Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Introducing NYSE OptX, 83890-83892 [2016-28034]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83890-83892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28034]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79327; File No. SR-NYSEArca-2016-143]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
Introducing NYSE OptX

November 16, 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 November 3, 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 self-regulatory 
organization. On November 15, 2016, the Exchange filed Amendment No. 1 
to the proposal.\4\ 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.
    \4\ In Amendment No. 1, the Exchange proposed to amend note 11, 
infra, to clarify that QCC Orders sent through NYSE OptX to the 
Exchange for execution would comply with the order format and EOC 
entry requirements established by the Exchange, which are set forth 
in Rule 6.67.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to introduce NYSE OptX, an order entry 
platform that would allow for the submission of Qualified Contingent 
Cross orders (``QCC Orders'') by OTP Holders and OTP Firms. 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,

[[Page 83891]]

of the most significant parts of such statements.

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

1. Purpose
    The Exchange proposes to introduce NYSE OptX, an order entry 
platform that would allow for the submission of QCC Orders by OTP 
Holders \5\ and OTP Firms \6\ (collectively, ``OTPs''). OTPs currently 
send QCC Orders through the use of third party front end order 
management systems, such as PrecISE \7\ or PULSe,\8\ or by calling 
Floor Brokers and relaying their orders by telephone.
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    \5\ The term ``OTP Holder'' refers to a natural person, in good 
standing, who has been issued an OTP, or has been named as a 
Nominee. An OTP Holder must be a registered broker or dealer 
pursuant to Section 15 of the Securities Exchange Act of 1934, or a 
nominee or an associated person of a registered broker or dealer 
that has been approved by the Exchange to conduct business on the 
Exchange's Trading Facilities. See Rule 1.1(q).
    \6\ The term ``OTP Firm'' refers to a sole proprietorship, 
partnership, corporation, limited liability company or other 
organization in good standing who holds an OTP or upon whom an 
individual OTP Holder has conferred trading privileges on the 
Exchange's Trading Facilities pursuant to and in compliance with 
Exchange Rules. An OTP Firm must be a registered broker or dealer 
pursuant to Section 15 of the Securities Exchange Act of 1934. See 
Rule 1.1(r).
    \7\ PrecISE Trade[supreg] is a front-end order and execution 
management system for trading options and stock-option combinations. 
See https://www.ise.com/options/precise/.
    \8\ PULSe\SM\ is a front end execution management system that 
allows users to send orders to CBOE, C2 and to other U.S. options 
and stock exchanges. See https://www.cboe.org/hybrid/pulsesalessheet.pdf.
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    NYSE OptX is an order entry platform that utilizes a combination of 
Instant Messaging (IM) and browser-based technology to allow OTPs to 
submit QCC Orders for execution on the Exchange's trading system.\9\ 
There are multiple steps required for OTPs to execute their QCC Orders 
through NYSE OptX.\10\ First, an OTP would send a QCC Order in plain 
text to NYSE OptX.\11\ NYSE OptX would be established by an OTP as an 
IM contact that can be accessed through various instant messaging 
platforms. Next, upon receipt of the plain text message sent by an OTP, 
NYSE OptX would translate the message into a pre-populated order ticket 
with details of the order and return the order ticket to the OTP in a 
browser-based URL. When the OTP opens the URL, the pre-populated order 
ticket would appear with the order information as entered by the OTP. 
The OTP would then confirm the order ticket and submit the order to the 
Exchange for execution, or send the order to a Floor Broker for 
execution. If an OTP sends the order to a Floor Broker, the Floor 
Broker would verify the order and send it through NYSE OptX for 
execution on the Exchange's trading system much like how the Floor 
Broker would normally execute the order but without having to re-key 
the order into the Floor Broker's terminal. After an order is executed 
on the Exchange,\12\ NYSE OptX would remit details of the execution 
back to the OTP.
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    \9\ The Exchange represents that NYSE OptX is merely an instant 
messaging platform to link OTPs with the Exchange's trading system 
(i.e., it is a new means of sending QCC Orders to the Exchange's 
existing trading system), and does not require any changes to the 
Exchange's communication or surveillance rules.
