Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Commentary .06 to NYSE Arca Rule 6.91-O To Enhance the Price Protections for Complex Orders Executed on the Exchange, 42861-42865 [2017-19241]
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Federal Register / Vol. 82, No. 175 / Tuesday, September 12, 2017 / Notices
Date of notice required under 39
U.S.C. 3642(d)(1): September 12, 2017.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on September 6,
2017, it filed with the Postal Regulatory
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POSTAL SERVICE
Date of notice required under 39
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ACTION:
DATES:
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
POSTAL SERVICE
The
United States Postal Service® hereby
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2017, it filed with the Postal Regulatory
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Product Change—Priority Mail Express
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Elizabeth A. Reed,
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Postal ServiceTM.
ACTION: Notice.
[FR Doc. 2017–19277 Filed 9–11–17; 8:45 am]
Elizabeth A. Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2017–19270 Filed 9–11–17; 8:45 am]
BILLING CODE 7710–12–P
AGENCY:
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BILLING CODE 7710–12–P
The Postal Service gives
notice of filing a request with the Postal
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domestic shipping services contract to
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DATES: Date of notice required under 39
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FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on September 6,
2017, it filed with the Postal Regulatory
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SUMMARY:
Product Change—Priority Mail
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ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
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Date of notice required under 39
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DATES:
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
Elizabeth A. Reed,
Attorney, Corporate and Postal Business Law.
The Postal Service gives
notice of filing a request with the Postal
[FR Doc. 2017–19273 Filed 9–11–17; 8:45 am]
SUMMARY:
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The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of notice required under 39
U.S.C. 3642(d)(1): September 12, 2017.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on September 6,
2017, it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Priority
Mail Contract 348 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2017–184,
CP2017–285.
SUMMARY:
Elizabeth A. Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2017–19269 Filed 9–11–17; 8:45 am]
Notice.
Postal ServiceTM.
ACTION: Notice.
POSTAL SERVICE
Postal ServiceTM.
Notice.
AGENCY:
Postal ServiceTM.
AGENCY:
BILLING CODE 7710–12–P
Product Change—Priority Mail
Negotiated Service Agreement
BILLING CODE 7710–12–P
AGENCY:
Product Change—Priority Mail and
First-Class Package Service
Negotiated Service Agreement
[FR Doc. 2017–19275 Filed 9–11–17; 8:45 am]
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POSTAL SERVICE
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on September 6,
2017, it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Priority
Mail Contract 352 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2017–188,
CP2017–289.
Elizabeth A. Reed,
Attorney, Corporate and Postal Business Law.
42861
SUPPLEMENTARY INFORMATION:
BILLING CODE 7710–12–P
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81539; File No. SR–
NYSEArca–2017–93]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adopt Commentary
.06 to NYSE Arca Rule 6.91–O To
Enhance the Price Protections for
Complex Orders Executed on the
Exchange
September 6, 2017.
Pursuant to the provisions of 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 August 25, 2017, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 82, No. 175 / Tuesday, September 12, 2017 / Notices
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt
Commentary .06 to Rule 6.91–O
(Electronic Complex Order Trading) to
enhance the price protections for
Complex Orders executed on the
Exchange. 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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange is proposing to adopt
Commentary .06 to Rule 6.91–O to
enhance the price protections applicable
to Electronic Complex Orders (or
‘‘ECOs’’).3
The Exchange currently provides
price protection to ECOs, which is
designed to prevent the execution of
orders at prices that are priced a certain
percentage away from the current
market and, therefore, are potentially
erroneous.4 The Exchange proposes an
additional price protection that would
be another check on whether an ECO’s
limit price is correctly aligned to the
3 Rule 6.62–O(e) defines a Complex Order as any
order involving the simultaneous purchase and/or
sale of two or more different option series in the
same underlying security, for the same account, in
a ratio that is equal to or greater than one-to-three
(.333) and less than or equal to three-to-one (3.00)
and for the purpose of executing particular
investment strategy. Per Rule 6.91–O, an ECO is a
Complex Order that has been entered into the NYSE
Arca System (‘‘System’’) for possible execution. See
Rule 6.91–O(a).
