Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.64 With Respect To Opening Trading in an Options Series, 46131-46133 [2016-16715]

Download as PDF Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission Advisory Committee on Small and Emerging Companies will hold a public meeting on Tuesday, July 19, 2016, in Multi-Purpose Room LL– 006 at the Commission’s headquarters, 100 F Street NE., Washington, DC. The meeting will begin at 9:30 a.m. (EDT) and will be open to the public. Seating will be on a first-come, firstserved basis. Doors will open at 9:00 a.m. Visitors will be subject to security checks. The meeting will be webcast on the Commission’s Web site at www.sec.gov. On June 27, 2016, the Commission published notice of the Committee meeting (Release No. 33–10105), indicating that the meeting is open to the public and inviting the public to submit written comments to the Committee. This Sunshine Act notice is being issued because a majority of the Commission may attend the meeting. The agenda for the meeting includes matters relating to rules and regulations affecting small and emerging companies under the federal securities laws. For further information, please contact Brent J. Fields in the Office of the Secretary at (202) 551–5400. Dated: July 12, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–16867 Filed 7–13–16; 11:15 am] BILLING CODE 8011–01–P sradovich on DSK3GMQ082PROD with NOTICES Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.64 With Respect To Opening Trading in an Options Series July 11, 2016. I. Introduction On March 23, 2016, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act Jkt 238001 Exchange Rule 6.64 sets forth the OX automated opening process.7 Current Rule 6.64(b) provides that, after the primary market for the underlying security disseminates an opening trade or an opening quote, the Exchange will open the related option series automatically based on the following principles and procedures: (A) The system will determine a single price at which a particular option series will be opened. (B) Orders and quotes in the system will be matched up with one another based on price-time priority; provided, however, that Orders will have priority U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 77539 (April 6, 2016), 81 FR 21639 (‘‘Notice’’). 4 See letter from Anonymous, dated May 3, 2016. The letter was generally supportive of the proposed rule change. 5 See Securities Exchange Act Release No. 77912 (May 25, 2016), 81 FR 35105 (June 1, 2016). 6 See Letter to Brent J. Fields, Secretary, Commission, from Martha Redding, Associate General Counsel, Assistant Secretary, NYSE Arca, LLC dated July 11, 2016. As more fully described below, in Amendment No. 1 the Exchange proposes additional modifications to Rule 6.64(c) to clarify and detail how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA. Amendment No. 1 to the proposed rule change is also available on the Commission’s Web site at: https://www.sec.gov/comments/sr-nysearca2016-49/nysearca201649.shtml. 7 See Exchange Rule 6.64. The term ‘‘OX’’ refers to the Exchange’s electronic order delivery, execution and reporting system for designated option issues through which orders and quotes of Users are consolidated for execution and/or display. See Exchange Rule 6.1A(a)(13) (defining ‘‘OX’’). 2 17 [Release No. 34–78284; File No. SR– NYSEARCA–2016–49] 19:03 Jul 14, 2016 II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 1 15 SECURITIES AND EXCHANGE COMMISSION VerDate Sep<11>2014 of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Exchange Rule 6.64 regarding the process for opening trading in an options series. The proposed rule change was published for comment in the Federal Register on April 12, 2016.3 The Commission received one comment letter on the proposed rule change.4 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 disapprove the proposed rule change to July 11, 2016.5 On July 8, 2016, the Exchange submitted Amendment No. 1 to the proposed rule change.6 The Commission is publishing this notice to solicit comment on Amendment No. 1 to the proposed rule change from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 46131 over Market Maker quotes at the same price. (C) Orders in the OX Book that were not executed during the Auction Process, other than Opening Only orders, shall become eligible for the Core Trading Session immediately after the conclusion of the Auction Process. (D) The OX System will not conduct an Auction Process if the bid-ask differential for that series is not within an acceptable range. For the purposes of this rule, an acceptable range shall mean within the bid-ask differential guidelines established pursuant to Rule 6.37(b)(1)(A)–(E). (E) If the OX System does not open a series with an Auction Process, the OX System shall open the series for trading after receiving notification of an initial NBBO disseminated by OPRA for the series or on a Market Maker quote, provided that the bid-ask differential does not exceed the bid-ask differential specified under Rule 6.37A(b)(4).8 In addition, Rule 6.64(c) provides for how the OX System will determine the opening price of a series when an Auction Process is conducted.9 Specifically, current Rule 6.64(c) states, in part, that the ‘‘opening price of a series will be the price, as determined by OX, at which the greatest number of contracts will trade at or nearest to the midpoint of the initial uncrossed NBBO disseminated by OPRA, if any, or the midpoint of the best quote bids and quote offers in the OX Book.’’ 10 The Exchange proposes several changes to Exchange Rule 6.64 and the OX opening process. The proposed changes would also affect the process of re-opening an options series after a trading halt.11 First, the Exchange proposes to amend Exchange Rule 6.64(b) so that trading in an options series will be opened automatically once the primary market for the underlying security disseminates both a quote and a trade that is at or within the quote.12 Further, the Exchange proposes to specify that the opening process will occur at or after 9:30 a.m. Eastern Time.13 The Exchange also proposes to modify Exchange Rule 6.64(b)(E) so that if the OX System does not open a series with an Auction Process, trading in an options series could no longer open on a local Market Maker quote, but would 8 See Exchange Rule 6.64(b)(A)–(E). Notice and current Exchange Rule 6.64(c). 