Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending Rule 6.2A To Authorize the Exchange to Share Any User-Designated Risk Settings in Exchange Systems With the Clearing Member That Clears Transactions on Behalf of the User, 75213-75215 [2014-29496]

Download as PDF Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 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–BOX– 2014–27 and should be submitted on or before January 7, 2015. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. 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–2014–27 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES 4(f)(6)(iii) 13 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay period so the pilot programs can continue without interruption. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, as it will allow the pilot programs to continue uninterrupted, thereby avoiding any potential investor confusion that could result from a temporary interruption in the pilot programs. For these reasons, the Commission designates the proposed rule change to be operative on December 18, 2014.14 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.15 SECURITIES AND EXCHANGE COMMISSION 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–BOX–2014–27. 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 13 17 CFR 240.19b–4(f)(6)(iii). 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). 15 15 U.S.C. 78s(b)(3)(C). 14 For VerDate Sep<11>2014 19:49 Dec 16, 2014 Jkt 235001 [FR Doc. 2014–29621 Filed 12–16–14; 8:45 am] 75213 change to amend Rule 6.2A to authorize the Exchange to share any Userdesignated risk settings in Exchange systems with the Clearing Member 3 that clears transactions on behalf of the User.4 The proposed rule change was published for comment in the Federal Register on October 7, 2014.5 On November 19, 2014, the Exchange submitted Amendment No. 1 to the proposed rule change.6 On November 21, 2014, pursuant to Section 19(b)(2) of the Exchange Act,7 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.8 The Commission received no comments on the proposal. The Commission is publishing this notice to solicit comments from interested persons on Amendment No. 1 to the proposed rule change and is approving the proposed rule change, as modified by Amendment No. 1 thereto, on an accelerated basis. II. Description of the Proposal The Exchange proposes to amend Exchange Rule 6.2A (Access to and Conduct on OX) to state that the Exchange may share any Userdesignated risk settings in the BILLING CODE 8011–01–P [Release No. 34–73818; File No. SR– NYSEArca–2014–110] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending Rule 6.2A To Authorize the Exchange to Share Any User-Designated Risk Settings in Exchange Systems With the Clearing Member That Clears Transactions on Behalf of the User December 11, 2014. I. Introduction On September 19, 2014, NYSE Arca, Inc., (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 3 See Exchange Rule 6.1(b)(3) defining ‘‘Clearing Member’’ as ‘‘an Exchange OTP Firm or OTP Holder which has been admitted to membership in the Options Clearing Corporation pursuant to the provisions of the Rules of the Options Clearing Corporation.’’ 4 See Exchange Rule 6.1A(a)(19) defining ‘‘User’’ as ‘‘any OTP Holder, OTP Firm or Sponsored Participant that is authorized to obtain access to OX pursuant to Rule 6.2A.’’ 5 See Securities Exchange Act Release No. 73281 (October 1, 2014), 79 FR 60552 (‘‘Notice’’). 6 In Amendment No. 1, the Exchange provided additional justification for why the Exchange believes the proposed rule change is consistent with the Act. In Amendment No. 1, the Exchange states, among other things, that the Exchange believes that sharing a User’s risk settings directly with its Clearing Member could reduce the administrative burden on Users to provide that information to their Clearing Members themselves and notes that any User could become a Clearing Member, which would allow the User to avoid sharing its risk settings with any third party. Amendment No. 1 has been placed in the public comment file for SR– NYSEArca–2014–110 at https://www.sec.gov/ comments/sr-nysearca-2014-110/nysearca20141101.pdf (See letter to Kevin M. O’Neill, Deputy Secretary, Commission, from Martha Redding, Chief Counsel and Assistant Corporate Secretary, New York Stock Exchange, dated November 20, 2014) and is also available on the Exchange’s Web site. 7 15 U.S.C. 78s(b)(2). 8 See Securities Exchange Act Release No. 34– 73668, 79 FR 70607 (November 26, 2014). The Commission designated January 5, 2014 as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. E:\FR\FM\17DEN1.SGM 17DEN1 75214 Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices Exchange’s OX 9 system with the Clearing Member that clears transactions on behalf of the User.10 The Exchange states that while not all Users are Clearing Members, all Users require a Clearing Member’s consent to clear transactions on their behalf in order to conduct business on the Exchange.11 The Exchange states that each User that transacts through a Clearing Member on the Exchange executes a Clearing Letter of Consent, which codifies the relationship between each User and Clearing Member and provides the Exchange with notice of which Clearing Members have relationships with which Users.12 The Exchange states that the Clearing Member that guarantees the User’s transactions on the Exchange has a financial interest in understanding the