4 See Commentary .05 to Rule 6.91–O (providing
for the rejection of ECOs that are priced away from
the current market by a ‘‘Specified Amount,’’ which
Specified Amount varies depending on the smallest
MPV of any leg in the ECO) (the ‘‘Price Protection
Filter’’ or ‘‘Filter’’) .
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complex strategy and would reject
erroneously priced incoming ECOs (the
‘‘Reasonability Checks’’).5 As discussed
herein, the proposed price protections
are materially identical to price
protections available on other options
exchanges, including Nasdaq ISE, LLC
(‘‘ISE’’).6
First, the Exchange proposes
Commentary .06(a)(1) to Rule 6.91–O,
pursuant to which, upon entry into the
System, the Exchange would reject any
incoming order for a complex strategy
where all legs are to sell (buy) if it is
entered at a price that is less (more) than
the minimum (maximum) price, which
is calculated as the sum of the ratio on
each leg of the Complex Order
multiplied by $0.01 (¥$0.01) per leg
(e.g., an order to sell (buy) 2 calls and
sell (buy) 1 put would have a minimum
(maximum) price of $0.03 (¥$0.03)).7
For example, an order to sell 2 calls
and sell 1 put would have a minimum
net credit price of $0.03. If such an
order were entered at a price of $0.02,
it would not be executable, as a price of
zero would have to be assigned to one
of the legs of the order. As proposed,
this order would be rejected.
As another example, if a market
participant is entering the following ‘‘all
sell’’ complex strategy for a debit:
• Leg A: 100 × 0.01 ¥ 0.02 × 100
• Leg B: 100 × 0.01 ¥ 0.02 × 100
• Order 1: Sell1 Leg A, Sell 2 Leg B; Net
price: ¥ $0.03
Result: As proposed, Order 1 would
be rejected because it is priced less than
the minimum order price of $0.03.
Based on each individual leg trading for
5 See proposed Commentary .06 to Rule 6.91–O,
which would provide that the Exchange would
reject any incoming ECO that has a strategy
described in paragraphs (a)(1)–(3) of proposed
Commentary .06 to Rule 6.91–O. Because
Reasonability Checks would be performed before
the Price Protection Filter, the proposed rule text
would provide that ‘‘[a]ny incoming Electronic
Complex Order that passes this Reasonability Check
would still be subject to the Price Protection Filter,
per Commentary .05(b) of this Rule.’’ See id.
6 See e.g., ISE Rule 722, Supplementary Material
.07(Price limits for complex orders and quotes). The
Exchange notes that, as discussed herein, the
proposed Reasonability Checks are similar to those
initially adopted by ISE and do not include a later
adopted pre-set value ‘‘buffer.’’ See infra nn. 12 and
15 [sic]. Moreover, because the Exchange does not
support ECOs entered as market orders, the
Exchange has not adopted price checks related to
such orders (which orders ISE supports). See e.g.,
ISE Rule 722, Supplementary Material .07(c)(1), (3).
The Exchange also notes that the Chicago Board
Options Exchange, Inc. (‘‘CBOE’’) likewise includes
complex strategy price checks, which cover more
strategies than proposed herein, but are nonetheless
designed to accomplish the same goal of avoiding
execution of erroneously priced complex orders.
See CBOE Rule 6.53C, Interpretations and Policies
.08 (Price Check Parameters).
7 See proposed Commentary .06(a)(1) to Rule
6.91–O.
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at least $0.01, this complex strategy
would never trade at a net credit price
of less than $0.03. Thus, any sell order
for this strategy with a limit price less
than $0.03 would be rejected.
