Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rules Regarding Trade Nullification and Price Adjustment, 78522-78524 [2014-30445]

Download as PDF 78522 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices Temporary Order The Commission has considered the matter and finds that Applicants have made the necessary showing to justify granting a temporary exemption. Accordingly, It is hereby ordered, pursuant to section 9(c) of the Act, that the Fund Servicing Applicants and any other Covered Persons are granted a temporary exemption from the provisions of section 9(a), solely with respect to the Injunction, subject to the representations and conditions in the application, from December 18, 2014, until the Commission takes final action on their application for a permanent order. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–30225 Filed 12–29–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73909; File No. SR– NYSEArca–2014–140] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Exchange Rules Regarding Trade Nullification and Price Adjustment December 22, 2014. mstockstill on DSK4VPTVN1PROD with NOTICES 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 16, 2014, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 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 the Substance of the Proposed Rule Change The Exchange proposes to amend exchange rules regarding trade nullification and price adjustment. 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 21:42 Dec 29, 2014 Jkt 235001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to add Rule 6.77A, ‘‘Trade Nullification and Price Adjustment Procedure.’’ 3 As proposed, Rule 6.77A would allow for transactions to be nullified if both parties to the transaction agree to the nullification and allow the price of executions to be adjusted if the price adjustment is agreed to by both parties to the transaction and authorized by the Exchange.4 The Exchange is also proposing to make other conforming administrative changes to streamline the rules governing this subject with the Exchange’s rules. Background Currently, pursuant to Commentary .02 of Rule 6.77, the Exchange allows for parties to agree to nullify an execution. Commentary .02 of Rule 6.77 also states that once both parties agree to the trade nullification, one party must ‘‘promptly notify the Exchange for dissemination of cancellation information to the Options Price Reporting Authority.’’ In addition, the Exchange currently allows for a mutual price adjustment for trades that meet the obvious error (or catastrophic error) requirements pursuant to Exchange Rule 6.87 if those mutual agreements are done within specific timeframes.5 The Exchange is now proposing to relocate the aforementioned trade nullification 3 The Exchange notes that there are efforts by the exchanges to create a uniform trade nullification and adjustment rule. Should the uniform rule be approved and effective, the Exchange will amend its rules appropriately. 4 The Exchange notes that, as proposed, Rule 6.77A would only apply to trades that were executed on the Exchange and, as such, any orders that were either fully or partially routed to, or executed, on another exchange would not be subject to the proposed Rule 6.77A. 5 See Rule 6.87(a)(3) and (7) and 6.87(d)(3). PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 language and add a provision to allow parties to mutually adjust prices of executions outside of those done in obvious error. The Exchange’s proposal is based upon similar rules of the Chicago Board Options Exchange (‘‘CBOE’’) and Miami International Securities Exchange, LLC (‘‘MIAX’’).6 Proposed Rule 6.77A The Exchange is proposing to add Rule 6.77A, ‘‘Trade Nullification and Price Adjustment Procedure,’’ which would: (a) Allow for any trades on the Exchange to be nullified if both parties to the trade agree to such nullification, and (b) allow for prices of executions to be adjusted if the price adjustment is agreed upon by both parties to the trade and authorized by the Exchange.7 As stated above, the Exchange currently allows for trades to be nullified based upon mutual agreement.8 With the proposed addition of Rule 6.77A, the Exchange is only renumbering and relocating this provision and is not proposing a substantive change to the rule itself. The Exchange believes that having the provision as a standalone rule would make it easier for OTP Holders to locate. In addition, the Exchange believes this administrative change would streamline the provisions surrounding this notion to put in one place. The Exchange is also proposing to add a provision allowing OTP Holders to mutually agree to adjust a price of an execution. The Exchange believes this provision is necessary given the benefits of adjusting a trade price rather than nullifying the trade completely. Because options trades are used to hedge transactions in other markets, including securities and futures, many OTP Holders, and their customers, would rather adjust prices of executions rather than nullify the transactions and, thus, lose a hedge altogether. As such, the Exchange believes it is in the best interest of investors to allow for price adjustments as well as nullifications. In addition, the Exchange believes it is in the nature of a fair and orderly market to allow for price adjustments rather than only cancellations because an adjustment would result in the least amount of disruption to the overall market. The Exchange also notes that current Exchange rules allow for prices of trades to be adjusted at the consent 6 See CBOE Rule 6.19 and Securities Exchange Act Release No. 72970 (September 3, 2014), 79 FR 53498 (September 9, 2014) (SR–CBOE–2014–066) and MIAX Rule 531 and Release No. 73463 (October 29, 2014), 79 FR 65445 (November 4, 2014) (SR– MIAX–2014–54). 