10 See current Exchange Rule 6.64(c). 11 See Exchange Rule 6.64(d), which provides that the Exchange will follow the same procedures in opening after a trading halt as the procedures followed for the opening of the trading day. 12 See proposed Rule 6.64(b). 13 See id. 9 See E:\FR\FM\15JYN1.SGM 15JYN1 46132 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices instead require an initial uncrossed NBBO disseminated by OPRA.14 According to the Exchange, OPRA disseminates an NBBO based on information collected from the exchanges.15 Thus, the Exchange states, NYSE Arca’s local Market Maker quotes would be disseminated back to the Exchange from OPRA and may or may not be at the same price as the NBBO.16 In addition, the Exchange proposes to amend Rule 6.64(c). As noted, current Rule 6.64(c) provides that if there is no initial uncrossed NBBO disseminated by OPRA, the System instead determines an opening price that is ‘‘at the midpoint of the best quotes and offers in the OX Book.’’ The Exchange originally proposed to modify Rule 6.64(c) by eliminating this language so that the rule would no longer provide that the opening price of a series could be determined by reference to the best quote bids and offers in the System Book.17 Thus, as originally proposed, the opening price of a series would be the price, as determined by the System, at which the greatest number of contracts will trade ‘‘at or nearest to the midpoint of the initial uncrossed NBBO disseminated by OPRA.’’ 18 As more fully set forth in the Notice, the Exchange stated that the original proposed modification was a conforming change that was necessary because the Exchange would no longer open solely on a local Market Maker quote.19 In Amendment No. 1, the Exchange proposes further modifications to Rule 6.64(c) to clarify and detail how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA. Under proposed Rule 6.64(c), as modified by Amendment No. 1, ‘‘[t]he opening price of a series will be the price, as determined by the System, at which the greatest number of contracts will trade at a price at or between the NBBO disseminated by OPRA.’’ 20 In addition, in Amendment No. 1 the Exchange proposes to specify further the circumstances under which the System would use midpoint pricing.21 In particular, proposed Rule 6.64(c), as modified by Amendment No. 14 See proposed Rule 6.64(b)(E). Notice, supra note 3, at 21640. 16 See Notice, supra note 3, at 21640. 17 Specifically, the Exchange proposed to delete from current Rule 6.64(c) the words ‘‘if any, or the midpoint of the best quotes and offers in the OX Book.’’ 18 See Notice supra note 3 at 21640. 19 See id. 20 See Amendment No. 1 and proposed Rule 6.64(c). 21 See Amendment No. 1 and proposed Rule 6.64(c). sradovich on DSK3GMQ082PROD with NOTICES 15 See VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 1, would specify what would happen if there is a tie and the same number of contracts can trade at multiple prices. Specifically, proposed Rule 6.64(c), as modified by Amendment No. 1, would provide that if the same number of contracts can trade at multiple prices, the opening price is the price at which the greatest number of contracts can trade that is ‘‘at or nearest to the midpoint’’ of the NBBO disseminated by OPRA. The rule would further specify that (i) if one of such prices is equal to the price of any Limit Order(s) in the Consolidated Book, the opening price will be the same price as the Limit Order(s) with the greatest size and, if the same size, the highest price; and (ii) if there is a tie between price levels and no Limit Orders exist at either of the prices, the Exchange would use the higher price.22 In connection with these proposed modifications, the Exchange further proposes to delete language in current Rule 6.64(c) referring to pricing by reference to the best quotes bids and offers in the System. According to the Exchange, the language proposed to be deleted is superfluous, as the Exchange would no longer use Market Maker quotes to determine the opening price.23 Finally, the Exchange proposes a new provision to permit the Exchange to deviate from the standard manner of the Auction Process, including adjusting the timing of the Auction Process in any option class, when the Exchange believes it to be necessary in the interest of a fair and orderly market.24 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.25 In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act,26 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and 22 See Amendment No. 1 and proposed Rule 6.64(c). 23 See Amendment No. 1 and proposed Rule 6.64(c). 24 See proposed Rule 6.64(b)(F); see also Notice, supra note 3, at 21640. For a more detailed description of the original proposed rule change, see Notice, supra note 3. 