If, for example, a market participant is
entering the following ‘‘all buy’’
complex strategy:
• Leg A: 100 × 0.01 ¥ 0.02 × 100
• Leg B: 100 × 0.01 ¥ 0.02 × 100
• Order 1: Buy Leg A, Buy 2 Leg B; Net
price: ¥ $0.02
Result: As proposed, Order 1 would
be rejected because it is priced greater
than the maximum net debit price of
¥$0.03 (and only orders priced at
¥$0.03 or less would be accepted).
Because debit orders are entered into
the Exchange System as a negative
value, the ‘‘maximum’’ price check for
buy orders is effectively a check for the
minimum order price. Here, Order 1 @
¥$0.02 would represent an order to buy
for a net debit price of $0.02, and
therefore would be rejected.
The Exchange notes that the price
check in proposed Commentary .06(a)(1)
to Rule 6.91–O is materially identical to
price protections available on at least
one other options exchange, ISE.8
Second, the Exchange proposes
Commentary .06(a)(2) to Rule 6.91–O,
pursuant to which, upon entry into the
System, the Exchange would reject any
incoming order for a vertical spread
strategy (i.e., an order to sell a call (put)
option and to buy another call (put)
option in the same security with the
same expiration but at a higher (lower)
strike price) when entered with a net
debit price of ¥$0.01 or less.9
For example, if a market participant is
entering the following vertical call
credit spread for a debit:
• Leg A: April SPY 240 Call: 100 × 1.72
¥ 1.73 × 100
• Leg B: April SPY 241 Call: 100 × 1.36
¥ 1.37 × 100
• Order 1: Sell 1 Leg A, Buy 1 Leg B;
Quantity 50; Net price: $ ¥ 0.35
Result: As proposed, Order 1 would
be rejected because it priced less than or
equal to ¥$0.01 (i.e., it has a negative
limit price). The Exchange notes that the
lower strike call will always be more
8 See Securities Exchange Act Release No. 71406
(January 27, 2014), 79 FR 5495, 5496 (January 31,
2014) (SR–ISE–2014–05) (‘‘ISE Price Reasonability
Filing’’) (adopting ‘‘minimum net price’’ protection
feature, providing that the ISE system would ‘‘reject
any complex order strategy where all legs are to buy
if it is entered at a price that is less than the
minimum price, which is calculated as the sum of
the ratio on each leg of the complex order
multiplied by $0.01 per leg (e.g., an order to buy
2 calls and buy 1 put would have a minimum price
of $0.03)’’).
9 See proposed Commentary .06(a)(2) to Rule
6.91–O.
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expensive than the higher strike call
within the same expiration.10 Thus,
entering this sell order with a negative
limit price would result in it being
rejected.
The Exchange notes that the price
check in proposed Commentary .06(a)(2)
to Rule 6.91–O is materially identical to
price protections available on at least
one other options exchange, ISE.11
Finally, upon entry into the System,
the Exchange proposes to reject any
incoming order for a credit calendar
spread strategy (i.e., an order to sell a
call (put) option with a longer
expiration and to buy another call (put)
option with a shorter expiration in the
same security at the same strike price)
when entered with a net price of
¥$0.01 or less.12
For example, if a market participant is
entering the following calendar credit
spread for a debit:
• Leg A: May SPY 240 Call: 100 × 3.41
¥ 3.43 × 100
• Leg B: April SPY 240 Call: 100 × 1.72
¥ 1.73 × 100
• Order 1: Sell 1 Leg A, Buy 1 Leg B;
Quantity: 50; Net price: ¥$1.68
Result: As proposed, Order 1 would
be rejected because it is priced less than
or equal to ¥$0.01. The Exchange notes
that the further out expiring call being
sold will always be more expensive than
a nearer expiring call being bought at
the same strike price, and should always
generate a credit.13 Thus, any order to
sell the far expiration and buy the near
expiration entered with a price of ¥0.01
or less would result in this order being
rejected.