risk tolerance of the User, and that the proposal would provide the Exchange with authority to directly provide Clearing Members with information that may otherwise be available to such Clearing Members by virtue of their relationship with the respective Users.13 The Exchange states that the Userdesignated risk settings that the Exchange may share with a User’s Clearing Member under the proposal are set forth in Exchange Rule 6.40 (Risk Limitation Mechanism).14 The Exchange states that it may adopt additional rules providing for User-enabled risk settings other than those provided in Exchange Rule 6.40 that could be shared with a User’s Clearing Member under the proposal, and the Exchange would announce these additional risk settings via Trader Update.15 III. Discussion and Commission Findings mstockstill on DSK4VPTVN1PROD with NOTICES After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations 9 See Exchange Rule 6.1A(a)(13) defining ‘‘OX’’ as ‘‘the Exchange’s electronic order delivery, execution and reporting system for designated option issues through which orders and quotes of Users are consolidated for execution and/or display. . . .’’ 10 See proposed Exchange Rule 6.2A. 11 See Amendment No. 1. 12 See Notice, supra note 5, at 60552. See also NYSE Arca Options OTP Application, Section 8 (Clearing Letter of Consent), available at: https:// www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_OTP_Firm_ Application.pdf. 13 See Notice, supra note 5, at 60552. 14 Id. According to the Exchange, pursuant to Rule 6.40(b)–(d), Users may set certain risk control thresholds in the Risk Limitation Mechanism, which are designed to mitigate the potential risks of multiple executions against a User’s trading interest. Id. 15 See id. at n.9. VerDate Sep<11>2014 19:49 Dec 16, 2014 Jkt 235001 thereunder applicable to a national securities exchange.16 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,17 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, 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, and Section 6(b)(8) of the Act,18 which requires that the rules of the exchange do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change will allow the Exchange to directly provide a User’s designated risk settings to the Clearing Member that clears trades on behalf of the User. The Exchange states that because a Clearing Member that executes a Clearing Letter of Consent on behalf of a User guarantees all transactions of that User, and therefore bears the risk associated with those transactions, it is appropriate for the Clearing Member to have knowledge of what risk settings the User may utilize within the Exchange’s systems.19 The Exchange states that the proposal will permit Clearing Members, who have a financial interest in the risk settings of Users with whom the Clearing Member has entered into a Clearing Letter of Consent, to better monitor and manage the potential risks assumed by Users, thereby providing Clearing Members with greater control and flexibility over setting their own risk tolerance and exposure and aiding Clearing Members in complying with the Act.20 The Exchange further states that, to the extent a Clearing Member might reasonably require a User to provide access to its risk settings as a prerequisite to continuing to clear trades on the User’s behalf, the Exchange’s proposal to share those risk settings directly reduces the administrative burden on Users and ensures that Clearing Members are receiving information that is up-to-date and conforms to the settings active in Exchange systems.21 16 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 17 15 U.S.C. 78f(b)(5). 18 15 U.S.C. 78f(b)(8). 19 See Notice, supra note 5, at 60552. 20 Id. at 60553. See also Amendment No. 1. 21 See Amendment No. 1. PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 The Exchange also states that it 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.22 According to the Exchange, the proposed rule change is not designed to address any competitive issues and does not pose an undue burden on non-Clearing Members because, unlike Clearing Members, nonClearing Members do not guarantee the execution of the User transactions on the Exchange.23 The Exchange notes further that the proposal is structured to offer the same enhancement to all Clearing Members, regardless of size, and would not impose a competitive burden on any participant.24 In addition, the Exchange states that any User that does not wish to share its designated risk settings with its Clearing Member could avoid sharing such settings by becoming a clearing member of the Options Clearing Corporation.25 Accordingly, the Commission finds that the proposal to allow the Exchange to directly provide a User’s designated risk settings to the Clearing Member that clears trades on behalf of the User, guarantees all transactions of that User, and therefore bears the risk associated with those transactions, is consistent with the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 to the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2014–110 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–NYSEArca–2014–110. This file number should be included on the subject line if email is used. To help the Commission process and review your 22 See Notice, supra note 5, at 60553. 23 Id. 24 Id. 25 See E:\FR\FM\17DEN1.SGM Amendment No. 1. 