25 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 26 15 U.S.C. 78f(b)(5). PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. As noted above, the Commission received one comment letter regarding the proposal, expressing support.27 The Commission believes the Exchange’s proposal to require both a disseminated quote and a trade within the quote in an underlying security before opening trading in the related options series, instead of either one or the other, is reasonably designed ensure that the underlying security has been opened pursuant to a robust price discovery process before the overlying option begins trading.28 The Exchange proposes that if it does not open a series with an Auction Process, it will open the series for trading after receiving notification of an initial uncrossed NBBO disseminated by OPRA.29 The Exchange represents that opening an options series for trading after receiving an uncrossed NBBO from OPRA, rather than based on a local Market Maker quote, will eliminate ambiguity as to the source of the information for each options series and should lead to more accurate prices on the Exchange.30 Further, the Exchange proposes that if it does open a series with an Auction Process, the opening price of a series will be the price, as determined by the System, at which the greatest number of contracts will trade at a price at or between the NBBO disseminated by OPRA. The Exchange further proposes to specify how the System will determine an opening price if the same number of contracts can trade at multiple prices.31 The Commission believes the proposed process for how the System will determine an opening price for an option series at or between the NBBO disseminated by OPRA, and the circumstances under which System would use midpoint pricing, should result in an opening price that is related to the current market for an option and is therefore reasonably designed to protect investors and the public interest. In addition, the Commission believes it is appropriate to allow the Exchange the discretion to deviate from the standard manner of the Auction Process, 27 See supra note 4. Notice, supra note 3, at 21640. 29 See supra note 14 and accompanying text. 30 See Notice, supra note 3, at 21640. 31 See supra note 21 and accompanying text. 28 See E:\FR\FM\15JYN1.SGM 15JYN1 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices as the proposal provides, when it believes it is necessary in the interests of a fair and orderly market. The Commission believes that the ability to exercise such discretion can be important in situations when, for example, the primary market for an options class is unable to open due to a systems or technical issue or if some other unanticipated circumstance arises. The Commission notes that it has previously approved provisions of this kind as consistent with the Act.32 The Commission further believes that the proposed rule change will provide transparency and enhance investors’ understanding of the operation of the Exchange’s opening process. For these reasons, the Commission believes that the proposed rule change, as modified by Amendment No. 1, is consistent with the Act. IV. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 to the proposed rule change is consistent with the Exchange 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 Number SR–NYSEARCA–2016–49 on the subject line. sradovich on DSK3GMQ082PROD with 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 Number SR–NYSEARCA–2016–49. 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 the 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–2016–49 and should be submitted by August 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Robert W. Errett, Deputy Secretary. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 July 11, 2016. The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the 30th day after the date of publication of notice of Amendment No. 1 in the Federal Register. As discussed above, Amendment No. 1 clarifies how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA, an in particular specifies the circumstances in which ‘‘at or nearest to the midpoint’’ pricing is utilized during the Auction Process. Furthermore, the Commission believes it is appropriate to have these changes incorporated into the rules of the Exchange concurrently with the changes discussed in the original filing. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,33 to approve the proposed rule change, as modified by Amendment No. 1 on an accelerated basis. VI. Conclusion IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Exchange Act,34 that the proposed rule change (SR–NYSEArca–2016–49), as modified by Amendment No. 1 thereto, be, and it hereby is, approved on an accelerated basis. [FR Doc. 2016–16715 Filed 7–14–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78281; File No. SR–FINRA– 2016–025] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Fee for the Regulatory Element of Continuing Education Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 1, 2016, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as ‘‘establishing or changing a due, fee or other charge’’ under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 4(f)(2) thereunder,4 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change FINRA is proposing to amend Section 4 of Schedule A to the FINRA By-Laws to address the transition of the Regulatory Element of Continuing Education (‘‘CE’’) to the FINRA CE Online System®. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. 35 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 1 15 32 See, e.g., Securities Exchange Act Release No. 71651 (March 5, 2014), 79 FR 13693 (March 11, 2014) (SR–BATS–2014–003). VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 46133 PO 00000 33 15 34 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\15JYN1.SGM 15JYN1

