Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending the Pilot Period Applicable to Rule 6.65A(c), Which Addresses How the Exchange Treats Obvious and Catastrophic Errors During Periods of Extreme Market Volatility To Coincide With the Pilot Period for the Plan To Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS, 66603-66605 [2015-27516]
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Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices
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 Section, 100 F Street NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the
Exchange’s principal office. 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–CHX–2015–06 and should
be submitted on or before November 19,
2015.
‘‘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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Robert W. Errett,
Deputy Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2015–27519 Filed 10–28–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76246; File No. SR–
NYSEArca–2015–101]
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Extending the Pilot
Period Applicable to Rule 6.65A(c),
Which Addresses How the Exchange
Treats Obvious and Catastrophic
Errors During Periods of Extreme
Market Volatility To Coincide With the
Pilot Period for the Plan To Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation
NMS
October 23, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
22, 2015, NYSE Arca, Inc. (the
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to extend the
pilot period applicable to Rule 6.65A(c),
which addresses how the Exchange
treats Obvious and Catastrophic Errors
during periods of extreme market
volatility to coincide with the pilot
period for the Plan to Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation
NMS. The pilot period is currently set
to expire on October 23, 2015. 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.
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 proposes to extend the
pilot period applicable to Rule 6.65A(c),
which addresses how the Exchange
treats Obvious and Catastrophic Errors
during periods of extreme market
volatility to coincide with the pilot
period for the Plan to Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation
NMS, as it may be amended from time
to time (‘‘LULD Plan’’), including any
extensions to the pilot period for the
LULD Plan. The pilot period is currently
set to expire on October 23, 2015.
PO 00000
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66603
In April 2013, in connection with the
Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
Regulation NMS (the ‘‘Plan’’),3 the
Exchange adopted Rule 6.65A(c) to
provide that options executions would
not be adjusted or nullified if the
execution occurs during periods of
extreme market volatility.4 Specifically,
Rule 6.65A(c) provides that, during the
pilot period, electronic transactions in
options that overlay an NMS Stock that
occur during a Limit State or a Straddle
State (as defined by the Plan) are not
subject to review under Rule 6.87(c) for
Obvious Errors or Rule 6.87(d) for
Catastrophic Errors. Nothing in Rule
6.65A(c) prevents electronic
transactions in options that overlay an
NMS Stock that occur during a Limit
State or a Straddle State from being
reviewed on Exchange motion pursuant
to Rule 6.87(c)(3), or a bust or adjust
pursuant to paragraphs (e) through (j) of
Rule 6.87.5
The Plan has been amended several
times since inception and was
implemented on February 24, 2014. On
May 28, 2015, the Participants
submitted to the Commission a
Supplemental Joint Assessment that
recommended that the Plan be adopted
as permanent with certain
modifications.6 The purpose of this
proposed extension is to allow the
Participants to conduct, and the
Commission to consider, further
analysis of data in support of the
recommendations made in the
Supplemental Joint Assessment,
including around the attributes of limit
states; the length of trading pauses; the
use of an alternative reference price at
the open of trading; and the alignment
of the percentage parameters with the
Clearly Erroneous Execution (CEE)
thresholds (with the goal of largely
eliminating the Participants’ CEE
authority).
In order to align the pilot period for
Rule 6.65A(c) with the proposed pilot
3 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (File
No. 4–631) (Order Approving, on a Pilot Basis, the
Plan). The Plan is designed to prevent trades in
individual NMS Stocks from occurring outside of
specified Price Bands, which are described in more
detail in the Plan.
4 See Securities and Exchange Act Release No.
69340 (April 8, 2013), 78 FR 22004 (April 12, 2013)
(SR–NYSEArca–2013–10) (‘‘Approval Order’’).
5 See Rule 6.87, Commentary .03.
6 See Letter from Christopher B. Stone, Vice
President, FINRA, to Brent J. Fields, Secretary, SEC,
dated May 28, 2015. In addition, the Participants to
the Plan recently filed to extend the Plan’s pilot
period until April 22, 2016 (the ‘‘Ninth
Amendment’’). See Securities Exchange Act Release
No. 75917 (September 14, 2015), 80 FR 56515
(September 18, 2015) (File No. 4–631) (notice of
proposed Ninth Amendment to the Plan).