7 See note 5 supra. 8 See Commentary .02 of Rule 6.77. E:\FR\FM\30DEN1.SGM 30DEN1 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES of both parties if such transactions are within the current obvious error and catastrophic error provisions.9 The Exchange is now proposing to merely allow this practice for any trade. As proposed, Rule 6.77A expressly states that trades may be subject to nullification or price adjustment only if such trades are authorized by the Exchange. The Exchange notes that this process is very similar to the process OTP Holders follow today for trade nullification based upon mutual consent. As described in more detail above, Commentary .02 of current Rule 6.77 allows two parties to agree to a trade nullification and ‘‘notify the Exchange for dissemination of cancellation information to the Options Price Reporting Authority.’’ The Exchange is only slightly changing this procedure by expressly requiring Exchange authorization prior to the effectuation of such nullification or mutual price adjustment. The Exchange would only authorize a proposed nullification or adjustment if the Exchange received verification from both parties to the trade that a mutual agreement has been made.10 In addition, prior to an authorization for a mutual price adjustment, the Exchange would ensure the agreed upon price would have been permissible and in compliance with any applicable rules of the Exchange and Securities and Exchange Commission, as amended, at the time the original transaction was executed.11 Finally, the proposed rule would state that the format and information required by the Exchange for this submission would be released by the Exchange via Trader Update. As such, prior to Rule 6.77A becoming operative, the Exchange would provide OTP Holders with specific requirements 9 The Exchange notes that no changes are being proposed to the procedures for nullification or adjustment of a trade by mutual agreement in the Exchanges’ obvious error and catastrophic error rules. See note 5 supra. With the effectiveness of proposed Rule 6.77A, OTP Holders would have two options to choose from in order to have their trades nullified or adjusted by mutual agreement: (i) Request under the procedures of Rule 6.87 (including the timeframes); or (ii) request under the procedures of Proposed Rule 6.77A which requires the authorization of the Exchange prior to the nullification or adjustment. The Exchange believes both provisions are complimentary [sic] in that they provide protections in different situations under procedures that are correspondingly appropriate based on the situation in which a nullification or an adjustment is requested. 10 Upon authorization, the Exchange will continue to report any price adjustment or trade nullification to the Options Price Reporting Authority. 11 Specifically, the Exchange would ensure that the mutually-agreed upon price would not have traded through resting interest on the Exchange or would have been in violation of Rule 991NY [sic] at the time of the initial execution. VerDate Sep<11>2014 21:42 Dec 29, 2014 Jkt 235001 via an Exchange-issued Trader Update. The Trader Update would, among other things, state specific timeframes required for requests and the format in which the requests would be accepted by the Exchange. Administrative Changes Finally, the Exchange is proposing to make administrative conforming changes to ensure Exchange rules on the subject are consistent. More specifically, the Exchange is proposing to delete Commentary .02 of Rule 6.77. The Exchange believes that deleting current Commentary .02 to Exchange Rule 6.77 would avoid any confusion with the proposed Rule 6.77A. Conclusion To conclude, the Exchange believes that the proposed changes are in furtherance of the Act because the proposed Rule 6.77A will allow OTP Holders to agree to nullify transactions or adjust prices of transactions to maintain a fair and orderly market. As stated above, the Exchange intends to release a Trade [sic] Update to announce the implementation of the Rule and other specifics surrounding the procedures of the implementation. In addition, prior to implementation, the Exchange will ensure it has proper policies and procedures in place to correctly administer the Rule. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 12 of the Act, in general, and furthers the objectives of Section 6(b)(5),13 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 regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. More specifically, the Exchange believes that the proposed changes are consistent with the Act as they are designed to promote just and equitable principles and protect investors and the 12 15 13 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00143 Fmt 4703 public interest. In particular, the Exchange believes the proposed change to move the provision authorizing parties to mutually agree to nullify a trade to a separate, stand-alone rule protects investors by eliminating confusion and making the provision more clear. Because options trades are used to hedge transactions in other markets, including securities and futures, many market participants would rather adjust