Self-Regulatory Organizations; NYSE MKT LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 955NY(c) by Revising the Clearing Member Requirement for Entering an Order Into the Electronic Order Capture System, 45323-45325 [2016-16479]
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Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
the Act 7 to determine whether to
approve or disapprove the proposed
rule change, as modified by Amendment
No. 1 thereto.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78238; File No. SR–
NYSEMKT–2016–13]
Self-Regulatory Organizations; NYSE
MKT LLC; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 1, To Amend Rule
955NY(c) by Revising the Clearing
Member Requirement for Entering an
Order Into the Electronic Order
Capture System
July 7, 2016.
I. Introduction
On March 22, 2016, NYSE MKT LLC
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Rule 955NY(c) to
change the timing for recording the
name of the Clearing Member 3 in the
Electronic Order Capture system
(‘‘EOC’’). On March 29, 2016,4 the
Exchange filed Amendment No. 1 to the
proposed rule change. The Commission
published the proposed rule change, as
modified by Amendment No. 1, for
comment in the Federal Register on
April 11, 2016.5 The Commission
received no comments on the proposed
rule change. On May 25, 2016 the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change to
July 10, 2016.6 The Commission did not
receive any comments on the proposed
rule change. This order institutes
proceedings under section 19(b)(2)(B) of
jstallworth on DSK7TPTVN1PROD with NOTICES
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Rule 900.2NY defines ‘‘Clearing Member’’ as an
Exchange ATP Holder which has been admitted to
membership in the Options Clearing Corporation
pursuant to the provisions of the Rules of the
Options Clearing Corporation.
4 The Commission notes that the amendment date
of March 30, 2016 in the SR–NYSEMKT–2016–13
Notice is incorrect and the proper date is March 29,
2016.
5 See Securities Exchange Act Release No. 34–
77518 (April 5, 2016), 81 FR 21415 (‘‘Notice’’).
Amendment No. 1 was included in the Notice and
provided the clarification that the CMTA
Information and the name of the clearing ATP
Holder would be entered into the EOC ‘‘as the
events occur and/or during trade reporting
procedures which may occur after the
representation and execution of the order.’’
6 See Securities Exchange Act Release No. 34–
77910 (May 25, 2016), 81 FR 35098 (June 1, 2016).
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II. Description of the Proposal, as
Modified by Amendment No. 1
The Exchange proposes to amend
Rule 955NY(c) by revising the timing for
an ATP holder to record the name of the
Clearing Member in the EOC.8 In 2000,
the Commission issued an order, which
required the Exchange, in coordination
with other exchanges, to ‘‘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.’’ 9 The
Commission Order requires the
Exchange to 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.’’ 10 To comply with the
Commission Order, the Exchange
developed the EOC system for ATP
holders.11
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 represented on the
Exchange’s trading floor.12 Rule
955NY(c) sets forth the EOC entry
requirements and requires every ATP
holder that receives an order for
execution on the Exchange to
‘‘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
U.S.C. 78s(b)(2)(B).
Notice, supra note 5, 81 FR at 21415.
9 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 (‘‘Commission
Order’’), Securities Exchange Act Release No. 43268
(September 11, 2000) and Administrative
Proceeding File No. 3–10282.
10 See id.
11 See Notice, supra note 5, 81 FR at 21415.
12 See id.; see also Rule 955NY(c).
PO 00000
7 15
8 See
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Fmt 4703
Sfmt 4703
45323
processing facilities.’’ 13 The pre-trade
EOC requirements under current Rule
955NY(c)(1) include ‘‘the name of the
clearing ATP Holder.’’ 14 Rule
955NY(c)(1) further states that ‘‘[t]he
remaining elements prescribed in Rule
956NY 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.’’ 15
The Exchange proposes to amend
Rule 955NY(c)(1) to allow an ATP
Holder to record the name of the
Clearing Member in the EOC ‘‘as the
events occur and/or during trade
reporting procedures’’ rather than prior
to representation of the order in the
trading crowd.16 The Exchange states
that because the identity of the firm
through which each trade will clear is
not always initially provided when an
order is presented, Floor Brokers
waiting to receive this information and
enter it into the EOC are delayed in
representing and executing an order.17
The Exchange represents that the
proposal would amend only the timing
for the recording of the Clearing
Member in the EOC while still
maintaining the requirement to record
the Clearing Member in the EOC for
audit trail purposes.18 According to the
Exchange, Floor Brokers would
continue to be required to maintain
proper order records, as part of each
trade record, including the identity of
the clearing ATP Holder, and would
continue to be required to give up the
responsible Clearing Member on each
trade as part of each trade record.19
III. Proceedings To Determine Whether
To Approve or Disapprove SR–
NYSEMKT–2016–13 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to section
13 See
Rule 955NY(c).
