Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.67(c) by Revising the Clearing Member Requirements for Entering an Order Into the Electronic Order Capture System (“EOC”), 21430-21433 [2016-08178]
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Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
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 9 and Rule 19b–
4(f)(6) thereunder.10
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 11 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 12
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 asked
the Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated that the
proposed rule change is designed to
assure compliance with Rule 201 of
Regulation SHO 13 by assuring that the
Exchange will not execute or display a
sell short PNP or a sell short PNP Blind
order at or below the national best bid
during a Short Sale Period. The
Exchange further stated that waiver of
the operative delay would allow the
Exchange to implement the rule change
without delay, which would help
eliminate potential investor confusion
regarding how sell short PNP and PNP
Blind Orders will be treated on arrival
during a Short Sale Period. The
Commission believes the waiver of the
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the operative delay and
designates the proposal operative upon
filing.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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
11 17 CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 17 CFR 242.201.
14 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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10 17
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change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08180 Filed 4–8–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77516; File No. SR–
NYSEArca–2016–15]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2016–51 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–2016–51. 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–2016–51, and should be
submitted on or before May 2, 2016.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1, To Amend Rule
6.67(c) by Revising the Clearing
Member Requirements for Entering an
Order Into the Electronic Order
Capture System (‘‘EOC’’)
April 5, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
22, 2016, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. On March 30, 2016, the
Exchange filed Amendment No. 1 to the
proposed rule change. The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, 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
Rule 6.67(c) by revising the
requirements for entering an order into
the Electronic Order Capture System
(‘‘EOC’’). 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
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
15 17
PO 00000
CFR 200.30–3(a)(12).
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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
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The Exchange proposes to amend
Exchange Rule 6.67(c) by revising the
requirements for entering an order into
the EOC. Specifically, the Exchange
proposes to eliminate the pre-trade EOC
requirement that OTP Holders or OTP
Firms (each an ‘‘OTP’’; collectively,
‘‘OTPs’’) give up the name of the
Clearing Member 4 responsible for
clearing each trade before representing a
trade in open outcry.5
The EOC is the Exchange’s floor-based
electronic audit trail and order tracking
system that provides an accurate timesequenced record of all orders and
transactions entered and executed on
the floor of the Exchange.6 This process,
commonly referred to as the
‘‘systemization’’ of an order, is
composed of the contractual terms of an
order that are required to be disclosed
in order to effect a trade. The EOC was
developed to comply with an order of
the Commission, which required that
the Exchange, in coordination with
other exchanges, ‘‘design and
implement a consolidated options audit
trail system (‘COATS’),’’ that would
‘‘enable the options exchanges to
reconstruct markets promptly,
effectively surveil them and enforce
order handling, firm quote, trade
reporting and other rules.’’ 7 In
4 Rule 6.1(3) defines ‘‘Clearing Member’’ as an
Exchange OTP which has been admitted to
membership in the Options Clearing Corporation
pursuant to the provisions of the Rules of the
Options Clearing Corporation.
5 In Amendment No. 1, the Exchange clarified
that it is proposing to amend the timing in which
Clearing Member information will be entered into
the EOC. More specifically, the Exchange noted that
Rule 6.67(c) requires the other items included in
Rule 6.68(a), including the ‘‘CMTA Information and
the name of the clearing OTP Holder or Firm,’’ to
be included in the EOC ‘‘as the events occur and/
or during trade reporting procedures which may
occur after the representation and execution of the
order.’’
6 This system includes the electronic
communications interface between booth terminals
and the Floor Broker work stations.