prices of executions rather than nullify the transactions and, thus, lose a hedge altogether. As such, the Exchange believes it is in the best interest of investors to allow for price adjustments as well as nullifications. In addition, the Exchange believes it is in the nature of a fair and orderly market to allow for price adjustments rather than only cancellations because an adjustment would result in the least amount of disruption to the overall market. Further, the Exchange believes that, harmonizing its nullification and adjustment rules with other options markets would promote just and equitable principles of trade by better allowing the market participants to be treated similarly across exchanges. The Exchange also believes that the other administrative changes would remove impediments to and perfect the mechanism of a fair and orderly market as they are merely trying to create more transparency in the Exchange’s rules. Finally, the Exchange does not believe that the proposed changes are unfairly discriminatory because they will be applied to all OTP Holders equally. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any aspect of competition, whether between the Exchange and its competitors, or among market participants. Instead, the proposed rule change is designed to adopt the nullification and adjustment of trades on similar terms to that of other options exchanges.14 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. 14 See Sfmt 4703 78523 E:\FR\FM\30DEN1.SGM note 7 supra. 30DEN1 78524 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and Rule 19b– 4(f)(6) thereunder.16 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2014–140 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2014–140. 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 (http://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 15 15 16 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). VerDate Sep<11>2014 21:42 Dec 29, 2014 Jkt 235001 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– NYSEArca–2014–140, and should be submitted on or before January 20, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Brent J. Fields, Secretary. [FR Doc. 2014–30445 Filed 12–29–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73914; File No. SR– NYSEArca–2014–100] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Change Relating to Listing and Trading of Shares of the SPDR SSgA Global Managed Volatility ETF under NYSE Arca Equities Rule 8.600 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.5 The Commission has received no comment letters on the proposed rule change. This Order institutes proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change. II. Description of the Proposal A. Generally The Exchange proposes to list and trade Shares of the Fund under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares. The Shares will be offered by SSgA Active ETF Trust (‘‘Trust’’), which is organized as a Massachusetts business trust and is registered with the Commission as an open-end management investment company.7 SSgA Funds Management, Inc. will serve as the investment adviser to the Fund (‘‘Adviser’’). State Street Global Markets, LLC will be the principal underwriter and distributor of the Fund’s Shares, and State Street Bank and Trust Company (‘‘Custodian’’ or ‘‘Transfer Agent’’) will serve as administrator, custodian, and transfer agent for the Fund. The Exchange represents that the Adviser is not a registered broker-dealer but is affiliated with a broker-dealer and has implemented a ‘‘fire wall’’ with respect to such broker-dealer regarding access to information concerning the composition of or changes to the Fund’s portfolio.8 The Exchange further represents that, in the event (a) the Adviser or any sub- December 22, 2014. I. Introduction On September 5, 2014, NYSE Arca, Inc. (‘‘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 list and trade shares (‘‘Shares’’) of the SPDR SSgA Global Managed Volatility ETF (‘‘Fund’’) under NYSE Arca Equities Rule 8.600. The proposed rule change was published for comment in the Federal Register on September 24, 2014.3 On November 4, 2014, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period 17 17 CFR 200.30–3(a)(12). U.S. C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 73141 (Sept. 18, 2014), 79 FR 57161 (‘‘Notice’’). 4 15 U.S. C. 78s(b)(2). 1 15 PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 5 See Securities Exchange Act Release No. 73515, 79 FR 66758 (Nov. 10, 2014). The Commission designated a longer period within which to take action on the proposed rule change and designated December 23, 2014, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. 6 15 U.S. C. 78s(b)(2)(B). 7 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). According to the Exchange, on September 20, 2012, the Trust filed with the Commission an amendment to its registration statement on Form N–1A under the Securities Act of 1933 (‘‘Securities Act’’) and under the 1940 Act relating to the Fund (File Nos. 333– 173276 and 811–22542) (‘‘Registration Statement’’). In addition, the Exchange states that the Trust has obtained from the Commission certain exemptive relief under the 1940 Act. See Investment Company Act Release No. 29524 (Dec. 13, 2010) (File No. 812–13487). 8 Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the broker-dealer with respect to access to information concerning the composition of or changes to the investment company portfolio. E:\FR\FM\30DEN1.SGM 30DEN1