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Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices
asabaliauskas on DSK5VPTVN1PROD with NOTICES
period for the Plan, the Exchange
similarly proposes to extend the pilot
period. The Exchange has committed to
provide the Commission with its data
assessments five months prior to the
expiration of the LULD Plan pilot
period, including any extensions. If the
Plan extension is approved, the
Exchange will deliver its next data
assessment to the Commission by
December 18, 2015.
In connection with the proposed
change, the Exchange proposes to
modify the text of Rule 6.65A to make
clear that paragraph (c), like paragraphs
(a) and (b), will be in effect for a pilot
period to coincide with the pilot period
for the LULD Plan, including any
extensions to the pilot period for the
LULD Plan. The Exchange believes the
benefits afforded to market participants
under Rule 6.65A(c) should continue on
a pilot basis during the same period as
the Plan pilot. The Exchange continues
to believe that adding certainty to the
execution of orders in Limit or Straddle
States would encourage market
participants to continue to provide
liquidity to the Exchange, and thus,
promote a fair and orderly market
during those periods. Thus, the
Exchange believes that the protections
of current Rule 6.65A(c) should
continue while the industry gains
further experience operating the Plan. In
addition, the Exchange believes that
extending the pilot period for Rule
6.65A(c) would allow the Exchange to
continue to collect and evaluate data, as
well as to conduct further data analyses,
related to this provision.
Specifically, in connection with the
adoption of Rule 6.65A (c), the
Exchange committed to review the
operation of this provision and to
analyze the impact of Limit and
Straddle States accordingly.7 The
Exchange agreed to and has been
providing to the Commission and the
public data for each Straddle State and
Limit State in NMS Stocks underlying
options traded on the Exchange
beginning in April 2013, limited to
those option classes that have at least
one (1) trade on the Exchange during a
Straddle State or Limit State.8 For each
of those option classes affected, each
7 Specifically, the Exchange committed to: ‘‘(1)
Evaluate the options market quality during Limit
States and Straddle States; (2) assess the character
of incoming order flow and transactions during
Limit States and Straddle States; and (3) review any
complaints from members and their customers
concerning executions during Limit States and
Straddle States.’’ See Approval Order, 78 FR at
22008.
8 See Securities Exchange Act Release No. 71869
(April 4, 2014), 79 FR 19689 (April 9, 2014) (SR–
NYSEArca–2014–36).
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Jkt 238001
data record contains the following
information:
• Stock symbol, option symbol, time
at the start of the Straddle or Limit
State, an indicator for whether it is a
Straddle or Limit State.
• For activity on the Exchange:
• Executed volume, time-weighted
quoted bid-ask spread, time-weighted
average quoted depth at the bid, timeweighted average quoted depth at the
offer;
• high execution price, low execution
price;
• number of trades for which a
request for review for error was received
during Straddle and Limit States;
• an indicator variable for whether
those options outlined above have a
price change exceeding 30% during the
underlying stock’s Limit or Straddle
state compared to the last available
option price as reported by OPRA before
the start of the Limit or Straddle State
(1 if observe 30% and 0 otherwise).
Another indicator variable for whether
the option price within five minutes of
the underlying stock leaving the Limit
or Straddle state (or halt if applicable)
is 30% away from the price before the
start of the Limit or Straddle state.
The Exchange believes that the
extension of the pilot period of Rule
6.65A(c) would allow the Exchange to
continue to observe the operation of the
pilot and conduct its assessments
relating to the impact of the operation
of the Rule during Limit and Straddle
States, which information will continue
to be shared with the Commission and
the public as set forth above.
Finally, the Exchange proposes to
amend 6.65A(c) to update crossreferences to Rule 6.87 that reflect the
recent amendments of that rule, which
add clarity and consistency to Exchange
rules. The Exchange also proposes to
similarly amend Commentary .03 to
Rule 6.87 regarding the Limit Up-Limit
Down State to reflect the extension of
the pilot to coincide with the pilot
period for the LULD Plan, including any
extensions to the pilot period for the
LULD Plan.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) of the Act 9 in general, and furthers
the objectives of Section 6(b)(5),10 in
particular, in that it is designed to
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanisms of, a free and
open market and a national market
9 15
U.S.C. 78f (b).
U.S.C. 78f(b)(5).
10 15
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
system and, in general, to protect
investors and the public interest.