7 See Section IV.B.e.(v) of the Commission’s
Order Instituting Public Administrative Proceedings
Pursuant to Sections 19(h)(1) of the Securities
Exchange Act of 1934, Making Findings and
Imposing Remedial Sanctions (the ‘‘Order’’). See
Securities Exchange Act Release No. 43268
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particular, the Exchange was required
incorporate into the audit trail all nonelectronic orders ‘‘such that the audit
trail provides an accurate, timesequenced record of electronic and
other orders, quotations and
transactions on such respondent
exchange, beginning with the receipt of
an order by such respondent exchange
and further documenting the life of the
order through the process of execution,
partial execution, or cancellation of that
order, which audit trail shall be readily
retrievable in the common computer
format.’’ 8
Current Rule 6.67(c) sets forth the
EOC entry requirements and mandates
that every OTP that receives an order for
execution on the Exchange ‘‘must
immediately, prior to representation in
the trading crowd, record the details of
the order (including any modification of
the terms of the order or cancellation of
the order) into the EOC, unless such
order has been entered into the
Exchange’s other electronic order
processing facilities (e.g., orders sent
electronically through the Exchange’s
Member Firm Interface).’’ 9 Among other
pre-trade EOC requirements under
current Rule 6.67(c)(1), every OTP must
provide ‘‘the name of the clearing OTP
Holder or OTP Firm’’ (the ‘‘Give Up
Requirement’’).10 Rule 6.67(c)(1) also
provides that ‘‘[t]he remaining elements
prescribed in Rule 6.68(a) and any
additional information with respect to
the order shall be recorded as the events
occur and/or during trade reporting
procedures which may occur after the
representation and execution of the
order.’’ 11
(September 11, 2000) and Administrative
Proceeding File No. 3–10282.
8 See id.
9 See Rule 6.67(c).
10 See Rule 6.67(c)(1)(vii). Rule 6.67(c)(1) also
requires the following data points to be entered
upon receipt of an order: (i) The option symbol; (ii)
the expiration date of the option; (iii) the exercise
price; (iv) buy or sell with applicable limit or stop
price or special instructions; (v) call or put; (vi) the
quantity of contracts; as well as such other
information as may be required by the Exchange
from time to time. Rule 6.67(c)(1) also provides that
the Exchange may also require additional
information if needed and provides that the
remaining data elements prescribed in Rule 6.68
[see infra n. 10] are to be recorded as the events
occur and/or during trade reporting procedures.
The Exchange proposes to add the words ‘‘in the
EOC’’ to Rule 6.67(c)(1) to make clear where the
additional information would be recorded. See
proposed Rule 6.67(c)(1).
11 See Rule 6.67(c)(1). The Exchange notes that
one such element prescribed in Rule 6.68(a) to be
recorded by each OTP is ‘‘CMTA Information and
the name of the clearing OTP Holder or Firm,’’ and
therefore, per Rule 6.67(c)(1), this information
would still be disclosed ‘‘as the events occur and/
or during trade reporting procedures which may
occur after the representation and execution of the
order.’’ Id. See also Rule 6.68(a) (Record of Orders)
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21431
Pursuant to the proposed rule change,
OTPs would no longer be subject to the
pre-trade Give Up Requirement. Floor
Brokers have told the Exchange that the
identity of the firm through which each
trade will clear is not always initially
provided when an order is presented
and that waiting to receive this
information and enter it into EOC can
delay the representation and execution
of an order. In today’s trading
environment of rapidly moving markets
and the need to execute an order and
hedge a trade in real or near real time,
even a slight delay can prove to be
detrimental to the handling of an order.
The proposed change to eliminate the
Give Up Requirement prior to execution
of each trade would not impair the
Exchange’s ability to comply with the
Order. Specifically, the EOC would still
provide an accurate, time-sequenced
record beginning with the receipt of an
order and document the life of the order
through the process of execution, partial
execution, or cancellation. Entry of
information pursuant to the Give Up
Requirement would occur after the
order had been represented and
executed in the Trading Crowd.12 Thus,
only the timing of the disclosure of such
information would be affected by this
proposal.