17DEN1 Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549–1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2014–110, and should be submitted on or before January 7, 2015. mstockstill on DSK4VPTVN1PROD with NOTICES V. Accelerated Approval of Proposed Rule Change, As Modified by Amendment No. 1 As discussed above, the Exchange submitted Amendment No. 1 to provide further justification as to why the Exchange believes the proposed rule change is consistent with the Act. The Exchange states in Amendment No. 1, among other things, that to the extent a Clearing Member might reasonably require a User to provide access to its risk settings as a prerequisite to continuing to clear trades on the User’s behalf, the Exchange’s proposal to share those risk settings directly reduces the administrative burden on Users and ensures that Clearing Members are receiving information that is up-to-date and conforms to the settings active in Exchange systems. The Exchange further notes in Amendment No. 1 that any User may become a Clearing Member, which would enable that User to avoid sharing risk settings with any third party. The Commission believes that Amendment No. 1 does not materially affect the substance of the proposed rule change or raise any novel or unique regulatory issues. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) VerDate Sep<11>2014 19:49 Dec 16, 2014 Jkt 235001 of the Act,26 for approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,27 that the proposed rule change (SR–NYSEArca– 2014–110), as modified by Amendment No. 1 thereto, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–29496 Filed 12–16–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73817; File No. SR– NYSEMKT–2014–81] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending Rule 902.1NY To Authorize the Exchange To Share Any UserDesignated Risk Settings in Exchange Systems with the Clearing Member that Clears Transactions on Behalf of the User December 11, 2014. I. Introduction On September 19, 2014, NYSE MKT LLC, (‘‘NYSE MKT’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Rule 902.1NY to authorize the Exchange to share any User-designated risk settings in Exchange systems with the Clearing Member 3 that clears transactions on behalf of the User.4 The proposed rule 26 15 U.S.C. 78s(b)(2). 27 Id. 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Exchange Rule 900.2NY (11) defining ‘‘Clearing Member’’ as ‘‘an Exchange ATP Holder which has been admitted to membership in the Options Clearing Corporation pursuant to the provisions of the Rules of the Options Clearing Corporation.’’ 4 See Exchange Rule 900.2NY (87) defining ‘‘User’’ as ‘‘any ATP Holder that is authorized to obtain access to the System pursuant to Rule 902.1NY.’’ 1 15 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 75215 change was published for comment in the Federal Register on October 7, 2014.5 On November 19, 2014, the Exchange submitted Amendment No. 1 to the proposed rule change.6 On November 21, 2014, pursuant to Section 19(b)(2) of the Exchange Act,7 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.8 The Commission received one comment on the proposal.9 The Commission is publishing this notice to solicit comments from interested persons on Amendment No. 1 to the proposed rule change and is approving the proposed rule change, as modified by Amendment No. 1 thereto, on an accelerated basis. II. Description of the Proposal The Exchange proposes to amend Exchange Rule 902.1NY (Admission to the System) to state that the Exchange may share any User-designated risk settings in the Exchange’s System 10 with the Clearing Member that clears transactions on behalf of the User.11 The Exchange states that while not all Users are Clearing Members, all Users require a Clearing Member’s consent to clear transactions on their behalf in order to conduct business on the Exchange.12 The Exchange states that 5 See Securities Exchange Act Release No. 73280 (October 1, 2014), 79 FR 60553 (‘‘Notice’’). 6 In Amendment No. 1, the Exchange provided additional justification for why the Exchange believes the proposed rule change is consistent with the Act. In Amendment No. 1, the Exchange states, among other things, that the Exchange believes that sharing a User’s risk settings directly with its Clearing Member could reduce the administrative burden on Users to provide that information to their Clearing Members themselves and notes that any User could become a Clearing Member, which would allow the User to avoid sharing its risk settings with any third party. Amendment No. 1 has been placed in the public comment file for SR– NYSEMKT–2014–81 at https://www.sec.gov/ comments/sr-nysemkt-2014-81/nysemkt2014812.pdf (See letter to Kevin M. O’Neill, Deputy Secretary, Commission, from Martha Redding, Chief Counsel and Assistant Corporate Secretary, New York Stock Exchange, dated November 20, 2014) and is also available on the Exchange’s Web site. 7 15 U.S.C. 78s(b)(2). 8 See Securities Exchange Act Release No. 34– 73669, 79 FR 70903 (November 28, 2014). The Commission designated January 5, 2014 as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. 9 See Letter from Dr. Lee Jackson, Esq., dated October 1, 2014. This commenter’s letter was incoherent and irrelevant to the proposed rule change. 10 According to the Exchange, ‘‘System’’ refers to the Exchange System facility. See Notice, supra note 5, at 60554. See also Exchange Rule 900.1NY. 11 See proposed Exchange Rule 902.1NY. 12 See Amendment No. 1. E:\FR\FM\17DEN1.SGM 17DEN1

