed rule change is available on the Exchange's Web site at 
www.nyse.com,

[[Page 60561]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 900.2NY to adopt definitions 
for the terms Complex BBO and Complex NBBO. Additionally, the Exchange 
proposes to amend Rule 900.3NY(w) by revising the definition of PNP 
Plus orders, to specify that the order type is available solely for 
Electronic Complex Orders,\4\ and describe the processing of an 
Electronic Complex Order designated as PNP Plus.
---------------------------------------------------------------------------

    \4\ See Rule 980NY
---------------------------------------------------------------------------

Complex BBO and Complex NBBO
    The term BBO is defined in Exchange Rule 900.2NY(7) as the best bid 
or offer on the System,\5\ and the term NBBO is defined in Exchange 
Rule 900.2NY(41) as the national best bid or offer. In both cases the 
best bid and offer represents the best price available in an individual 
option series as disseminated by either the Exchange (in the case of 
the BBO) or the Options Price Reporting Authority (``OPRA'') (in the 
case of the NBBO). Unlike bids and offers for each individual option 
series, derived bids and offers for Complex Orders are not disseminated 
by either the Exchange or OPRA.
---------------------------------------------------------------------------

    \5\ ``System'' refers to the Exchange's electronic order 
delivery, execution and reporting system for options through which 
orders and quotes are consolidated for execution and/or display.
---------------------------------------------------------------------------

    Even though there is not a published bid or offer for every complex 
order strategy, there are situations where it is necessary to derive a 
(theoretical) bid or offer for a particular strategy.\6\ In order to 
derive the best bid or best offer for a given complex order strategy 
the Exchange takes the best bid and best offer in the individual leg 
markets comprising the complex order strategy, that when aggregated 
create either a derived Complex BBO or derived Complex NBBO for that 
same strategy. The Exchange uses the best quotes available on the 
Exchange in each component series (as shown in the System) to create 
the Complex BBO and the best quotes available nationally in each 
component series (as disseminated by OPRA) to establish the Complex 
NBBO. When deriving the Complex BBO or Complex NBBO the Exchange only 
factors in the best prices available in the individual leg markets and 
does not take into consideration prices of individual Complex Orders 
that may be resting on the Exchange or in another exchange's complex 
order book (spread book, contingency book).
---------------------------------------------------------------------------

    \6\ For example, the Complex Matching Engine utilizes a Complex 
NBBO when establishing the acceptable price range applicable to the 
opening auction process for Electronic Complex Orders. See Rule 
980NY(c)(i)(B).
---------------------------------------------------------------------------

    The Exchange proposes to add definitions of the terms Complex BBO 
and Complex NBBO in Rule 900.2NY. The term ``Complex BBO'' would be 
defined in Rule 900.2NY(7)(ii) as the BBO for a given complex order 
strategy as derived from the best bid on the System and best offer on 
the System for each individual component series of a Complex Order. The 
term ``Complex NBBO'' would be defined in Rule 900.2NY(41)(ii) as the 
NBBO for a given complex order strategy as derived from the national 
best bid and national best offer for each individual component series 
of a Complex Order.
    An example of how the Complex BBO and Complex NBBO is derived for a 
given strategy is shown below;

Jan 20 calls BBO 2.00 x 2.20 NBBO 2.05-2.20
Jan 25 calls BBO 1.00 x 1.20 NBBO 1.05-1.20

    To derive the bid side of the Complex BBO for the Jan 20/25 call 
spread using the markets available on the Exchange, the Exchange takes 
the best bid in the Jan 20 calls coupled with the best offer in the Jan 
25 calls. The result is an .80 bid (2.00-1.20 = .80). To derive the 
offer side of the Complex BBO for the same call spread the Exchange 
take [sic] the best offer in the Jan 20 calls coupled with the best bid 
in the Jan 25 calls. The result is an offer of 1.20 (2.20-1.00 = 1.20). 
In this example, the resulting Complex BBO is .80-1.20.
    To derive the bid side of the Complex NBBO for the Jan 20/25 call 
spread using the markets as disseminated by OPRA, the Exchange takes 
the national best bid in the Jan 20 calls coupled with the national 
best offer in the Jan 25 calls. This results in an .85 bid (2.05-1.20 = 
.85). To derive the offer side of the Complex NBBO for the same call 
spread the Exchange take [sic] the national best offer in the Jan 20 
calls coupled with the national best bid in the Jan 25 calls. This 
results in an offer of 1.15 (2.20-1.05 = 1.15). In this example, the 
resulting Complex NBBO is .85-1.15.
PNP Plus
    As defined in Rule 900.3NY(w) an order designated as PNP Plus is a 
limit order that is automatically re-priced by the Exchange to a price 
that is one minimum price variation (``MPV'') higher (lower) than the 
NBBO bid (offer) if it were to lock or cross the NBBO. The re-priced 
order is then posted in the Consolidated Book. PNP Plus orders continue 
to be re-priced and re-posted in the Consolidated Book, with each 
change in the NBBO, until such time as the NBBO has moved to a price 
where the original limit price of the PNP Plus order no longer locks or 
crosses the NBBO, at which time the PNP Plus order will revert to the 
original limit price of such order. Orders designated as PNP Plus are 
ranked in the Consolidated Book pursuant to Rule 964NY and assigned a 
new price time priority as of the time of each reposting. Because an 
order designated as PNP Plus would be posted at a price that is higher 
(lower) that [sic] the best contra-side market, by designating an order 
as PNP Plus, a market participant could guarantee that if its order 
were to be executed, it would be executed at a price that is better 
than the disseminated contra-side market Complex BBO. Accordingly, PNP 
Plus provides ATP Holders with additional processing capability to 
control the circumstances under which their orders are executed. The 
Exchange notes that the PNP Plus designation is currently not operable 
for single-leg orders nor does the Exchange intend to introduce such 
functionality in the near future. However, ATP Holders are able to and 
do use the PNP Plus designation when submitting Electronic Complex 
Orders. Accordingly, the Exchange is proposing to amend the definition 
of the PNP Plus order type and to make it applicable solely to 
Electronic Complex Orders.
    In addition, the revised rule would explain that the net debit/
credit price \7\ of an Electronic Complex Order designated as PNP Plus 
is re-priced