Agencies

[Federal Register Volume 79, Number 249 (Tuesday, December 30, 2014)]
[Notices]
[Pages 78522-78524]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30445]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73909; File No. SR-NYSEArca-2014-140]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Exchange 
Rules Regarding Trade Nullification and Price Adjustment

December 22, 2014.
    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 16, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') 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 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend exchange rules regarding trade 
nullification and price adjustment. The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to add Rule 6.77A, ``Trade Nullification 
and Price Adjustment Procedure.'' \3\ As proposed, Rule 6.77A would 
allow for transactions to be nullified if both parties to the 
transaction agree to the nullification and allow the price of 
executions to be adjusted if the price adjustment is agreed to by both 
parties to the transaction and authorized by the Exchange.\4\ The 
Exchange is also proposing to make other conforming administrative 
changes to streamline the rules governing this subject with the 
Exchange's rules.
---------------------------------------------------------------------------

    \3\ The Exchange notes that there are efforts by the exchanges 
to create a uniform trade nullification and adjustment rule. Should 
the uniform rule be approved and effective, the Exchange will amend 
its rules appropriately.
    \4\ The Exchange notes that, as proposed, Rule 6.77A would only 
apply to trades that were executed on the Exchange and, as such, any 
orders that were either fully or partially routed to, or executed, 
on another exchange would not be subject to the proposed Rule 6.77A.
---------------------------------------------------------------------------

Background
    Currently, pursuant to Commentary .02 of Rule 6.77, the Exchange 
allows for parties to agree to nullify an execution. Commentary .02 of 
Rule 6.77 also states that once both parties agree to the trade 
nullification, one party must ``promptly notify the Exchange for 
dissemination of cancellation information to the Options Price 
Reporting Authority.'' In addition, the Exchange currently allows for a 
mutual price adjustment for trades that meet the obvious error (or 
catastrophic error) requirements pursuant to Exchange Rule 6.87 if 
those mutual agreements are done within specific timeframes.\5\ The 
Exchange is now proposing to relocate the aforementioned trade 
nullification language and add a provision to allow parties to mutually 
adjust prices of executions outside of those done in obvious error. The 
Exchange's proposal is based upon similar rules of the Chicago Board 
Options Exchange (``CBOE'') and Miami International Securities 
Exchange, LLC (``MIAX'').\6\
---------------------------------------------------------------------------

    \5\ See Rule 6.87(a)(3) and (7) and 6.87(d)(3).
    \6\ See CBOE Rule 6.19 and Securities Exchange Act Release No. 
72970 (September 3, 2014), 79 FR 53498 (September 9, 2014) (SR-CBOE-
2014-066) and MIAX Rule 531 and Release No. 73463 (October 29, 
2014), 79 FR 65445 (November 4, 2014) (SR-MIAX-2014-54).
---------------------------------------------------------------------------