The Exchange notes that the price
check in proposed Commentary .06(a)(3)
to Rule 6.91–O is materially identical to
price protections available on at least
one other options exchange, ISE.14
Regarding calendar spread orders, the
Exchange also proposes to retain
discretion to deactivate this price check
in the interest of fair and orderly
markets.15 For example, the Exchange
may deactivate this price check if there
is a corporate action in a complex
symbol that would result in an
otherwise valid strategy being rejected
by the proposed check.16 The Exchange
believes this discretion to deactivate the
Reasonability Check would be
consistent with its obligation to assure
a fair and orderly market, and that the
need for such flexibility is recognized in
other Exchange rules, such as those
related to position limits, quote-width
differentials and price protection
filters.17 As proposed, the Exchange
would announce by electronic message
to ATP Holders that request to receive
such messages if the Exchange
deactivates (and later reactivates) the
Reasonability Check for calendar spread
orders.
Further, the Exchange does not
propose to apply the Reasonability
Check on calendar orders entered on the
Trading Floor, as such orders are subject
10 The principle behind this check is based on the
standard trading principle of ‘‘buy low, sell high.’’
The ability to buy stock at a lower price is more
valuable than the ability to buy stock at a higher
price, and thus a call with a lower strike price has
more value, and thus is more expensive, than a call
with a higher strike price. Similarly, the ability to
sell stock at a higher price is more valuable than
the ability to sell stock at a lower price, and thus
a put with a higher strike price has more value, and
thus is more expensive, than a put with a lower
strike price.
11 See supra note 9 [sic], ISE Price Reasonability
Filing (providing that, subject to certain limitations,
the ISE system would ‘‘reject a vertical spread order
(i.e., an order to buy a call (put) option and to sell
another call (put) option in the same security with
the same expiration but at a higher (lower) strike
price) when entered with a net price of less than
zero’’). The Exchange notes that ISE amended
Supplementary Material .07(c)(1) to ISE Rule 722 to
add a ‘‘pre-set value’’ less than zero to allow a
buffer within which certain orders would not be
rejected. See, e.g., See Securities Exchange Act
Release No. 72254 (May 27, 2014), 79 FR 31372,
31373 (June 2, 2014) (SR–ISE–2014–26) (‘‘ISE Price
Reasonability Modification Filing’’). The Exchange
has opted to hard code the reject value as $¥0.01,
which aligns with the ISE Price Reasonability Filing
and, would nonetheless operate in a manner similar
to ISE’s current rule, notwithstanding the ‘‘buffer.’’
12 See proposed Commentary .06(a)(3) to Rule
6.91–O.
13 The principle behind this check is based on the
general concept that locking in a price further into
the future involves more risk for the buyer and
seller and thus is more valuable, making an option
(call or put) with a farther expiration more
expensive than an option with a nearer expiration.
This is similar, for example, to interest rates for
mortgages: In general, an interest rate on a 30-year
mortgage is higher than the interest rate on a 15year mortgage due to the risk of potential interest
rate changes over the longer period of time to both
the mortgagor and mortgagee.
14 See, e.g., ISE Rule 722, Supplementary Material
.07(c)(3) (providing, in part, that the ISE system will
‘‘reject a calendar spread order (i.e., an order to buy
a call (put) option with a longer expiration and to
sell another call (put) option with a shorter
expiration in the same security at the same strike
price) when entered with a net price of less than
zero (minus a pre-set value).’’ See also supra note
12 [sic], ISE Price Reasonability Modification Filing
(adopting ISE Rule 722, Supplementary Material
.07(c)(2)). Rather than utilize a ‘‘pre-set value’’ (or
buffer), the Exchange has opted to hard code the
reject value as $¥0.01. See id.
15 See proposed Commentary .06(a)(3)(i) to Rule
6.91–O.
16 The Exchange has not similarly retained
discretion to deactivate the Reasonability Checks
for minimum price and vertical spreads because
corporate actions will not create a scenario where
a lower strike call would be cheaper than a higher
strike call, or a higher strike put will be cheaper
than a lower strike put.