[[Page 60562]]

based on the Complex BBO for the same complex order strategy. An 
Electronic Complex Order designated as PNP Plus would follow existing 
PNP Plus processing in that the order will be automatically be [sic] 
re-priced by the Exchange to a price that is one MPV lower (higher) 
than the displayed contra-side market for buy (sell) orders if it were 
to lock or cross that market. However, because the leg prices of an 
Electronic Complex Order are bound by the best bid or offer on the 
Exchange and not the national best bid or offer \8\ as is the case with 
single-leg orders, when re-pricing an Electronic Complex Order 
designated as PNP Plus, the order would be re-priced one MPV lower 
(higher) than the Complex BBO if it were to lock or cross the Complex 
BBO.
---------------------------------------------------------------------------

    \7\ Bids and offers for Electronic Complex Orders are entered 
based on the net debit/credit of prices of the individual component 
series comprising the complex order strategy.
    \8\ See Rule 980NY(c).
---------------------------------------------------------------------------

    Accordingly, as amended, Rule 900.3NY(w) would state that an 
Electronic Complex Order designated as PNP Plus is automatically re-
priced by the Exchange to an MPV higher (for sell orders) than the 
Complex BBO bid for that same Complex Order strategy or at an MPV lower 
(for buy orders) than the Complex BBO offer for that same Complex Order 
strategy for any unexecuted portion of the order that would otherwise 
lock or cross the Complex BBO. The Exchange notes that because bids and 
offers for Electronic Complex Orders are priced on a net debit/credit 
basis and 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 MPV otherwise applicable to the individual legs of 
the order,\9\ the MPV applicable to Electronic Complex Order designated 
as PNP Plus will always be .01 cent. The re-priced order would then be 
posted in the Consolidated Book pursuant to Rule 980NY(b).
---------------------------------------------------------------------------

    \9\ See Rule 980NY Commentary .01.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to change the existing cross 
reference in Rule 900.3NY(w) from Rule 964NY to 980NY(b). This is a 
non-substantive change as both rules call for orders to be ranked 
according to price/time priority with orders on behalf of Customers 
being ranked ahead of same price orders for non-Customers. The Exchange 
believes Rule 980NY(b) is the more appropriate rule to reference 
because it is specific to Electronic Complex Orders. For the purposes 
of ranking in the Consolidated Book, Electronic Complex Order 
designated as PNP Plus shall initially be ranked based on their 
original time of entry and will be assigned a new price time priority 
as of the time of each reposting. From there, with the exception of the 
use of the Complex BBO as opposed to the NBBO, all other PNP Plus 
functionality remains unchanged.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)(5) of the Securities Exchange Act of 1934 (the ``Act''),\10\ 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 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 would provide transparency in Exchange rules that the PNP 
Plus is a designation applicable to Electronic Complex Orders. The 
Exchange further believes that revising the PNP Plus definition to 
describe how an Electronic Complex Order designated as PNP Plus is re-
price [sic] based off the Complex BBO and not the NBBO would align the 
rule with existing functionality and rules governing Electronic Complex 
Orders.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The Exchange also believes that [sic] proposed rule change would 
perfect the mechanism of a free and open market because by revising the 
PNP Plus order type to make the designation available solely for 
Electronic Complex Orders, and not for single leg orders, the rule 
would clearly describe the applicability of the PNP Plus order type and 
eliminate any suggestion of an order type for which there is no 
demonstrated demand and is not supported by Exchange systems.
    The Exchange also believes that defining the terms Complex BBO and 
Complex NBBO will help to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, in 
general because it would provide all market participants with 
additional clarity in how the Exchange calculates the Complex BBO and 
Complex NBBO in connection with the processing of Complex Orders
    In addition, the Exchange further believes that the proposal 
removes impediments to and perfects the mechanism of a free and open 
market by ensuring that members, regulators and the public can more 
easily navigate the Exchange's rulebook and better understand the 
orders types available for trading on 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 change is not 
designed to address any competitive issue but rather revise an existing 
a [sic] rule, that can be seen as inaccurate or incomplete, by 
accurately describing functionality applicable to the PNP Plus order 
type and describing the processing of an Electronic Complex Order 
designated as PNP Plus, thereby reducing confusion and making the 
Exchange's rules easier to understand and navigate. Also, adopting 
Complex BBO and Complex NBBO as defined terms is intended to add 
clarity into Exchange rules regarding the methodology of how a Complex 
BBO and a Complex NBBO is derived and therefore does not raise any 
competitive concerns.

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 \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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) thereunder.\13\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6). 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.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 60563]]

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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2014-84 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2014-84. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the 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 submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEMKT-2014-84 and should be submitted on or before 
October 28, 2014.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-23848 Filed 10-6-14; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.