    \10\ OTPs would be required to log into NYSE OptX each trading 
day, similar to how they would log into any other front end order 
management system.
    \11\ OTPs would be required to provide all the essential 
information regarding the QCC Order when sending it to NYSE OptX, 
including the price of the option and the stock, the size and side 
of the order, i.e., buy or sell, and delta. The Exchange represents 
that QCC Orders sent to the Exchange for execution would comply with 
the order format and EOC entry requirements established by the 
Exchange. See Rule 6.67--Order Format and System Entry Requirements. 
See also Amendment No. 1, supra note 4.
    \12\ All executions would be subject to the Exchange's standard 
transaction fees and credits applicable to QCC Orders.
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    NYSE OptX is designed as an alternative to the front end order 
management systems, such as PrecISE and PULSe, and as an alternative to 
the use of telephones for the sending by OTPs of QCC Orders to the 
Exchange. NYSE OptX would not provide OTPs with the capability to send 
any other type of orders or the capability to send QCC Orders for 
execution to other options markets. At this time, OTPs would only be 
able to use NYSE OptX for the transmission of QCC Orders. Use of NYSE 
OptX by OTPs would be voluntary and OTPs would continue to be able to 
submit QCC Orders through the use of a third party front end order 
management system, or by telephone, as they do today.
    While PrecISE and PULSe require software to be installed on a 
desktop computer, NYSE OptX does not require installation of any 
software as it relies on existing instant messaging technology which 
would make its use by OTPs seamless. OTPs would also not need a 
physical workstation to use NYSE OptX.
    The Exchange notes that the use of NYSE OptX to send QCC Orders is 
optional. The Exchange is offering NYSE OptX as a convenience to OTPs 
and NYSE OptX would not be the exclusive means available to OTPs to 
execute QCC Orders on the Exchange. The Exchange will announce the 
effective date of NYSE OptX in a Trader Update to be published no later 
than 90 days following Commission approval. The effective date will be 
no later than 270 days following publication of that Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \13\ of 
the Securities Exchange Act of 1934 (the ``Act''), in general, and 
furthers the objectives of Section 6(b)(5),\14\ in particular, in that 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change would promote just 
and equitable principles of trade and remove impediments to and perfect 
the mechanism of a free and open market because offering NYSE OptX as 
an alternate means to submit QCC Orders for execution on the Exchange 
would generally allow the Exchange to better compete for QCC Orders and 
thus enhance competition. The Exchange believes that the proposed rule 
change is reasonable as it could encourage OTPs to direct a greater 
number of QCC Orders to the Exchange instead of sending such orders to 
a competing exchange.
    The Exchange further believes that the proposed rule change would 
allow the Exchange of [sic] offer a new service on an equitable and 
non-discriminatory basis. Specifically, the Exchange believes that use 
of NYSE OptX is equitable as it is voluntary and not required for OTPs 
to execute QCC Orders on the Exchange. Additionally, as proposed, the 
Exchange would provide NYSE OptX to OPTs [sic] on a non-discriminatory 
basis in that NYSE OptX would be available to all OTPs in a `one-size 
fits all' offering in which all OTPs would be subject to the same terms 
and conditions and would receive the same level of service.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

[[Page 83892]]

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

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. To the contrary, the Exchange believes that 
the proposed rule change evidences the strength of competition in the 
options industry. Specifically, the Exchange believes the proposed rule 
change will enhance the competitiveness of the Exchange relative to 
other options exchanges that transact in QCC Orders.
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    \15\ 15 U.S.C. 78f(b)(8).
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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 up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the 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, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please 
include File Number SR-NYSEArca-2016-143 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-2016-143. 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-2016-143 and should 
be submitted on or before December 13, 2016.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Brent J. Fields,
Secretary.
[FR Doc. 2016-28034 Filed 11-21-16; 8:45 am]
 BILLING CODE 8011-01-P