Specifically, the proposal to extend
the pilot program of Rule 6.65A(c) and
Commentary .03 to Rule 6.87 to
coincide with the pilot period for the
LULD Plan, as it may be amended from
time to time, including any extensions
to the pilot period for the LULD Plan
would align that pilot program with the
Pilot Period for the Plan, as proposed in
the Ninth Amendment to the Plan. The
Exchange believes that aligning the pilot
periods would ensure that trading in
options that overlay NMS Stocks
continues to be appropriately modified
to reflect market conditions that occur
during a Limit State or a Straddle State
in a manner that promotes just and
equitable principles of trade and
removes impediments to, and perfects
the mechanism of, a free and open
market and a national market system.
The Exchange believes that the
extension of Rule 6.65A(c) and
Commentary .03 to Rule 6.87 would
help encourage market participants to
continue to provide liquidity during
extraordinary market volatility.
Moreover, the Exchange believes that
extending the pilot period for Rule
6.65A(c) and Commentary .03 to Rule
6.87 would remove impediments to, and
perfect the mechanisms of, a free and
open market because it would enable
the Exchange to continue to conduct its
assessments relating to the impact of the
operation of the Obvious Error rules
during Limit and Straddle States as set
forth above, which, in turn, provides the
Exchange with more information from
which to assess the impact of Rule
6.65A(c) and Commentary .03 to Rule
6.87.
Finally, the Exchange believes that
amending 6.65A(c) to update crossreferences to Rule 6.87 to reflect the
recent amendments of that rule would
remove impediments to, and perfect the
mechanisms of, a free and open market
by adding clarity and consistency to
Exchange rules to the benefit of all
market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed changes will not impose any
burden on competition and will instead
provide certainty regarding the
treatment and execution of options
orders, specifically the treatment of
Obvious and Catastrophic Errors during
periods of extraordinary volatility in the
underlying NMS Stock, and will
E:\FR\FM\29OCN1.SGM
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Federal Register / Vol. 80, No. 209 / Thursday, October 29, 2015 / Notices
facilitate appropriate liquidity during a
Limit State or Straddle State.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 11 and Rule 19b–4(f)(6)(iii)
thereunder.12
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. 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 obvious error pilot
program to continue uninterrupted
while the industry gains further
experience operating under the Plan,
and avoid any investor confusion that
could result from a temporary
interruption in the pilot program. For
this reason, the Commission designates
the proposed rule change to be operative
upon filing.13
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. If the
Commission takes such action, the
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
13 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2015–101 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–2015–101. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2015–101, and should be
submitted on or before November 19,
2015.
14 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00118
Fmt 4703
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66605
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–27516 Filed 10–28–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76247; File No. SR–CBOE–
2015–094]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Qualification
and Registration of Trading Permit
Holders and Associated Persons
October 23, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
9, 2015, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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
Interpretation and Policy .08 to Rule
3.6A (Qualifications and Registration of
Trading Permit Holders and Associated
Persons) regarding the categories of
registration and respective qualification
examinations required for Trading
Permit Holders (‘‘TPHs’’) and associated
persons that engage in trading activities
on the Exchange. Specifically, the
Exchange proposes to replace the
Proprietary Trader registration category
and the Series 56 Proprietary Trader
registration qualification examination
for Proprietary Traders with the
Securities Trader category of registration
and the Series 57 Securities Trader
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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]]>Agencies
[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Notices]
[Pages 66603-66605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27516]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76246; File No. SR-NYSEArca-2015-101]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Extending the Pilot
Period Applicable to Rule 6.65A(c), Which Addresses How the Exchange
Treats Obvious and Catastrophic Errors During Periods of Extreme Market
Volatility To Coincide With the Pilot Period for the Plan To Address
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS
October 23, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 22, 2015, 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 extend the pilot period applicable to Rule
6.65A(c), which addresses how the Exchange treats Obvious and
Catastrophic Errors during periods of extreme market volatility to
coincide with the pilot period for the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS. The pilot
period is currently set to expire on October 23, 2015. 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 proposes to extend the pilot period applicable to Rule
6.65A(c), which addresses how the Exchange treats Obvious and
Catastrophic Errors during periods of extreme market volatility to
coincide with the pilot period for the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS, as it may be
amended from time to time (``LULD Plan''), including any extensions to
the pilot period for the LULD Plan. The pilot period is currently set
to expire on October 23, 2015.