Agencies

[Federal Register Volume 81, Number 136 (Friday, July 15, 2016)]
[Notices]
[Pages 46131-46133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16715]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78284; File No. SR-NYSEARCA-2016-49]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 
6.64 With Respect To Opening Trading in an Options Series

July 11, 2016.

I. Introduction

    On March 23, 2016, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange 
Rule 6.64 regarding the process for opening trading in an options 
series. The proposed rule change was published for comment in the 
Federal Register on April 12, 2016.\3\ The Commission received one 
comment letter on the proposed rule change.\4\ 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 disapprove the proposed rule change 
to July 11, 2016.\5\ On July 8, 2016, the Exchange submitted Amendment 
No. 1 to the proposed rule change.\6\ The Commission is publishing this 
notice to solicit comment on Amendment No. 1 to the proposed rule 
change from interested persons and is approving the proposed rule 
change, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77539 (April 6, 
2016), 81 FR 21639 (``Notice'').
    \4\ See letter from Anonymous, dated May 3, 2016. The letter was 
generally supportive of the proposed rule change.
    \5\ See Securities Exchange Act Release No. 77912 (May 25, 
2016), 81 FR 35105 (June 1, 2016).
    \6\ See Letter to Brent J. Fields, Secretary, Commission, from 
Martha Redding, Associate General Counsel, Assistant Secretary, NYSE 
Arca, LLC dated July 11, 2016. As more fully described below, in 
Amendment No. 1 the Exchange proposes additional modifications to 
Rule 6.64(c) to clarify and detail how the Exchange would determine 
the opening price upon dissemination of an NBBO from OPRA. Amendment 
No. 1 to the proposed rule change is also available on the 
Commission's Web site at: https://www.sec.gov/comments/sr-nysearca-2016-49/nysearca201649.shtml.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    Exchange Rule 6.64 sets forth the OX automated opening process.\7\ 
Current Rule 6.64(b) provides that, after the primary market for the 
underlying security disseminates an opening trade or an opening quote, 
the Exchange will open the related option series automatically based on 
the following principles and procedures:
---------------------------------------------------------------------------