Rule 955NY(c)(1)(vii).
15 See Rule 955NY(c)(1); see also Rule 956NY(a)
(Record of Orders) (requiring that ATP Holders
maintain a record of each order that includes that
the following data elements: (1) CMTA Information
and the name of the clearing ATP Holder; (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).
16 See Notice, supra note 5, 81 FR at 21415–16.
17 See id. at 21416.
18 See id.
19 See Notice, supra note 5, 81 FR at 21416; see
also Rule 956NY(a).
14 See
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Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
19(b)(2)(B) of the Act 20 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposed rule change, as discussed
below. Institution of proceedings does
not indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described in greater detail below, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change.
Pursuant to section 19(b)(2)(B) of the
Act, the Commission is providing notice
of the grounds for disapproval under
consideration. The Commission is
instituting proceedings because the
proposal raises important issues that
warrant further public comment and
Commission consideration. Specifically,
the Commission is instituting
proceedings to allow for additional
analysis of, and input from commenters
with respect to, the proposed rule
change’s consistency with section
6(b)(5) of the Act,21 which requires that
the rules of a national securities
exchange be designed, among other
things, to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
Under the Exchange’s current rules, a
floor broker must record the name of the
Clearing Member in the EOC prior to
representing an order on the floor. As
discussed above,22 the Exchange
developed the EOC and created the pretrade Clearing Member requirement in
response to the Commission Order. The
Exchange justifies the proposed
elimination of the pre-trade clearing
requirement by stating that ‘‘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
jstallworth on DSK7TPTVN1PROD with NOTICES
20 15
U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding.
See id.
21 15 U.S.C. 78f(b)(5).
22 See supra note 9.
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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.’’ 23 The Exchange further states
that 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 [Commission] 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. Thus,
only the timing of the disclosure of such
information would be affected by this
proposal.’’ 24
The Exchange, however, does not
explain why the identity of the Clearing
Member may not be provided when an
order is presented to a Floor Broker,
how frequently this occurs, or why it is
burdensome to identify the Clearing
Member in advance. As a result, the
Exchange does not appear to offer a
credible justification for proposing to
incur the risk of delaying the recording
of this important information into the
EOC. The Commission accordingly
believes the proposal, as modified by
Amendment No. 1, raises questions as to
whether it consistent with the
requirements of section 6(b)(5) of the
Act, including whether the proposal is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data and
arguments with respect to the concerns
identified above, as well as any other
concerns they may have with the
proposed rule change. In particular, the
Commission invites the written views of
interested persons concerning whether
the proposal, as modified by
Amendment No. 1, is consistent with
sections 6(b)(5) 25 or any other provision
of the Act, or the rules and regulations
PO 00000
23 See
Notice, supra note 5, 81 FR at 21416.
id.
25 15 U.S.C. 78f(b)(5).
24 See
Frm 00051
Fmt 4703
Sfmt 4703
thereunder. Although there does not
appear to be any issue relevant to
approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Act,26 any request
for an opportunity to make an oral
presentation.27 Interested persons are
invited to submit written data, views,
and arguments regarding whether the
proposal should be approved or
disapproved by August 3, 2016. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by August 17, 2016. In light
of the concerns raised by the proposed
rule change, as discussed above, the
Commission invites additional comment
on the proposed rule change as the
Commission continues its analysis of
the proposed rule change’s consistency
with sections 6(b)(5) and 6(b)(8),28 or
any other provision of the Act, or the
rules and regulations thereunder. The
Commission asks that commenters
address the sufficiency and merit of the
Exchange’s statements in support of the
proposed rule change, in addition to any
other comments they may wish to
submit about the proposed rule change.