17 See, e.g., Rules 6.8–O (regarding position
limits); 6.37A–O (regarding maximum quotation
spreads); 6.60–O (regarding price protection for
orders); 6.61–O (regarding price protection for
Market Maker quotes) and Commentary .05 to Rule
6.91–O (regarding the Price Protection Filter for
ECOs).
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42863
to manual handling by individuals who
will have evaluated the price of an order
based on then-market conditions.18 The
Exchange notes that other exchanges
that offer price protections similar to
those proposed for calendar spreads
have similarly retained discretion to
limit the application of this check.19
The Exchange notes that ECOs that
are not rejected by the Reasonability
Checks would still be subject to the
Price Protection Filter.20
Implementation
The Exchange will announce by
Trader Update the implementation date
of the proposed rule change within 90
days of the effective date of this rule
filing.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’),21 in general, and furthers
the objectives of Section 6(b)(5) of the
Act,22 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.
In particular, the Exchange believes
the proposed Reasonability Checks
would protect investors and the public
interest and maintain fair and orderly
markets by mitigating potential risks
associated with market participants
entering Complex Orders at clearly
unintended prices that are inconsistent
with their strategies. Specifically, a
Complex Order strategy where all legs
are to sell (buy) will be rejected if it is
entered at a price that is less (more) than
the minimum (maximum) price. The
Exchange believes it is reasonable to
reject such orders upon entry as they are
not executable. Allowing such orders to
be entered would create investor
confusion; as such orders would not
receive an execution and would remain
pending until canceled. Similarly, the
18 See proposed Commentary .06(a)(3)(i) to Rule
6.91–O.
19 See, e.g., CBOE Rule 6.53C, Interpretations and
Policies .08(c)(6) (excluding from debit/credit
reasonability checks ‘‘orders routed from a PAR
workstation or order management terminal’’
because such orders would be subject to manual
handling). The Exchange notes that CBOE’s
exclusion of complex orders entered on the floor
from its debit/credit reasonability checks is not
limited to calendar spreads but applies to all such
orders entered from the floor of the CBOE.
20 See proposed Commentary .06(b) to Rule 6.91–
O; see also supra note 6 [sic].
21 15 U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
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Exchange believes that rejecting orders
for vertical spread strategies—as well as
calendar spread strategies—that are
entered at a negative price also protects
investors from executing orders that
were likely entered in error.
Regarding orders for calendar spreads,
the Exchange recognizes that it may not
be appropriate to apply the
Reasonability Checks to calendar
spreads in unusual market conditions,
such as corporate actions that result in
changes in price to the underlying
security.23 The Exchange therefore
believes it would remove impediments
and perfect the mechanism of a free and
open market and a national market
system for the Exchange to temporarily
deactivate the checks in the event of
unusual market conditions, which
flexibility is consistent with other
exchange rules.24 Further, the Exchange
also recognizes that the applicable
protections are not appropriate for
orders entered manually on the Trading
Floor, because such orders would be
subject to an additional check of thenmarket conditions by the individual
entering the order, which flexibility is
consistent with the rules of other
exchanges.25
The Exchange’s proposed
Reasonability Checks are similar to
similar protections offered on other
options exchanges, including ISE. To
the extent there are differences between
the proposed Reasonability Checks, as
described above (see supra notes12 and
15) [sic], the Exchange does not believe
such differences raise any new or
significant policy concerns. Further,
despite the differences, the proposed
Reasonability Checks would otherwise
operate in a similar manner to the
checks on ISE. As such, the Exchange
merely desires to adopt functionality
that is similar to what already exists on
ISE.26 Permitting the Exchange to
operate on an even playing field relative
to other exchanges that have similar
functionality removes impediments to
and perfects the mechanism for a free
and open market and a national market
system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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.
The proposed Reasonability Checks
specify circumstances in which the
23 See
supra note 17 [sic].
supra note 18 [sic].