Proposed Rule 6.77A
    The Exchange is proposing to add Rule 6.77A, ``Trade Nullification 
and Price Adjustment Procedure,'' which would: (a) Allow for any trades 
on the Exchange to be nullified if both parties to the trade agree to 
such nullification, and (b) allow for prices of executions to be 
adjusted if the price adjustment is agreed upon by both parties to the 
trade and authorized by the Exchange.\7\
---------------------------------------------------------------------------

    \7\ See note 5 supra.
---------------------------------------------------------------------------

    As stated above, the Exchange currently allows for trades to be 
nullified based upon mutual agreement.\8\ With the proposed addition of 
Rule 6.77A, the Exchange is only renumbering and relocating this 
provision and is not proposing a substantive change to the rule itself. 
The Exchange believes that having the provision as a standalone rule 
would make it easier for OTP Holders to locate. In addition, the 
Exchange believes this administrative change would streamline the 
provisions surrounding this notion to put in one place.
---------------------------------------------------------------------------

    \8\ See Commentary .02 of Rule 6.77.
---------------------------------------------------------------------------

    The Exchange is also proposing to add a provision allowing OTP 
Holders to mutually agree to adjust a price of an execution. The 
Exchange believes this provision is necessary given the benefits of 
adjusting a trade price rather than nullifying the trade completely. 
Because options trades are used to hedge transactions in other markets, 
including securities and futures, many OTP Holders, and their 
customers, would rather adjust prices of executions rather than nullify 
the transactions and, thus, lose a hedge altogether. As such, the 
Exchange believes it is in the best interest of investors to allow for 
price adjustments as well as nullifications. In addition, the Exchange 
believes it is in the nature of a fair and orderly market to allow for 
price adjustments rather than only cancellations because an adjustment 
would result in the least amount of disruption to the overall market. 
The Exchange also notes that current Exchange rules allow for prices of 
trades to be adjusted at the consent

[[Page 78523]]

of both parties if such transactions are within the current obvious 
error and catastrophic error provisions.\9\ The Exchange is now 
proposing to merely allow this practice for any trade.
---------------------------------------------------------------------------

    \9\ The Exchange notes that no changes are being proposed to the 
procedures for nullification or adjustment of a trade by mutual 
agreement in the Exchanges' obvious error and catastrophic error 
rules. See note 5 supra. With the effectiveness of proposed Rule 
6.77A, OTP Holders would have two options to choose from in order to 
have their trades nullified or adjusted by mutual agreement: (i) 
Request under the procedures of Rule 6.87 (including the 
timeframes); or (ii) request under the procedures of Proposed Rule 
6.77A which requires the authorization of the Exchange prior to the 
nullification or adjustment. The Exchange believes both provisions 
are complimentary [sic] in that they provide protections in 
different situations under procedures that are correspondingly 
appropriate based on the situation in which a nullification or an 
adjustment is requested.
---------------------------------------------------------------------------

    As proposed, Rule 6.77A expressly states that trades may be subject 
to nullification or price adjustment only if such trades are authorized 
by the Exchange. The Exchange notes that this process is very similar 
to the process OTP Holders follow today for trade nullification based 
upon mutual consent. As described in more detail above, Commentary .02 
of current Rule 6.77 allows two parties to agree to a trade 
nullification and ``notify the Exchange for dissemination of 
cancellation information to the Options Price Reporting Authority.'' 
The Exchange is only slightly changing this procedure by expressly 
requiring Exchange authorization prior to the effectuation of such 
nullification or mutual price adjustment. The Exchange would only 
authorize a proposed nullification or adjustment if the Exchange 
received verification from both parties to the trade that a mutual 
agreement has been made.\10\ In addition, prior to an authorization for 
a mutual price adjustment, the Exchange would ensure the agreed upon 
price would have been permissible and in compliance with any applicable 
rules of the Exchange and Securities and Exchange Commission, as 
amended, at the time the original transaction was executed.\11\ 
Finally, the proposed rule would state that the format and information 
required by the Exchange for this submission would be released by the 
Exchange via Trader Update. As such, prior to Rule 6.77A becoming 
operative, the Exchange would provide OTP Holders with specific 
requirements via an Exchange-issued Trader Update. The Trader Update 
would, among other things, state specific timeframes required for 
requests and the format in which the requests would be accepted by the 
Exchange.
---------------------------------------------------------------------------