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–
NYSEMKT–2016–13 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–NYSEMKT–2016–13. 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
26 17
CFR 240.19b–4.
19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants to the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
28 15 U.S.C. 78f(b)(5), (b)(8).
27 Section
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Federal Register / Vol. 81, No. 134 / Wednesday, July 13, 2016 / Notices
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–NYSEMKT–
2016–13, and should be submitted by
August 3, 2016. Rebuttal comments
should be submitted by August 17,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Brent J. Fields,
Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78241; File No. SR–
NYSEMKT–2016–65]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Commentary
.07 to Rule 904 To Extend the Pilot
Program That Eliminated the Position
Limits for Options on SPDR S&P 500
ETF
jstallworth on DSK7TPTVN1PROD with NOTICES
July 7, 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 June 29,
2016, NYSE MKT LLC (the ‘‘Exchange’’
or ‘‘NYSE MKT’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
CFR 200.30–3(a)(57).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Jkt 238001
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Commentary .07 to Rule 904 to extend
the pilot program that eliminated the
position limits for options on SPDR S&P
500 ETF (‘‘SPY’’) (‘‘SPY Pilot Program’’).
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
[FR Doc. 2016–16479 Filed 7–12–16; 8:45 am]
29 17
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. Purpose
The Exchange proposes to amend
Commentary .07 to Rule 904 to extend
the time period of the SPY Pilot
Program,4 which is currently scheduled
to expire on July 12, 2016, through July
12, 2017.
This filing does not propose any
substantive changes to the SPY Pilot
Program. In proposing to extend the
SPY Pilot Program, the Exchange
reaffirms its consideration of several
factors that supported the original
proposal of the SPY Pilot Program,
including (1) the availability of
economically equivalent products and
their respective position limits, (2) the
liquidity of the option and the
underlying security, (3) the market
capitalization of the underlying security
4 See Securities Exchange Act Release No. 67672
(August 15, 2012), 77 FR 50750 (August 22, 2012).
The SPY Pilot Program was subsequently extended.
See Securities Exchange Release Nos. 70734
(October 22, 2013), 78 FR 64255 (October 28, 2013);
73847 (December 16, 2014), 79 FR 76426 (December
22, 2014); and 75416 (July 9, 2015), 80 FR 41521
(July 15, 2016) (the ‘‘July 2015 Extension’’).
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
45325
and the related index, (4) the reporting
of large positions and requirements
surrounding margin, and (5) the
potential for market on close volatility.
In the July 2015 Extension, the
Exchange stated that if it were to
propose an extension, permanent
approval or termination of the program,
the Exchange would submit, along with
any filing proposing such amendments
to the program, a report providing an
analysis of the SPY Pilot Program
covering the period since the previous
extension (the ‘‘Pilot Report’’).
Accordingly, the Exchange is submitting
a Pilot Report detailing the Exchange’s
experience with the SPY Pilot Program
for the period covering thirteen (13)
months from May 2015 to May 2016.
The Pilot Report is attached as Exhibit
3 to this filing. The Exchange notes that
it is unaware of any problems created by
the SPY Pilot Program and does not
foresee any as a result of the proposed
extension. In extending the SPY Pilot
Program, the Exchange states that if it
were to propose another extension,
permanent approval or termination of
the program, the Exchange would
submit another Pilot Report covering the
period since the previous extension,
which would be submitted at least 30
days before the end of the proposed
extension. If the SPY Pilot Program is
not extended or adopted on a permanent
basis by July 12, 2017, the position
limits for SPY would revert to limits in
effect at the commencement of the pilot
program. The proposed extension will
allow the Exchange and the Commission
additional time to further evaluate the
SPY Pilot Program and its effect on the
market.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 5 in general, and furthers the
objectives of Section 6(b)(5) of the Act 6
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange believes
that extending the SPY Pilot Program
promotes just and equitable principles
of trade by permitting market
participants, including market makers,
institutional investors and retail
investors, to establish greater positions
5 15
6 15
E:\FR\FM\13JYN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
13JYN1
]]>Agencies
[Federal Register Volume 81, Number 134 (Wednesday, July 13, 2016)]
[Notices]
[Pages 45323-45325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16479]
[[Page 45323]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78238; File No. SR-NYSEMKT-2016-13]
Self-Regulatory Organizations; NYSE MKT LLC; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change, as Modified by Amendment No. 1, To Amend Rule 955NY(c) by
Revising the Clearing Member Requirement for Entering an Order Into the
Electronic Order Capture System
July 7, 2016.