25 See supra note 20 [sic].
26 See supra note 7 [sic].
24 See
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Exchange would reject certain ECOs in
the interest of protecting investors
against the execution of erroneous
orders or the execution of orders at
erroneous prices. As such, the proposal
does not impose any burden on
competition. To the contrary, the
Exchange believes that the proposed
Reasonability Checks may foster more
competition. Specifically, the Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues. The Exchange’s proposed rule
change would enhance its ability to
compete with other exchanges that
already offer similar reasonability
checks. Thus, the Exchange believes
that this type of competition amongst
exchanges is beneficial to the market
place as a whole as it can result in
enhanced processes, functionality, and
technologies. The Exchange further
believes that because the proposed rule
change would be applicable to all OTP
Holders and OTP Firms, it would not
impose any burden on intra-market
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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
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 for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 27 and Rule 19b–
4(f)(6) thereunder.28
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 29 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 30
permits the Commission to designate a
27 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
29 17 CFR 240.19b–4(f)(6).
30 17 CFR 240.19b–4(f)(6)(iii).
28 17
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
shorter time if such action is consistent
with the protection of investors and the
public interest. NYSE Arca has asked
the Commission to waive the 30-day
operative delay. NYSE Arcs believes
that waiving the operative delay would
protect investors by enabling the
Exchange to provide greater protections
from potentially erroneous executions
and potentially reduce the attendant
risks of such executions. As noted
above, the proposal provides that a
Complex Order strategy where all legs
are to sell (buy) will be rejected if it is
entered at a price that is less (more) than
the minimum (maximum) price. NYSE
Arca notes that such an order is not
executable, and that allowing such an
order to be entered would create
investor confusion because the order
would not receive an execution and
would remain pending until canceled.
Similarly, the Exchange believes that
rejecting orders for vertical and calendar
spread strategies that are entered at a
negative price will protect investors
from executing orders that were likely
entered in error.31 The Commission
believes that waiver of the operative
delay is consistent with the protection
of investors and the public interest
because the proposed rules are designed
to reduce investor confusion and to
prevent the entry and execution of
erroneously priced ECOs. Therefore, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.32
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
31 As discussed above, the proposal also allows
the Exchange to deactivate the Reasonability Check
for calendar spread strategies. The Exchange will
notify OTP Holders and OTP Firms by electronic
message of any such deactivation or re-activation.
The Exchange believes that this discretion is
necessary because a corporate action, for example,
could result in the Reasonability Check for calendar
spread strategies rejecting an otherwise valid
strategy. The proposal also provides that the
Reasonability Check for calendar spread strategies
will not apply to ECOs that are entered on the
Trading Floor. The Exchange notes that such orders
are subject to manual handling by individuals who
will have evaluated the price of the order based on
market conditions. The Exchange further notes that
another exchange has adopted a similar rule. See
note 19, supra.
32 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
E:\FR\FM\12SEN1.SGM
12SEN1
Federal Register / Vol. 82, No. 175 / Tuesday, September 12, 2017 / Notices
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–2017–93 on the subject line.
pmangrum on DSK3GDR082PROD with NOTICES1
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2017–93. 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–2017–93 and should be
submitted on or before October 3, 2017.
33 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Eduardo A. Aleman,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2017–19241 Filed 9–11–17; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Withdrawal of a
Proposed Rule Change Relating to the
Listing and Trading of Shares of the
EtherIndex Ether Trust Under NYSE
Arca Equities Rule 8.201
Sunshine Act Meeting
September 6, 2017.
BILLING CODE 8011–01–P
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
Advisory Committee on Small and
Emerging Companies will hold a public
meeting on Wednesday, September 13,
2017, 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 August 14, 2017, the Commission
published notice of the Committee
meeting (Release No. 33–10399),
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. No
earlier notice of this Meeting was
practicable.
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 from the Office of
the Secretary at (202) 551–5400.