    \7\ See Exchange Rule 6.64. The term ``OX'' refers to the 
Exchange's electronic order delivery, execution and reporting system 
for designated option issues through which orders and quotes of 
Users are consolidated for execution and/or display. See Exchange 
Rule 6.1A(a)(13) (defining ``OX'').
---------------------------------------------------------------------------

    (A) The system will determine a single price at which a particular 
option series will be opened.
    (B) Orders and quotes in the system will be matched up with one 
another based on price-time priority; provided, however, that Orders 
will have priority over Market Maker quotes at the same price.
    (C) Orders in the OX Book that were not executed during the Auction 
Process, other than Opening Only orders, shall become eligible for the 
Core Trading Session immediately after the conclusion of the Auction 
Process.
    (D) The OX System will not conduct an Auction Process if the bid-
ask differential for that series is not within an acceptable range. For 
the purposes of this rule, an acceptable range shall mean within the 
bid-ask differential guidelines established pursuant to Rule 
6.37(b)(1)(A)-(E).
    (E) If the OX System does not open a series with an Auction 
Process, the OX System shall open the series for trading after 
receiving notification of an initial NBBO disseminated by OPRA for the 
series or on a Market Maker quote, provided that the bid-ask 
differential does not exceed the bid-ask differential specified under 
Rule 6.37A(b)(4).\8\
---------------------------------------------------------------------------

    \8\ See Exchange Rule 6.64(b)(A)-(E).
---------------------------------------------------------------------------

    In addition, Rule 6.64(c) provides for how the OX System will 
determine the opening price of a series when an Auction Process is 
conducted.\9\ Specifically, current Rule 6.64(c) states, in part, that 
the ``opening price of a series will be the price, as determined by OX, 
at which the greatest number of contracts will trade at or nearest to 
the midpoint of the initial uncrossed NBBO disseminated by OPRA, if 
any, or the midpoint of the best quote bids and quote offers in the OX 
Book.'' \10\
---------------------------------------------------------------------------

    \9\ See Notice and current Exchange Rule 6.64(c).
    \10\ See current Exchange Rule 6.64(c).
---------------------------------------------------------------------------

    The Exchange proposes several changes to Exchange Rule 6.64 and the 
OX opening process. The proposed changes would also affect the process 
of re-opening an options series after a trading halt.\11\
---------------------------------------------------------------------------

    \11\ See Exchange Rule 6.64(d), which provides that the Exchange 
will follow the same procedures in opening after a trading halt as 
the procedures followed for the opening of the trading day.
---------------------------------------------------------------------------

    First, the Exchange proposes to amend Exchange Rule 6.64(b) so that 
trading in an options series will be opened automatically once the 
primary market for the underlying security disseminates both a quote 
and a trade that is at or within the quote.\12\ Further, the Exchange 
proposes to specify that the opening process will occur at or after 
9:30 a.m. Eastern Time.\13\
---------------------------------------------------------------------------

    \12\ See proposed Rule 6.64(b).
    \13\ See id.
---------------------------------------------------------------------------

    The Exchange also proposes to modify Exchange Rule 6.64(b)(E) so 
that if the OX System does not open a series with an Auction Process, 
trading in an options series could no longer open on a local Market 
Maker quote, but would

[[Page 46132]]

instead require an initial uncrossed NBBO disseminated by OPRA.\14\ 
According to the Exchange, OPRA disseminates an NBBO based on 
information collected from the exchanges.\15\ Thus, the Exchange 
states, NYSE Arca's local Market Maker quotes would be disseminated 
back to the Exchange from OPRA and may or may not be at the same price 
as the NBBO.\16\
---------------------------------------------------------------------------