Agencies

[Federal Register Volume 79, Number 242 (Wednesday, December 17, 2014)]
[Notices]
[Pages 75213-75215]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29496]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73818; File No. SR-NYSEArca-2014-110]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending 
Rule 6.2A To Authorize the Exchange to Share Any User-Designated Risk 
Settings in Exchange Systems With the Clearing Member That Clears 
Transactions on Behalf of the User

December 11, 2014.

I. Introduction

    On September 19, 2014, NYSE Arca, Inc., (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Rule 6.2A to authorize the Exchange to 
share any User-designated risk settings in Exchange systems with the 
Clearing Member \3\ that clears transactions on behalf of the User.\4\ 
The proposed rule change was published for comment in the Federal 
Register on October 7, 2014.\5\ On November 19, 2014, the Exchange 
submitted Amendment No. 1 to the proposed rule change.\6\ On November 
21, 2014, pursuant to Section 19(b)(2) of the Exchange Act,\7\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\8\ The Commission received no comments on the proposal. The 
Commission is publishing this notice to solicit comments from 
interested persons on Amendment No. 1 to the proposed rule change and 
is approving the proposed rule change, as modified by Amendment No. 1 
thereto, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Rule 6.1(b)(3) defining ``Clearing Member'' as 
``an Exchange OTP Firm or OTP Holder which has been admitted to 
membership in the Options Clearing Corporation pursuant to the 
provisions of the Rules of the Options Clearing Corporation.''
    \4\ See Exchange Rule 6.1A(a)(19) defining ``User'' as ``any OTP 
Holder, OTP Firm or Sponsored Participant that is authorized to 
obtain access to OX pursuant to Rule 6.2A.''
    \5\ See Securities Exchange Act Release No. 73281 (October 1, 
2014), 79 FR 60552 (``Notice'').
    \6\ In Amendment No. 1, the Exchange provided additional 
justification for why the Exchange believes the proposed rule change 
is consistent with the Act. In Amendment No. 1, the Exchange states, 
among other things, that the Exchange believes that sharing a User's 
risk settings directly with its Clearing Member could reduce the 
administrative burden on Users to provide that information to their 
Clearing Members themselves and notes that any User could become a 
Clearing Member, which would allow the User to avoid sharing its 
risk settings with any third party. Amendment No. 1 has been placed 
in the public comment file for SR-NYSEArca-2014-110 at https://www.sec.gov/comments/sr-nysearca-2014-110/nysearca2014110-1.pdf (See 
letter to Kevin M. O'Neill, Deputy Secretary, Commission, from 
Martha Redding, Chief Counsel and Assistant Corporate Secretary, New 
York Stock Exchange, dated November 20, 2014) and is also available 
on the Exchange's Web site.
    \7\ 15 U.S.C. 78s(b)(2).
    \8\ See Securities Exchange Act Release No. 34-73668, 79 FR 
70607 (November 26, 2014). The Commission designated January 5, 2014 
as the date by which it should approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to amend Exchange Rule 6.2A (Access to and 
Conduct on OX) to state that the Exchange may share any User-designated 
risk settings in the