Dated: September 8, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017–19445 Filed 9–8–17; 4:15 pm]
BILLING CODE 8011–01–P
[Release No. 34–81538; File No. SR–
NYSEArca–2016–176]
On December 30, 2016, NYSE Arca,
Inc. (‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares of the
EtherIndex Ether Trust. The proposed
rule change was published for comment
in the Federal Register on January 23,
2017.3
On February 23, 2017, pursuant to
Section 19(b)(2) of the Exchange Act,4
the Commission designated a longer
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.5 On April 21, 2017, the
Commission instituted proceedings to
determine whether to approve or
disapprove the proposed rule change.6
On July 17, 2017, the Commission
designated a longer period for
Commission action on the proposed rule
change.7 The Commission received nine
comment letters regarding the proposed
rule change.8
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 79792
(Jan. 13, 2017), 82 FR 7891 (Jan. 23, 2017).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 80094
(Feb. 23, 2017), 82 FR 12268 (Mar. 1, 2017). The
Commission designated April 23, 2017, as the date
by which the Commission shall either approve or
disapprove, or institute proceedings to determine
whether to approve or disapprove, the proposed
rule change.
6 See Securities Exchange Act Release No. 80501
(Apr. 21, 2017), 82 FR 19397 (Apr. 27, 2017).
7 See Securities Exchange Act Release No. 81155
(July 17, 2017), 82 FR 33938 (July 21, 2017). The
Commission designated September 20, 2017, as the
date by which the Commission shall either approve
or disapprove the proposed rule change.
8 See Letters from Andrew Quentson (Apr. 26,
2017); Charles K. Massey, III, Venture Private
Equity Investment (Apr. 26, 2017); Anita Desai
(Apr. 29, 2017); Luc Jean (May 3, 2017); Tisho P.
(May 10, 2017); Kevin McSheehan (May 14, 2017);
Bruce Granger (May 16, 2017); Bruce Granger (May
16, 2017); Alen Lee (May 18, 2017). All comments
on the proposed rule change are available on the
Commission’s Web site at: https://www.sec.gov/
2 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
15:19 Sep 11, 2017
42865
Continued
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]]>Agencies
[Federal Register Volume 82, Number 175 (Tuesday, September 12, 2017)]
[Notices]
[Pages 42861-42865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19241]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81539; File No. SR-NYSEArca-2017-93]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adopt Commentary
.06 to NYSE Arca Rule 6.91-O To Enhance the Price Protections for
Complex Orders Executed on the Exchange
September 6, 2017.
Pursuant to the provisions of 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 August 25, 2017, NYSE Arca, Inc. (``NYSE Arca''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to
[[Page 42862]]
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 adopt Commentary .06 to Rule 6.91-O
(Electronic Complex Order Trading) to enhance the price protections for
Complex Orders executed on the Exchange. 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 Exchange 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to adopt Commentary .06 to Rule 6.91-O to
enhance the price protections applicable to Electronic Complex Orders
(or ``ECOs'').\3\
---------------------------------------------------------------------------
\3\ Rule 6.62-O(e) defines a Complex Order as any order
involving the simultaneous purchase and/or sale of two or more
different option series in the same underlying security, for the
same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for
the purpose of executing particular investment strategy. Per Rule
6.91-O, an ECO is a Complex Order that has been entered into the
NYSE Arca System (``System'') for possible execution. See Rule 6.91-
O(a).
---------------------------------------------------------------------------
The Exchange currently provides price protection to ECOs, which is
designed to prevent the execution of orders at prices that are priced a
certain percentage away from the current market and, therefore, are
potentially erroneous.\4\ The Exchange proposes an additional price
protection that would be another check on whether an ECO's limit price
is correctly aligned to the complex strategy and would reject
erroneously priced incoming ECOs (the ``Reasonability Checks'').\5\ As
discussed herein, the proposed price protections are materially
identical to price protections available on other options exchanges,
including Nasdaq ISE, LLC (``ISE'').\6\
---------------------------------------------------------------------------
\4\ See Commentary .05 to Rule 6.91-O (providing for the
rejection of ECOs that are priced away from the current market by a
``Specified Amount,'' which Specified Amount varies depending on the
smallest MPV of any leg in the ECO) (the ``Price Protection Filter''
or ``Filter'') .