    \10\ Upon authorization, the Exchange will continue to report 
any price adjustment or trade nullification to the Options Price 
Reporting Authority.
    \11\ Specifically, the Exchange would ensure that the mutually-
agreed upon price would not have traded through resting interest on 
the Exchange or would have been in violation of Rule 991NY [sic] at 
the time of the initial execution.
---------------------------------------------------------------------------

Administrative Changes
    Finally, the Exchange is proposing to make administrative 
conforming changes to ensure Exchange rules on the subject are 
consistent. More specifically, the Exchange is proposing to delete 
Commentary .02 of Rule 6.77. The Exchange believes that deleting 
current Commentary .02 to Exchange Rule 6.77 would avoid any confusion 
with the proposed Rule 6.77A.
Conclusion
    To conclude, the Exchange believes that the proposed changes are in 
furtherance of the Act because the proposed Rule 6.77A will allow OTP 
Holders to agree to nullify transactions or adjust prices of 
transactions to maintain a fair and orderly market. As stated above, 
the Exchange intends to release a Trade [sic] Update to announce the 
implementation of the Rule and other specifics surrounding the 
procedures of the implementation. In addition, prior to implementation, 
the Exchange will ensure it has proper policies and procedures in place 
to correctly administer the Rule.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \12\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\13\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    More specifically, the Exchange believes that the proposed changes 
are consistent with the Act as they are designed to promote just and 
equitable principles and protect investors and the public interest. In 
particular, the Exchange believes the proposed change to move the 
provision authorizing parties to mutually agree to nullify a trade to a 
separate, stand-alone rule protects investors by eliminating confusion 
and making the provision more clear. Because options trades are used to 
hedge transactions in other markets, including securities and futures, 
many market participants would rather adjust prices of executions 
rather than nullify the transactions and, thus, lose a hedge 
altogether. As such, the Exchange believes it is in the best interest 
of investors to allow for price adjustments as well as nullifications. 
In addition, the Exchange believes it is in the nature of a fair and 
orderly market to allow for price adjustments rather than only 
cancellations because an adjustment would result in the least amount of 
disruption to the overall market. Further, the Exchange believes that, 
harmonizing its nullification and adjustment rules with other options 
markets would promote just and equitable principles of trade by better 
allowing the market participants to be treated similarly across 
exchanges. The Exchange also believes that the other administrative 
changes would remove impediments to and perfect the mechanism of a fair 
and orderly market as they are merely trying to create more 
transparency in the Exchange's rules. Finally, the Exchange does not 
believe that the proposed changes are unfairly discriminatory because 
they will be applied to all OTP Holders equally.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is not 
designed to address any aspect of competition, whether between the 
Exchange and its competitors, or among market participants. Instead, 
the proposed rule change is designed to adopt the nullification and 
adjustment of trades on similar terms to that of other options 
exchanges.\14\
---------------------------------------------------------------------------

    \14\ See note 7 supra.
---------------------------------------------------------------------------

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.

[[Page 78524]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-140 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2014-140. 
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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2014-140, and should be submitted on or before January 20, 
2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Brent J. Fields,
Secretary.
[FR Doc. 2014-30445 Filed 12-29-14; 8:45 am]
BILLING CODE 8011-01-P