[[Page 75214]]

Exchange's OX \9\ system with the Clearing Member that clears 
transactions on behalf of the User.\10\
---------------------------------------------------------------------------

    \9\ See Exchange Rule 6.1A(a)(13) defining ``OX'' as ``the 
Exchange's electronic order delivery, execution and reporting system 
for designated option issues through which orders and quotes of 
Users are consolidated for execution and/or display. . . .''
    \10\ See proposed Exchange Rule 6.2A.
---------------------------------------------------------------------------

    The Exchange states that while not all Users are Clearing Members, 
all Users require a Clearing Member's consent to clear transactions on 
their behalf in order to conduct business on the Exchange.\11\ The 
Exchange states that each User that transacts through a Clearing Member 
on the Exchange executes a Clearing Letter of Consent, which codifies 
the relationship between each User and Clearing Member and provides the 
Exchange with notice of which Clearing Members have relationships with 
which Users.\12\ The Exchange states that the Clearing Member that 
guarantees the User's transactions on the Exchange has a financial 
interest in understanding the risk tolerance of the User, and that the 
proposal would provide the Exchange with authority to directly provide 
Clearing Members with information that may otherwise be available to 
such Clearing Members by virtue of their relationship with the 
respective Users.\13\
---------------------------------------------------------------------------

    \11\ See Amendment No. 1.
    \12\ See Notice, supra note 5, at 60552. See also NYSE Arca 
Options OTP Application, Section 8 (Clearing Letter of Consent), 
available at: https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_OTP_Firm_Application.pdf.
    \13\ See Notice, supra note 5, at 60552.
---------------------------------------------------------------------------

    The Exchange states that the User-designated risk settings that the 
Exchange may share with a User's Clearing Member under the proposal are 
set forth in Exchange Rule 6.40 (Risk Limitation Mechanism).\14\ The 
Exchange states that it may adopt additional rules providing for User-
enabled risk settings other than those provided in Exchange Rule 6.40 
that could be shared with a User's Clearing Member under the proposal, 
and the Exchange would announce these additional risk settings via 
Trader Update.\15\
---------------------------------------------------------------------------