The Exchange notes that, similar to a
filing it submitted in 2013,13 the
proposed rule change relates only to the
system entry requirements for floorbased orders and would not change
rules governing the record of orders
(Rule 6.68). Floor Brokers would
(requiring that OTP Holders and OTP Firms
maintain a record of each order that includes that
the following data elements: (1) CMTA Information
and the name of the clearing OTP Holder or Firm;
(2) options symbol, expiration month, exercise price
and type of options; (3) side of the market and order
type; (4) quantity of options; (5) limit or stop price
or special conditions; (6) opening or closing
transaction; (7) time in force; (8) account origin
code; and (9) whether the order was solicited or
unsolicited.) See also Rule 6.69 (Reporting Duties),
infra n. 12.
12 See id.; see also Commentary .01 to Rule 6.69
(providing that for each transaction executed on the
Options Floor, the responsible OTP Holder or OTP
Firm will immediately report, among other
information, both its assigned broker initial code
and the name of the contra clearing member).
13 See Securities and Exchange Act Release 69080
(March 8, 2013), 78 FR 16329, 16330 (March 14,
2013) (SR–NYSEArca–2013–21) (noting that
‘‘[b]ecause the CMTA information, the opening/
closing designation, the account origin code, the
time if force and whether an order was solicited or
unsolicited are not contractual terms of a trade itself
nor are they required data elements pursuant to the
Exchange’s order format requirements, the
Exchange does not believe this information needs
to be entered into the EOC prior to an order being
represented in the Trading Crowd, but may be
entered contemporaneously upon the receipt of
such information, even if that occurs after the order
had been represented and executed in the Trading
Crowd’’).
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Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
continue to be required to maintain
proper order records, as part of each
trade record, including the identity of
the clearing OTP Holder or Firm.14 In
that regard, Floor Brokers would
continue to be required to give up the
responsible Clearing Member on each
trade as part of each trade record.15
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2. Statutory Basis
The Exchange believes that the
proposed change is consistent with
Section 6(b) of the Act,16 in general, and
furthers the objectives of Section
6(b)(5),17 in particular, in that it is
designed 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 facilitation transactions in
securities, to remove impediments to,
and perfect the mechanism of a free and
open market 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) 18 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
Specifically, the proposed change to
order entry requirements for the EOC
(i.e., eliminating the pre-trade Give Up)
is designed to promote just and
14 The Exchange notes that another exchange has
made modifications to its rules related to the Order.
See Securities Exchange Act Release No. 63071
(October 8, 2010), 75 FR 63876, 63877–78 (October
18, 2010) (SR–Phlx–2010–139) (immediately
effective filing to amend language related to the
timing of the entry of clearing information, noting
in relevant part that ‘‘[t]he clearing information,
which is the contra-side clearing information, is not
required to be entered pursuant to COATS. Rather,
this information facilitates the identification of the
trade for clearing.’’). The Exchange notes that the
Philadelphia Stock Exchange proposed these
changes to its rules without solicitation of the
exchanges that were subject to the Order, including
the Exchange. Accordingly, the Exchange believes
that exchanges’ changes to their rules put in place
to comply with the Order are appropriately effected
pursuant to the provisions of Section 19(b)(1) of the
Act and Rule 19b–4 thereunder. See 15 U.S.C.
78s(b)(1); 17 CFR 240.19b–4.
15 See supra nn. 11, 12. In addition, the Exchange
notes that this proposal would not change rules
governing trade reporting requirements (Rule 6.69)
(i.e., that ‘‘[t]ransactions not reported to [the
Options Pricing Reporting Authority] within 90
seconds after the execution will be designated as
‘late,’ ’’ per Rule 6.69(a)). The Exchange also notes
that last year it revised and detailed the process in
which an OTP ‘‘gives up’’ or selects a Clearing
Member responsible for the clearance of an
Exchange transaction (the ‘‘Give Up Process’’). See
Securities and Exchange Act Release 75641 (August
7, 2015), 80 FR 48577 (August 13, 2015) (SR–
NYSEArca–2015–65) (revising the Exchange’s Give
Up Process through modifications to Rules 6.15,
6.66 and 6.79).