    \14\ See proposed Rule 6.64(b)(E).
    \15\ See Notice, supra note 3, at 21640.
    \16\ See Notice, supra note 3, at 21640.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to amend Rule 6.64(c). As noted, 
current Rule 6.64(c) provides that if there is no initial uncrossed 
NBBO disseminated by OPRA, the System instead determines an opening 
price that is ``at the midpoint of the best quotes and offers in the OX 
Book.'' The Exchange originally proposed to modify Rule 6.64(c) by 
eliminating this language so that the rule would no longer provide that 
the opening price of a series could be determined by reference to the 
best quote bids and offers in the System Book.\17\ Thus, as originally 
proposed, the opening price of a series would be the price, as 
determined by the System, at which the greatest number of contracts 
will trade ``at or nearest to the midpoint of the initial uncrossed 
NBBO disseminated by OPRA.'' \18\ As more fully set forth in the 
Notice, the Exchange stated that the original proposed modification was 
a conforming change that was necessary because the Exchange would no 
longer open solely on a local Market Maker quote.\19\
---------------------------------------------------------------------------

    \17\ Specifically, the Exchange proposed to delete from current 
Rule 6.64(c) the words ``if any, or the midpoint of the best quotes 
and offers in the OX Book.''
    \18\ See Notice supra note 3 at 21640.
    \19\ See id.
---------------------------------------------------------------------------

    In Amendment No. 1, the Exchange proposes further modifications to 
Rule 6.64(c) to clarify and detail how the Exchange would determine the 
opening price upon dissemination of an NBBO from OPRA. Under proposed 
Rule 6.64(c), as modified by Amendment No. 1, ``[t]he opening price of 
a series will be the price, as determined by the System, at which the 
greatest number of contracts will trade at a price at or between the 
NBBO disseminated by OPRA.'' \20\ In addition, in Amendment No. 1 the 
Exchange proposes to specify further the circumstances under which the 
System would use midpoint pricing.\21\ In particular, proposed Rule 
6.64(c), as modified by Amendment No. 1, would specify what would 
happen if there is a tie and the same number of contracts can trade at 
multiple prices. Specifically, proposed Rule 6.64(c), as modified by 
Amendment No. 1, would provide that if the same number of contracts can 
trade at multiple prices, the opening price is the price at which the 
greatest number of contracts can trade that is ``at or nearest to the 
midpoint'' of the NBBO disseminated by OPRA. The rule would further 
specify that (i) if one of such prices is equal to the price of any 
Limit Order(s) in the Consolidated Book, the opening price will be the 
same price as the Limit Order(s) with the greatest size and, if the 
same size, the highest price; and (ii) if there is a tie between price 
levels and no Limit Orders exist at either of the prices, the Exchange 
would use the higher price.\22\ In connection with these proposed 
modifications, the Exchange further proposes to delete language in 
current Rule 6.64(c) referring to pricing by reference to the best 
quotes bids and offers in the System. According to the Exchange, the 
language proposed to be deleted is superfluous, as the Exchange would 
no longer use Market Maker quotes to determine the opening price.\23\
---------------------------------------------------------------------------

    \20\ See Amendment No. 1 and proposed Rule 6.64(c).
    \21\ See Amendment No. 1 and proposed Rule 6.64(c).
    \22\ See Amendment No. 1 and proposed Rule 6.64(c).
    \23\ See Amendment No. 1 and proposed Rule 6.64(c).
---------------------------------------------------------------------------

    Finally, the Exchange proposes a new provision to permit the 
Exchange to deviate from the standard manner of the Auction Process, 
including adjusting the timing of the Auction Process in any option 
class, when the Exchange believes it to be necessary in the interest of 
a fair and orderly market.\24\
---------------------------------------------------------------------------