I. Introduction
On March 22, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend Rule 955NY(c) to change the timing for recording the name of the
Clearing Member \3\ in the Electronic Order Capture system (``EOC'').
On March 29, 2016,\4\ the Exchange filed Amendment No. 1 to the
proposed rule change. The Commission published the proposed rule
change, as modified by Amendment No. 1, for comment in the Federal
Register on April 11, 2016.\5\ The Commission received no comments on
the proposed rule change. On May 25, 2016 the Commission extended the
time period within which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to approve or disapprove the proposed rule change to
July 10, 2016.\6\ The Commission did not receive any comments on the
proposed rule change. This order institutes proceedings under section
19(b)(2)(B) of the Act \7\ to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1
thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Rule 900.2NY defines ``Clearing Member'' as an Exchange ATP
Holder which has been admitted to membership in the Options Clearing
Corporation pursuant to the provisions of the Rules of the Options
Clearing Corporation.
\4\ The Commission notes that the amendment date of March 30,
2016 in the SR-NYSEMKT-2016-13 Notice is incorrect and the proper
date is March 29, 2016.
\5\ See Securities Exchange Act Release No. 34-77518 (April 5,
2016), 81 FR 21415 (``Notice''). Amendment No. 1 was included in the
Notice and provided the clarification that the CMTA Information and
the name of the clearing ATP Holder would be entered into the EOC
``as the events occur and/or during trade reporting procedures which
may occur after the representation and execution of the order.''
\6\ See Securities Exchange Act Release No. 34-77910 (May 25,
2016), 81 FR 35098 (June 1, 2016).
\7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposal, as Modified by Amendment No. 1
The Exchange proposes to amend Rule 955NY(c) by revising the timing
for an ATP holder to record the name of the Clearing Member in the
EOC.\8\ In 2000, the Commission issued an order, which required the
Exchange, in coordination with other exchanges, to ``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.'' \9\ The Commission Order requires the
Exchange to 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.'' \10\ To comply with the Commission Order, the
Exchange developed the EOC system for ATP holders.\11\
---------------------------------------------------------------------------
\8\ See Notice, supra note 5, 81 FR at 21415.
\9\ 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 (``Commission Order''), Securities Exchange Act
Release No. 43268 (September 11, 2000) and Administrative Proceeding
File No. 3-10282.
\10\ See id.
\11\ See Notice, supra note 5, 81 FR at 21415.
---------------------------------------------------------------------------
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 represented on the Exchange's trading
floor.\12\ Rule 955NY(c) sets forth the EOC entry requirements and
requires every ATP holder that receives an order for execution on the
Exchange to ``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.'' \13\ The pre-trade EOC requirements
under current Rule 955NY(c)(1) include ``the name of the clearing ATP
Holder.'' \14\ Rule 955NY(c)(1) further states that ``[t]he remaining
elements prescribed in Rule 956NY 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.'' \15\
---------------------------------------------------------------------------
\12\ See id.; see also Rule 955NY(c).
\13\ See Rule 955NY(c).
\14\ See Rule 955NY(c)(1)(vii).
\15\ See Rule 955NY(c)(1); see also Rule 956NY(a) (Record of
Orders) (requiring that ATP Holders maintain a record of each order
that includes that the following data elements: (1) CMTA Information
and the name of the clearing ATP Holder; (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).