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
18 Id.
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equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities by ensuring
that the terms of an order continue to be
properly systematized prior to the order
being represented in the Trading Crowd.
The proposed change to eliminate the
Give Up Requirement prior to execution
of each trade would not impair the
Exchange’s ability to comply with the
Order. Specifically, the EOC would still
provide an accurate, time-sequenced
record of electronic and other orders,
quotations and transactions, beginning
with the receipt of the order and
documenting the life of the order
through the process of execution, partial
execution, or cancellation.19
The proposal is also designed to
prevent fraudulent and manipulative
acts and practices, by ensuring that the
Exchange is continues to meet its
obligation to create and maintain a timesequenced record of orders, quotations
and transactions on the Exchange. This
proposal does not alter—or, as stated
above, impair, the Exchange’s obligation
to incorporate into its audit trail all nonelectronic orders to provide an accurate,
time-sequenced record of electronic and
other orders, quotations and
transactions that documents the life of
the order from receipt through the
execution, partial execution, or
cancellation.20 Moreover, the proposed
change merely removes the Give Up
Requirement from pre-trade
systemization, it does not alter that give
ups must be disclosed as part of the
Give Up Process and as part of trade
reporting on the Exchange.21
Accordingly, nothing in this proposal
would alter the Exchange’s obligations
pursuant to, or ability to comply with,
the Order. The Exchange notes that it
has previously modified the noncontractual data elements required
pursuant to Rule 6.67(c) (i.e., not
mandated by the Order).22
Finally, the Exchange believes that
the proposed change would reduce the
burden on Floor Brokers to enter order
information prior to representation
which would, in turn, promote just and
equitable principles of trade and remove
impediments to and perfect the
mechanism of a free and open market by
reducing the delay in representation and
execution of an order on the Exchange.
19 See
supra n. 7.
20 Id.
21 See
22 See
PO 00000
supra nn. 11, 12, 15.
supra n. 13.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
this proposed rule change would
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change would reduce the
burden on Floor Brokers that have
reported that the identity of the firm
through which each trade will clear is
not always initially provided when an
order is presented and that waiting to
receive this information and enter it into
EOC can delay the representation and
execution of an order. By reducing Floor
Brokers’ burden on order entry
compliance, the Exchange believes the
proposal will improve the
competitiveness of Exchange Floor
Brokers, by enabling more timely
executions of open outcry trades and
promoting competition for order flow
among market participants and the
options exchanges.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be 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 rulecomments@sec.gov. Please include File
No. SR–NYSEArca–2016–15 on the
subject line.
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Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
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 No.
SR–NYSEArca–2016–15. 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 No. SR–NYSEArca–
2016–15, and should be submitted on or
before May 2, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08178 Filed 4–8–16; 8:45 am]
mstockstill on DSK4VPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77521; File No. SR–
NYSEArca–2016–53]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE Arca
Options Fee Schedule To Add Fees for
Reserve Market Maker Options Trading
Permits
April 5, 2016
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
25, 2016, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’) to add fees for Reserve
Market Maker Options Trading Permits.
The Exchange proposes to implement
the fee change effective April 1, 2016.
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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
23 17
CFR 200.30–3(a)(12).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to add
fees for Reserve Market Maker Options
Trading Permits (each a ‘‘Reserve
OTP’’).
Under the current NYSE Arca Fee
Schedule (Fee Schedule),4 an OTP
Holder or OTP Firm 5 acting as a Market
Maker must pay a monthly fee for each
Options Trading Permit (‘‘OTP’’) it
utilizes.6 In order to act as a Market
Maker 7 on the Exchange Floor, an
individual must be specifically named
on the relevant Market Maker’s OTP. On
occasions when a Market Maker
operating on the Floor may is [sic]
absent, the OTP Holder or OTP Firm
may wish to have a Market Maker
Authorized Trader 8 (‘‘MMAT’’)
employee engage in open outcry trading
to cover for the absent Market Maker.
