Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending Its Program That Allows Transactions to Take Place at a Price That Is Below $1 Per Option Contract Until July 5, 2017, 93716-93717 [2016-30687]
Download as PDFAgencies
[Federal Register Volume 81, Number 245 (Wednesday, December 21, 2016)] [Notices] [Pages 93716-93717] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2016-30687] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79564; File No. SR-NYSEMKT-2016-116] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending Its Program That Allows Transactions to Take Place at a Price That Is Below $1 Per Option Contract Until July 5, 2017 December 15, 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 December 7, 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, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C.78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to extend its program that allows transactions to take place at a price that is below $1 per option contract until July 5, 2017. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to extend the Pilot Program \4\ under Rule 968NY to allow accommodation transactions (``Cabinet Trades'') to take place at a price that is below $1 per option contract for one additional year [sic]. The Exchange proposes to extend the program, which is due to expire on January 5, 2017, until July 5, 2017. The proposed extension of the Pilot Program will provide the Exchange additional time to submit a separate proposed rule change under Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'') to make the program permanent (``Permanent Filing''). In support of making the Pilot Program permanent, the Exchange represents that, in the Permanent Filing, it would provide statistics related to Cabinet Trades that were executed in calendar year 2016 and describe the manner in which Cabinet Trades are cleared and processed. --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 63475 (December 8, 2010), 75 FR 77932 (December 14, 2010) (SR-NYSE Amex-2010-114). --------------------------------------------------------------------------- An ``accommodation'' or ``cabinet'' trade refers to trades in listed options on the Exchange that are worthless and typically not actively traded. Cabinet trading is generally conducted in accordance with Exchange Rules, except as provided in Exchange Rule 968NY, Accommodation Transactions (Cabinet Trades), which sets forth specific procedures for engaging in cabinet trades. Rule 968NY currently provides for cabinet transactions to occur via open outcry at a cabinet price of a $1 per option contract in any options series open for trading on the Exchange, except that the Rule is not applicable to trading in option classes participating in the Penny Pilot Program. Under the procedures, bids and offers (whether opening or closing a position) at a price of $1 per option contract may be represented in the trading crowd by a Floor Broker or by a Market Maker or provided in response to a request by a Trading Official, a Floor Broker or a Market Maker, but must yield priority to all resting orders in the Cabinet (those orders held by the Trading Official, and which resting cabinet orders may be closing only). Provided that the buyer and the seller yield to orders resting in the cabinet book, opening cabinet bids can trade with opening cabinet offers at $1 per option contract. The Exchange has temporarily amended the procedures through January 5, 2017 to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract. These lower-priced transactions are permitted to be traded pursuant to the same procedures applicable to $1 cabinet trades, except that (i) bids and offers for opening transactions are only permitted to accommodate closing transactions in order to limit use of the procedure to liquidations of existing positions, and (ii) the procedures are also made available for trading in option classes participating in the Penny Pilot Program.\5\ The Exchange believes that allowing a price of at least $0 but less than $1 better accommodates the closing of options positions in series that are worthless or not actively traded, particularly in the event where there has been a significant move in the price of the underlying security that results in a large number of series being out-of-the- money. For example, a market participant might have a long position in a put series with a strike price of $30 and the underlying stock might be trading at $100. In such an instance, there might not otherwise be a market for that person to close-out the position even at the $1 cabinet price (e.g., the series might be quoted no bid). --------------------------------------------------------------------------- \5\ Currently, the $1 cabinet trading procedures are limited to options classes traded in $0.05 or $0.10 standard increment. The $1 cabinet trading procedures are not available in Penny Pilot Program classes because in those classes an option series can trade in a standard increment as low as $0.01 per share (or $1.00 per option contract with a 100 share multiplier). Because the temporary procedures allow trading below $0.01 per share (or $1.00 per option contract with a 100 share multiplier), the procedures are available for all classes, including those classes participating in the Penny Pilot Program. --------------------------------------------------------------------------- As with other accommodation liquidations under Rule 968NY, transactions that occur for less than $1 will not be disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 968NY, the transactions will be exempt from the Consolidated Options Audit Trail (``COATS'') requirements of Exchange Rule 955NY, Order Format and System Entry Requirements. However, the Exchange will maintain quotation, order and transaction information for the transactions in the same format as the COATS data is maintained. In this regard, all transactions for less than $1 must be reported to the Exchange [[Page 93717]] following the close of each business day. 2. Statutory Basis The Exchange believes that this proposed rule change is consistent with Section 6(b) \6\ of the Act, in general, and furthers the objectives of Section 6(b)(5) \7\ of the Act in particular, in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that allowing for liquidations at a price less than $1 per option contract will better facilitate the closing of options positions that are worthless or not actively trading, especially in Penny Pilot issues where Cabinet Trades are not otherwise permitted. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78f(b). \7\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is to extend an established pilot program for an additional six months and continue to facilitate ATP Holders ability to close positions in worthless or not actively traded series. 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b- 4(f)(6)(iii) thereunder. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78s(b)(3)(A)(iii). \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange's intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\11\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the Pilot Program may continue without interruption. The Commission believes that the proposed rule change is consistent with the protection of investors and the public interest because it will allow the pilot to continue uninterrupted, thereby avoiding any potential investor confusion that could result from a temporary interruption in the pilot and allowing members to continue to benefit from the Pilot Program. Based on the foregoing, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.\12\ --------------------------------------------------------------------------- \10\ 17 CFR 240.19b-4(f)(6). \11\ 17 CFR 240.19b-4(f)(6)(iii). \12\ For purposes only of waiving the operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-NYSEMKT-2016-116 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEMKT-2016-116. 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-NYSEMKT-2016-116 and should be submitted on or before January 11, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ Eduardo A. Aleman, Assistant Secretary. --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-30687 Filed 12-20-16; 8:45 am] BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