    \24\ See proposed Rule 6.64(b)(F); see also Notice, supra note 
3, at 21640. For a more detailed description of the original 
proposed rule change, see Notice, supra note 3.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\25\ In particular, the 
Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\26\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
As noted above, the Commission received one comment letter regarding 
the proposal, expressing support.\27\
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    \25\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ See supra note 4.
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    The Commission believes the Exchange's proposal to require both a 
disseminated quote and a trade within the quote in an underlying 
security before opening trading in the related options series, instead 
of either one or the other, is reasonably designed ensure that the 
underlying security has been opened pursuant to a robust price 
discovery process before the overlying option begins trading.\28\
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    \28\ See Notice, supra note 3, at 21640.
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    The Exchange proposes that if it does not open a series with an 
Auction Process, it will open the series for trading after receiving 
notification of an initial uncrossed NBBO disseminated by OPRA.\29\ The 
Exchange represents that opening an options series for trading after 
receiving an uncrossed NBBO from OPRA, rather than based on a local 
Market Maker quote, will eliminate ambiguity as to the source of the 
information for each options series and should lead to more accurate 
prices on the Exchange.\30\
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    \29\ See supra note 14 and accompanying text.
    \30\ See Notice, supra note 3, at 21640.
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    Further, the Exchange proposes that if it does open a series with 
an Auction Process, the opening price of a series will be the price, as 
determined by the System, at which the greatest number of contracts 
will trade at a price at or between the NBBO disseminated by OPRA. The 
Exchange further proposes to specify how the System will determine an 
opening price if the same number of contracts can trade at multiple 
prices.\31\ The Commission believes the proposed process for how the 
System will determine an opening price for an option series at or 
between the NBBO disseminated by OPRA, and the circumstances under 
which System would use midpoint pricing, should result in an opening 
price that is related to the current market for an option and is 
therefore reasonably designed to protect investors and the public 
interest.
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    \31\ See supra note 21 and accompanying text.
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    In addition, the Commission believes it is appropriate to allow the 
Exchange the discretion to deviate from the standard manner of the 
Auction Process,

[[Page 46133]]

as the proposal provides, when it believes it is necessary in the 
interests of a fair and orderly market. The Commission believes that 
the ability to exercise such discretion can be important in situations 
when, for example, the primary market for an options class is unable to 
open due to a systems or technical issue or if some other unanticipated 
circumstance arises. The Commission notes that it has previously 
approved provisions of this kind as consistent with the Act.\32\
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    \32\ See, e.g., Securities Exchange Act Release No. 71651 (March 
5, 2014), 79 FR 13693 (March 11, 2014) (SR-BATS-2014-003).
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    The Commission further believes that the proposed rule change will 
provide transparency and enhance investors' understanding of the 
operation of the Exchange's opening process. For these reasons, the 
Commission believes that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the Act.

IV. Solicitation of Comments on Amendment No. 1

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2016-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEARCA-2016-49. 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 the 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-2016-49 and should 
be submitted by August 5, 2016.

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

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the 30th day after the 
date of publication of notice of Amendment No. 1 in the Federal 
Register. As discussed above, Amendment No. 1 clarifies how the 
Exchange would determine the opening price upon dissemination of an 
NBBO from OPRA, an in particular specifies the circumstances in which 
``at or nearest to the midpoint'' pricing is utilized during the 
Auction Process. Furthermore, the Commission believes it is appropriate 
to have these changes incorporated into the rules of the Exchange 
concurrently with the changes discussed in the original filing.
    Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\33\ to approve the proposed rule change, 
as modified by Amendment No. 1 on an accelerated basis.
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    \33\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Exchange Act,\34\ that the proposed rule change (SR-NYSEArca-2016-49), 
as modified by Amendment No. 1 thereto, be, and it hereby is, approved 
on an accelerated basis.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16715 Filed 7-14-16; 8:45 am]
 BILLING CODE 8011-01-P
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