However, an MMAT may only step in to
cover for the absent Market Maker if it
is specifically named on the relevant
OTP; if such individual is not named,
the OTP Holder or OTP Firm would be
charged the full monthly fee if it
activates the OTP to allow that
individual to stand in for as briefly as
one day.9
4 See Fee Schedule, available here, https://
www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_Fee_Schedule.pdf.
5 An OTP Holder is a natural person, in good
standing, that has been issued an OTP. See Rule
1.1.(q). An OTP Firm is a sole proprietorship,
partnership, corporation, limited liability company
or other organization in good standing, who has
been issued an OTP or upon whom an OTP Holder
has conferred trading privileges on the Exchange.
See Rule 1.1.(r).
6 OTPs are issued by the Exchange for effecting
approved securities transactions on the Exchange’s
Trading Facilities. See Rule 1.1.(p). The cost of each
OTP ranges from $6,000, for the first OTP, to $1,000
for the fifth or greater OTP, as the cost decreases
as the number of OTPs utilized per month
increases. See supra n. 4. The first OTP allows a
Market Maker to quote in up to 175 issues; a Market
Maker is required to have four OTPs to quote all
issues on the Exchange. See id.
7 A Market Maker is an individual who is
registered with the Exchange for the purpose of
making transactions as a dealer-specialist on the
Floor of the Exchange or for the purpose of
submitting quotes electronically and making
transactions as a dealer-specialist through the NYSE
Arca OX electronic trading system. See Rule 6.32(a).
8 A Market Maker Authorized Trader is an
authorized trader who performs market making
activities pursuant to Rule 6 on behalf of an OTP
Holder or OTP Firm registered as a Market Maker.
See Rule 6.1A(a)(9). A Market Maker Authorized
Trader must meet the same registration
requirements as a Market Maker before they can be
designated as a Market Maker Authorized Trader.
See Rule 6.33.
9 The Monthly OTP fee is based on the maximum
number of OTPs held by an OTP Firm or OTP
Continued
Sfmt 4703
E:\FR\FM\11APN1.SGM
11APN1
]]>Agencies
[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21430-21433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08178]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77516; File No. SR-NYSEArca-2016-15]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule
6.67(c) by Revising the Clearing Member Requirements for Entering an
Order Into the Electronic Order Capture System (``EOC'')
April 5, 2016.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on March 22, 2016, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. On March 30, 2016, the Exchange filed Amendment No. 1 to
the proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 1, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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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 amend Rule 6.67(c) by revising the
requirements for entering an order into the Electronic Order Capture
System (``EOC''). 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
[[Page 21431]]
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 amend Exchange Rule 6.67(c) by revising
the requirements for entering an order into the EOC. Specifically, the
Exchange proposes to eliminate the pre-trade EOC requirement that OTP
Holders or OTP Firms (each an ``OTP''; collectively, ``OTPs'') give up
the name of the Clearing Member \4\ responsible for clearing each trade
before representing a trade in open outcry.\5\
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\4\ Rule 6.1(3) defines ``Clearing Member'' as an Exchange OTP
which has been admitted to membership in the Options Clearing
Corporation pursuant to the provisions of the Rules of the Options
Clearing Corporation.
\5\ In Amendment No. 1, the Exchange clarified that it is
proposing to amend the timing in which Clearing Member information
will be entered into the EOC. More specifically, the Exchange noted
that Rule 6.67(c) requires the other items included in Rule 6.68(a),
including the ``CMTA Information and the name of the clearing OTP
Holder or Firm,'' to be included in the EOC ``as the events occur
and/or during trade reporting procedures which may occur after the
representation and execution of the order.''