    \14\ Id. According to the Exchange, pursuant to Rule 6.40(b)-
(d), Users may set certain risk control thresholds in the Risk 
Limitation Mechanism, which are designed to mitigate the potential 
risks of multiple executions against a User's trading interest. Id.
    \15\ See id. at n.9.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\16\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\17\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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, and Section 6(b)(8) of the Act,\18\ which requires 
that the rules of the exchange do not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \16\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The proposed rule change will allow the Exchange to directly 
provide a User's designated risk settings to the Clearing Member that 
clears trades on behalf of the User. The Exchange states that because a 
Clearing Member that executes a Clearing Letter of Consent on behalf of 
a User guarantees all transactions of that User, and therefore bears 
the risk associated with those transactions, it is appropriate for the 
Clearing Member to have knowledge of what risk settings the User may 
utilize within the Exchange's systems.\19\ The Exchange states that the 
proposal will permit Clearing Members, who have a financial interest in 
the risk settings of Users with whom the Clearing Member has entered 
into a Clearing Letter of Consent, to better monitor and manage the 
potential risks assumed by Users, thereby providing Clearing Members 
with greater control and flexibility over setting their own risk 
tolerance and exposure and aiding Clearing Members in complying with 
the Act.\20\ The Exchange further states that, to the extent a Clearing 
Member might reasonably require a User to provide access to its risk 
settings as a prerequisite to continuing to clear trades on the User's 
behalf, the Exchange's proposal to share those risk settings directly 
reduces the administrative burden on Users and ensures that Clearing 
Members are receiving information that is up-to-date and conforms to 
the settings active in Exchange systems.\21\
---------------------------------------------------------------------------

    \19\ See Notice, supra note 5, at 60552.
    \20\ Id. at 60553. See also Amendment No. 1.
    \21\ See Amendment No. 1.
---------------------------------------------------------------------------

    The Exchange also states that it 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.\22\ According 
to the Exchange, the proposed rule change is not designed to address 
any competitive issues and does not pose an undue burden on non-
Clearing Members because, unlike Clearing Members, non-Clearing Members 
do not guarantee the execution of the User transactions on the 
Exchange.\23\ The Exchange notes further that the proposal is 
structured to offer the same enhancement to all Clearing Members, 
regardless of size, and would not impose a competitive burden on any 
participant.\24\ In addition, the Exchange states that any User that 
does not wish to share its designated risk settings with its Clearing 
Member could avoid sharing such settings by becoming a clearing member 
of the Options Clearing Corporation.\25\
---------------------------------------------------------------------------

    \22\ See Notice, supra note 5, at 60553.
    \23\ Id.
    \24\ Id.
    \25\ See Amendment No. 1.
---------------------------------------------------------------------------

    Accordingly, the Commission finds that the proposal to allow the 
Exchange to directly provide a User's designated risk settings to the 
Clearing Member that clears trades on behalf of the User, guarantees 
all transactions of that User, and therefore bears the risk associated 
with those transactions, is consistent with the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to the proposed rule change is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-110 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-NYSEArca-2014-110. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 75215]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549-1090, on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal office of the Exchange. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2014-110, and should be 
submitted on or before January 7, 2015.

V. Accelerated Approval of Proposed Rule Change, As Modified by 
Amendment No. 1

    As discussed above, the Exchange submitted Amendment No. 1 to 
provide further justification as to why the Exchange believes the 
proposed rule change is consistent with the Act. The Exchange states in 
Amendment No. 1, among other things, that to the extent a Clearing 
Member might reasonably require a User to provide access to its risk 
settings as a prerequisite to continuing to clear trades on the User's 
behalf, the Exchange's proposal to share those risk settings directly 
reduces the administrative burden on Users and ensures that Clearing 
Members are receiving information that is up-to-date and conforms to 
the settings active in Exchange systems. The Exchange further notes in 
Amendment No. 1 that any User may become a Clearing Member, which would 
enable that User to avoid sharing risk settings with any third party. 
The Commission believes that Amendment No. 1 does not materially affect 
the substance of the proposed rule change or raise any novel or unique 
regulatory issues. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act,\26\ for approving the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.
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    \26\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NYSEArca-2014-110), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved on 
an accelerated basis.
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    \27\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\

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    \28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29496 Filed 12-16-14; 8:45 am]
BILLING CODE 8011-01-P
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