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The Exchange proposes to amend Rule 955NY(c)(1) to allow an ATP
Holder to record the name of the Clearing Member in the EOC ``as the
events occur and/or during trade reporting procedures'' rather than
prior to representation of the order in the trading crowd.\16\ The
Exchange states that because the identity of the firm through which
each trade will clear is not always initially provided when an order is
presented, Floor Brokers waiting to receive this information and enter
it into the EOC are delayed in representing and executing an order.\17\
The Exchange represents that the proposal would amend only the timing
for the recording of the Clearing Member in the EOC while still
maintaining the requirement to record the Clearing Member in the EOC
for audit trail purposes.\18\ According to the Exchange, Floor Brokers
would continue to be required to maintain proper order records, as part
of each trade record, including the identity of the clearing ATP
Holder, and would continue to be required to give up the responsible
Clearing Member on each trade as part of each trade record.\19\
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\16\ See Notice, supra note 5, 81 FR at 21415-16.
\17\ See id. at 21416.
\18\ See id.
\19\ See Notice, supra note 5, 81 FR at 21416; see also Rule
956NY(a).
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEMKT-2016-13 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to section
[[Page 45324]]
19(b)(2)(B) of the Act \20\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change, as discussed below.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described in greater detail below, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change.
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\20\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding. See id.
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Pursuant to section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings because the proposal raises
important issues that warrant further public comment and Commission
consideration. Specifically, the Commission is instituting proceedings
to allow for additional analysis of, and input from commenters with
respect to, the proposed rule change's consistency with section 6(b)(5)
of the Act,\21\ which requires that the rules of a national securities
exchange be designed, among other things, to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system and, in general,
to protect investors and the public interest.
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\21\ 15 U.S.C. 78f(b)(5).
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Under the Exchange's current rules, a floor broker must record the
name of the Clearing Member in the EOC prior to representing an order
on the floor. As discussed above,\22\ the Exchange developed the EOC
and created the pre-trade Clearing Member requirement in response to
the Commission Order. The Exchange justifies the proposed elimination
of the pre-trade clearing requirement by stating that ``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.''
\23\ The Exchange further states that 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 [Commission]
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. Thus, only the timing of the disclosure
of such information would be affected by this proposal.'' \24\
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\22\ See supra note 9.
\23\ See Notice, supra note 5, 81 FR at 21416.
\24\ See id.
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The Exchange, however, does not explain why the identity of the
Clearing Member may not be provided when an order is presented to a
Floor Broker, how frequently this occurs, or why it is burdensome to
identify the Clearing Member in advance. As a result, the Exchange does
not appear to offer a credible justification for proposing to incur the
risk of delaying the recording of this important information into the
EOC. The Commission accordingly believes the proposal, as modified by
Amendment No. 1, raises questions as to whether it consistent with the
requirements of section 6(b)(5) of the Act, including whether the
proposal is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposed rule change. In particular, the Commission invites
the written views of interested persons concerning whether the
proposal, as modified by Amendment No. 1, is consistent with sections
6(b)(5) \25\ or any other provision of the Act, or the rules and
regulations thereunder. Although there does not appear to be any issue
relevant to approval or disapproval which would be facilitated by an
oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4 under the Act,\26\ any request for an
opportunity to make an oral presentation.\27\ Interested persons are
invited to submit written data, views, and arguments regarding whether
the proposal should be approved or disapproved by August 3, 2016. Any
person who wishes to file a rebuttal to any other person's submission
must file that rebuttal by August 17, 2016. In light of the concerns
raised by the proposed rule change, as discussed above, the Commission
invites additional comment on the proposed rule change as the
Commission continues its analysis of the proposed rule change's
consistency with sections 6(b)(5) and 6(b)(8),\28\ or any other
provision of the Act, or the rules and regulations thereunder. The
Commission asks that commenters address the sufficiency and merit of
the Exchange's statements in support of the proposed rule change, in
addition to any other comments they may wish to submit about the
proposed rule change.
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\25\ 15 U.S.C. 78f(b)(5).
\26\ 17 CFR 240.19b-4.
\27\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Act Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
\28\ 15 U.S.C. 78f(b)(5), (b)(8).
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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-NYSEMKT-2016-13 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-NYSEMKT-2016-13. 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
[[Page 45325]]
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-NYSEMKT-2016-13, and should be
submitted by August 3, 2016. Rebuttal comments should be submitted by
August 17, 2016.
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\29\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
Brent J. Fields,
Secretary.
[FR Doc. 2016-16479 Filed 7-12-16; 8:45 am]
BILLING CODE 8011-01-P