---------------------------------------------------------------------------
The EOC is the Exchange's floor-based electronic audit trail and
order tracking system that provides an accurate time-sequenced record
of all orders and transactions entered and executed on the floor of the
Exchange.\6\ This process, commonly referred to as the
``systemization'' of an order, is composed of the contractual terms of
an order that are required to be disclosed in order to effect a trade.
The EOC was developed to comply with an order of the Commission, which
required that the Exchange, in coordination with other exchanges,
``design and implement a consolidated options audit trail system
(`COATS'),'' that would ``enable the options exchanges to reconstruct
markets promptly, effectively surveil them and enforce order handling,
firm quote, trade reporting and other rules.'' \7\ In particular, the
Exchange was required incorporate into the audit trail all non-
electronic orders ``such that the audit trail provides an accurate,
time-sequenced record of electronic and other orders, quotations and
transactions on such respondent exchange, beginning with the receipt of
an order by such respondent exchange and further documenting the life
of the order through the process of execution, partial execution, or
cancellation of that order, which audit trail shall be readily
retrievable in the common computer format.'' \8\
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\6\ This system includes the electronic communications interface
between booth terminals and the Floor Broker work stations.
\7\ See Section IV.B.e.(v) of the Commission's Order Instituting
Public Administrative Proceedings Pursuant to Sections 19(h)(1) of
the Securities Exchange Act of 1934, Making Findings and Imposing
Remedial Sanctions (the ``Order''). See Securities Exchange Act
Release No. 43268 (September 11, 2000) and Administrative Proceeding
File No. 3-10282.
\8\ See id.
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Current Rule 6.67(c) sets forth the EOC entry requirements and
mandates that every OTP that receives an order for execution on the
Exchange ``must immediately, prior to representation in the trading
crowd, record the details of the order (including any modification of
the terms of the order or cancellation of the order) into the EOC,
unless such order has been entered into the Exchange's other electronic
order processing facilities (e.g., orders sent electronically through
the Exchange's Member Firm Interface).'' \9\ Among other pre-trade EOC
requirements under current Rule 6.67(c)(1), every OTP must provide
``the name of the clearing OTP Holder or OTP Firm'' (the ``Give Up
Requirement'').\10\ Rule 6.67(c)(1) also provides that ``[t]he
remaining elements prescribed in Rule 6.68(a) and any additional
information with respect to the order shall be recorded as the events
occur and/or during trade reporting procedures which may occur after
the representation and execution of the order.'' \11\
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\9\ See Rule 6.67(c).
\10\ See Rule 6.67(c)(1)(vii). Rule 6.67(c)(1) also requires the
following data points to be entered upon receipt of an order: (i)
The option symbol; (ii) the expiration date of the option; (iii) the
exercise price; (iv) buy or sell with applicable limit or stop price
or special instructions; (v) call or put; (vi) the quantity of
contracts; as well as such other information as may be required by
the Exchange from time to time. Rule 6.67(c)(1) also provides that
the Exchange may also require additional information if needed and
provides that the remaining data elements prescribed in Rule 6.68
[see infra n. 10] are to be recorded as the events occur and/or
during trade reporting procedures. The Exchange proposes to add the
words ``in the EOC'' to Rule 6.67(c)(1) to make clear where the
additional information would be recorded. See proposed Rule
6.67(c)(1).
\11\ See Rule 6.67(c)(1). The Exchange notes that one such
element prescribed in Rule 6.68(a) to be recorded by each OTP is
``CMTA Information and the name of the clearing OTP Holder or
Firm,'' and therefore, per Rule 6.67(c)(1), this information would
still be disclosed ``as the events occur and/or during trade
reporting procedures which may occur after the representation and
execution of the order.'' Id. See also Rule 6.68(a) (Record of
Orders) (requiring that OTP Holders and OTP Firms maintain a record
of each order that includes that the following data elements: (1)
CMTA Information and the name of the clearing OTP Holder or Firm;
(2) options symbol, expiration month, exercise price and type of
options; (3) side of the market and order type; (4) quantity of
options; (5) limit or stop price or special conditions; (6) opening
or closing transaction; (7) time in force; (8) account origin code;
and (9) whether the order was solicited or unsolicited.) See also
Rule 6.69 (Reporting Duties), infra n. 12.