In April 2013, in connection with the Plan to Address Extraordinary
Market Volatility Pursuant to Rule 608 of Regulation NMS (the
``Plan''),\3\ the Exchange adopted Rule 6.65A(c) to provide that
options executions would not be adjusted or nullified if the execution
occurs during periods of extreme market volatility.\4\ Specifically,
Rule 6.65A(c) provides that, during the pilot period, electronic
transactions in options that overlay an NMS Stock that occur during a
Limit State or a Straddle State (as defined by the Plan) are not
subject to review under Rule 6.87(c) for Obvious Errors or Rule 6.87(d)
for Catastrophic Errors. Nothing in Rule 6.65A(c) prevents electronic
transactions in options that overlay an NMS Stock that occur during a
Limit State or a Straddle State from being reviewed on Exchange motion
pursuant to Rule 6.87(c)(3), or a bust or adjust pursuant to paragraphs
(e) through (j) of Rule 6.87.\5\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (Order Approving,
on a Pilot Basis, the Plan). The Plan is designed to prevent trades
in individual NMS Stocks from occurring outside of specified Price
Bands, which are described in more detail in the Plan.
\4\ See Securities and Exchange Act Release No. 69340 (April 8,
2013), 78 FR 22004 (April 12, 2013) (SR-NYSEArca-2013-10)
(``Approval Order'').
\5\ See Rule 6.87, Commentary .03.
---------------------------------------------------------------------------
The Plan has been amended several times since inception and was
implemented on February 24, 2014. On May 28, 2015, the Participants
submitted to the Commission a Supplemental Joint Assessment that
recommended that the Plan be adopted as permanent with certain
modifications.\6\ The purpose of this proposed extension is to allow
the Participants to conduct, and the Commission to consider, further
analysis of data in support of the recommendations made in the
Supplemental Joint Assessment, including around the attributes of limit
states; the length of trading pauses; the use of an alternative
reference price at the open of trading; and the alignment of the
percentage parameters with the Clearly Erroneous Execution (CEE)
thresholds (with the goal of largely eliminating the Participants' CEE
authority).
---------------------------------------------------------------------------
\6\ See Letter from Christopher B. Stone, Vice President, FINRA,
to Brent J. Fields, Secretary, SEC, dated May 28, 2015. In addition,
the Participants to the Plan recently filed to extend the Plan's
pilot period until April 22, 2016 (the ``Ninth Amendment''). See
Securities Exchange Act Release No. 75917 (September 14, 2015), 80
FR 56515 (September 18, 2015) (File No. 4-631) (notice of proposed
Ninth Amendment to the Plan).
---------------------------------------------------------------------------
In order to align the pilot period for Rule 6.65A(c) with the
proposed pilot
[[Page 66604]]
period for the Plan, the Exchange similarly proposes to extend the
pilot period. The Exchange has committed to provide the Commission with
its data assessments five months prior to the expiration of the LULD
Plan pilot period, including any extensions. If the Plan extension is
approved, the Exchange will deliver its next data assessment to the
Commission by December 18, 2015.
In connection with the proposed change, the Exchange proposes to
modify the text of Rule 6.65A to make clear that paragraph (c), like
paragraphs (a) and (b), will be in effect for a pilot period to
coincide with the pilot period for the LULD Plan, including any
extensions to the pilot period for the LULD Plan. The Exchange believes
the benefits afforded to market participants under Rule 6.65A(c) should
continue on a pilot basis during the same period as the Plan pilot. The
Exchange continues to believe that adding certainty to the execution of
orders in Limit or Straddle States would encourage market participants
to continue to provide liquidity to the Exchange, and thus, promote a
fair and orderly market during those periods. Thus, the Exchange
believes that the protections of current Rule 6.65A(c) should continue
while the industry gains further experience operating the Plan. In
addition, the Exchange believes that extending the pilot period for
Rule 6.65A(c) would allow the Exchange to continue to collect and
evaluate data, as well as to conduct further data analyses, related to
this provision.
Specifically, in connection with the adoption of Rule 6.65A (c),
the Exchange committed to review the operation of this provision and to
analyze the impact of Limit and Straddle States accordingly.\7\ The
Exchange agreed to and has been providing to the Commission and the
public data for each Straddle State and Limit State in NMS Stocks
underlying options traded on the Exchange beginning in April 2013,
limited to those option classes that have at least one (1) trade on the
Exchange during a Straddle State or Limit State.\8\ For each of those
option classes affected, each data record contains the following
information:
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\7\ Specifically, the Exchange committed to: ``(1) Evaluate the
options market quality during Limit States and Straddle States; (2)
assess the character of incoming order flow and transactions during
Limit States and Straddle States; and (3) review any complaints from
members and their customers concerning executions during Limit
States and Straddle States.'' See Approval Order, 78 FR at 22008.