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Pursuant to the proposed rule change, OTPs would no longer be
subject to the pre-trade Give Up Requirement. Floor Brokers have told
the Exchange that the identity of the firm through which each trade
will clear is not always initially provided when an order is presented
and that waiting to receive this information and enter it into EOC can
delay the representation and execution of an order. In today's trading
environment of rapidly moving markets and the need to execute an order
and hedge a trade in real or near real time, even a slight delay can
prove to be detrimental to the handling of an order. The proposed
change to eliminate the Give Up Requirement prior to execution of each
trade would not impair the Exchange's ability to comply with the Order.
Specifically, the EOC would still provide an accurate, time-sequenced
record beginning with the receipt of an order and document the life of
the order through the process of execution, partial execution, or
cancellation. Entry of information pursuant to the Give Up Requirement
would occur after the order had been represented and executed in the
Trading Crowd.\12\ Thus, only the timing of the disclosure of such
information would be affected by this proposal.
---------------------------------------------------------------------------
\12\ See id.; see also Commentary .01 to Rule 6.69 (providing
that for each transaction executed on the Options Floor, the
responsible OTP Holder or OTP Firm will immediately report, among
other information, both its assigned broker initial code and the
name of the contra clearing member).
---------------------------------------------------------------------------
The Exchange notes that, similar to a filing it submitted in
2013,\13\ the proposed rule change relates only to the system entry
requirements for floor-based orders and would not change rules
governing the record of orders (Rule 6.68). Floor Brokers would
[[Page 21432]]
continue to be required to maintain proper order records, as part of
each trade record, including the identity of the clearing OTP Holder or
Firm.\14\ In that regard, Floor Brokers would continue to be required
to give up the responsible Clearing Member on each trade as part of
each trade record.\15\
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\13\ See Securities and Exchange Act Release 69080 (March 8,
2013), 78 FR 16329, 16330 (March 14, 2013) (SR-NYSEArca-2013-21)
(noting that ``[b]ecause the CMTA information, the opening/closing
designation, the account origin code, the time if force and whether
an order was solicited or unsolicited are not contractual terms of a
trade itself nor are they required data elements pursuant to the
Exchange's order format requirements, the Exchange does not believe
this information needs to be entered into the EOC prior to an order
being represented in the Trading Crowd, but may be entered
contemporaneously upon the receipt of such information, even if that
occurs after the order had been represented and executed in the
Trading Crowd'').
\14\ The Exchange notes that another exchange has made
modifications to its rules related to the Order. See Securities
Exchange Act Release No. 63071 (October 8, 2010), 75 FR 63876,
63877-78 (October 18, 2010) (SR-Phlx-2010-139) (immediately
effective filing to amend language related to the timing of the
entry of clearing information, noting in relevant part that ``[t]he
clearing information, which is the contra-side clearing information,
is not required to be entered pursuant to COATS. Rather, this
information facilitates the identification of the trade for
clearing.''). The Exchange notes that the Philadelphia Stock
Exchange proposed these changes to its rules without solicitation of
the exchanges that were subject to the Order, including the
Exchange. Accordingly, the Exchange believes that exchanges' changes
to their rules put in place to comply with the Order are
appropriately effected pursuant to the provisions of Section
19(b)(1) of the Act and Rule 19b-4 thereunder. See 15 U.S.C.
78s(b)(1); 17 CFR 240.19b-4.
\15\ See supra nn. 11, 12. In addition, the Exchange notes that
this proposal would not change rules governing trade reporting
requirements (Rule 6.69) (i.e., that ``[t]ransactions not reported
to [the Options Pricing Reporting Authority] within 90 seconds after
the execution will be designated as `late,' '' per Rule 6.69(a)).
The Exchange also notes that last year it revised and detailed the
process in which an OTP ``gives up'' or selects a Clearing Member
responsible for the clearance of an Exchange transaction (the ``Give
Up Process''). See Securities and Exchange Act Release 75641 (August
7, 2015), 80 FR 48577 (August 13, 2015) (SR-NYSEArca-2015-65)
(revising the Exchange's Give Up Process through modifications to
Rules 6.15, 6.66 and 6.79).
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2. Statutory Basis
The Exchange believes that the proposed change is consistent with
Section 6(b) of the Act,\16\ in general, and furthers the objectives of
Section 6(b)(5),\17\ in particular, in that it is designed 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 facilitation transactions
in securities, to remove impediments to, and perfect the mechanism of a
free and open market 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) \18\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
---------------------------------------------------------------------------
Specifically, the proposed change to order entry requirements for
the EOC (i.e., eliminating the pre-trade Give Up) is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities by ensuring that the terms of an order continue to be
properly systematized prior to the order being represented in the
Trading Crowd. The proposed change to eliminate the Give Up Requirement
prior to execution of each trade would not impair the Exchange's
ability to comply with the Order. Specifically, the EOC would still
provide an accurate, time-sequenced record of electronic and other
orders, quotations and transactions, beginning with the receipt of the
order and documenting the life of the order through the process of
execution, partial execution, or cancellation.\19\
---------------------------------------------------------------------------
\19\ See supra n. 7.
---------------------------------------------------------------------------
The proposal is also designed to prevent fraudulent and
manipulative acts and practices, by ensuring that the Exchange is
continues to meet its obligation to create and maintain a time-
sequenced record of orders, quotations and transactions on the
Exchange. This proposal does not alter--or, as stated above, impair,
the Exchange's obligation to incorporate into its audit trail all non-
electronic orders to provide an accurate, time-sequenced record of
electronic and other orders, quotations and transactions that documents
the life of the order from receipt through the execution, partial
execution, or cancellation.\20\ Moreover, the proposed change merely
removes the Give Up Requirement from pre-trade systemization, it does
not alter that give ups must be disclosed as part of the Give Up
Process and as part of trade reporting on the Exchange.\21\
Accordingly, nothing in this proposal would alter the Exchange's
obligations pursuant to, or ability to comply with, the Order. The
Exchange notes that it has previously modified the non-contractual data
elements required pursuant to Rule 6.67(c) (i.e., not mandated by the
Order).\22\
---------------------------------------------------------------------------
\20\ Id.
\21\ See supra nn. 11, 12, 15.
\22\ See supra n. 13.
---------------------------------------------------------------------------
Finally, the Exchange believes that the proposed change would
reduce the burden on Floor Brokers to enter order information prior to
representation which would, in turn, promote just and equitable
principles of trade and remove impediments to and perfect the mechanism
of a free and open market by reducing the delay in representation and
execution of an order on the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that this proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change would
reduce the burden on Floor Brokers that have reported that the identity
of the firm through which each trade will clear is not always initially
provided when an order is presented and that waiting to receive this
information and enter it into EOC can delay the representation and
execution of an order. By reducing Floor Brokers' burden on order entry
compliance, the Exchange believes the proposal will improve the
competitiveness of Exchange Floor Brokers, by enabling more timely
executions of open outcry trades and promoting competition for order
flow among market participants and the options exchanges.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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 No. SR-NYSEArca-2016-15 on the subject line.
[[Page 21433]]
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 No. SR-NYSEArca-2016-15. 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 No. SR-NYSEArca-2016-15, and should be
submitted on or before May 2, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08178 Filed 4-8-16; 8:45 am]
BILLING CODE 8011-01-P