\8\ See Securities Exchange Act Release No. 71869 (April 4,
2014), 79 FR 19689 (April 9, 2014) (SR-NYSEArca-2014-36).
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Stock symbol, option symbol, time at the start of the
Straddle or Limit State, an indicator for whether it is a Straddle or
Limit State.
For activity on the Exchange:
Executed volume, time-weighted quoted bid-ask spread,
time-weighted average quoted depth at the bid, time-weighted average
quoted depth at the offer;
high execution price, low execution price;
number of trades for which a request for review for error
was received during Straddle and Limit States;
an indicator variable for whether those options outlined
above have a price change exceeding 30% during the underlying stock's
Limit or Straddle state compared to the last available option price as
reported by OPRA before the start of the Limit or Straddle State (1 if
observe 30% and 0 otherwise). Another indicator variable for whether
the option price within five minutes of the underlying stock leaving
the Limit or Straddle state (or halt if applicable) is 30% away from
the price before the start of the Limit or Straddle state.
The Exchange believes that the extension of the pilot period of
Rule 6.65A(c) would allow the Exchange to continue to observe the
operation of the pilot and conduct its assessments relating to the
impact of the operation of the Rule during Limit and Straddle States,
which information will continue to be shared with the Commission and
the public as set forth above.
Finally, the Exchange proposes to amend 6.65A(c) to update cross-
references to Rule 6.87 that reflect the recent amendments of that
rule, which add clarity and consistency to Exchange rules. The Exchange
also proposes to similarly amend Commentary .03 to Rule 6.87 regarding
the Limit Up-Limit Down State to reflect the extension of the pilot to
coincide with the pilot period for the LULD Plan, including any
extensions to the pilot period for the LULD Plan.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \9\ in general, and furthers the objectives of
Section 6(b)(5),\10\ in particular, in that it is designed to promote
just and equitable principles of trade, remove impediments to and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest.
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\9\ 15 U.S.C. 78f (b).
\10\ 15 U.S.C. 78f(b)(5).
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Specifically, the proposal to extend the pilot program of Rule
6.65A(c) and Commentary .03 to Rule 6.87 to coincide with the pilot
period for the LULD Plan, as it may be amended from time to time,
including any extensions to the pilot period for the LULD Plan would
align that pilot program with the Pilot Period for the Plan, as
proposed in the Ninth Amendment to the Plan. The Exchange believes that
aligning the pilot periods would ensure that trading in options that
overlay NMS Stocks continues to be appropriately modified to reflect
market conditions that occur during a Limit State or a Straddle State
in a manner that promotes just and equitable principles of trade and
removes impediments to, and perfects the mechanism of, a free and open
market and a national market system. The Exchange believes that the
extension of Rule 6.65A(c) and Commentary .03 to Rule 6.87 would help
encourage market participants to continue to provide liquidity during
extraordinary market volatility.
Moreover, the Exchange believes that extending the pilot period for
Rule 6.65A(c) and Commentary .03 to Rule 6.87 would remove impediments
to, and perfect the mechanisms of, a free and open market because it
would enable the Exchange to continue to conduct its assessments
relating to the impact of the operation of the Obvious Error rules
during Limit and Straddle States as set forth above, which, in turn,
provides the Exchange with more information from which to assess the
impact of Rule 6.65A(c) and Commentary .03 to Rule 6.87.
Finally, the Exchange believes that amending 6.65A(c) to update
cross-references to Rule 6.87 to reflect the recent amendments of that
rule would remove impediments to, and perfect the mechanisms of, a free
and open market by adding clarity and consistency to Exchange rules to
the benefit of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed changes will
not impose any burden on competition and will instead provide certainty
regarding the treatment and execution of options orders, specifically
the treatment of Obvious and Catastrophic Errors during periods of
extraordinary volatility in the underlying NMS Stock, and will
[[Page 66605]]
facilitate appropriate liquidity during a Limit State or Straddle
State.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. 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 obvious error pilot program to continue
uninterrupted while the industry gains further experience operating
under the Plan, and avoid any investor confusion that could result from
a temporary interruption in the pilot program. For this reason, the
Commission designates the proposed rule change to be operative upon
filing.\13\
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2015-101 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-2015-101. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2015-101, and
should be submitted on or before November 19, 2015.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27516 Filed 10-28-15; 8:45 am]
BILLING CODE 8011-01-P