\5\ See proposed Commentary .06 to Rule 6.91-O, which would
provide that the Exchange would reject any incoming ECO that has a
strategy described in paragraphs (a)(1)-(3) of proposed Commentary
.06 to Rule 6.91-O. Because Reasonability Checks would be performed
before the Price Protection Filter, the proposed rule text would
provide that ``[a]ny incoming Electronic Complex Order that passes
this Reasonability Check would still be subject to the Price
Protection Filter, per Commentary .05(b) of this Rule.'' See id.
\6\ See e.g., ISE Rule 722, Supplementary Material .07(Price
limits for complex orders and quotes). The Exchange notes that, as
discussed herein, the proposed Reasonability Checks are similar to
those initially adopted by ISE and do not include a later adopted
pre-set value ``buffer.'' See infra nn. 12 and 15 [sic]. Moreover,
because the Exchange does not support ECOs entered as market orders,
the Exchange has not adopted price checks related to such orders
(which orders ISE supports). See e.g., ISE Rule 722, Supplementary
Material .07(c)(1), (3). The Exchange also notes that the Chicago
Board Options Exchange, Inc. (``CBOE'') likewise includes complex
strategy price checks, which cover more strategies than proposed
herein, but are nonetheless designed to accomplish the same goal of
avoiding execution of erroneously priced complex orders. See CBOE
Rule 6.53C, Interpretations and Policies .08 (Price Check
Parameters).
---------------------------------------------------------------------------
First, the Exchange proposes Commentary .06(a)(1) to Rule 6.91-O,
pursuant to which, upon entry into the System, the Exchange would
reject any incoming order for a complex strategy where all legs are to
sell (buy) if it is entered at a price that is less (more) than the
minimum (maximum) price, which is calculated as the sum of the ratio on
each leg of the Complex Order multiplied by $0.01 (-$0.01) per leg
(e.g., an order to sell (buy) 2 calls and sell (buy) 1 put would have a
minimum (maximum) price of $0.03 (-$0.03)).\7\
---------------------------------------------------------------------------
\7\ See proposed Commentary .06(a)(1) to Rule 6.91-O.
---------------------------------------------------------------------------
For example, an order to sell 2 calls and sell 1 put would have a
minimum net credit price of $0.03. If such an order were entered at a
price of $0.02, it would not be executable, as a price of zero would
have to be assigned to one of the legs of the order. As proposed, this
order would be rejected.
As another example, if a market participant is entering the
following ``all sell'' complex strategy for a debit:
Leg A: 100 x 0.01 - 0.02 x 100
Leg B: 100 x 0.01 - 0.02 x 100
Order 1: Sell1 Leg A, Sell 2 Leg B; Net price: - $0.03
Result: As proposed, Order 1 would be rejected because it is priced
less than the minimum order price of $0.03. Based on each individual
leg trading for at least $0.01, this complex strategy would never trade
at a net credit price of less than $0.03. Thus, any sell order for this
strategy with a limit price less than $0.03 would be rejected.
If, for example, a market participant is entering the following
``all buy'' complex strategy:
Leg A: 100 x 0.01 - 0.02 x 100
Leg B: 100 x 0.01 - 0.02 x 100
Order 1: Buy Leg A, Buy 2 Leg B; Net price: - $0.02
Result: As proposed, Order 1 would be rejected because it is priced
greater than the maximum net debit price of -$0.03 (and only orders
priced at -$0.03 or less would be accepted). Because debit orders are
entered into the Exchange System as a negative value, the ``maximum''
price check for buy orders is effectively a check for the minimum order
price. Here, Order 1 @-$0.02 would represent an order to buy for a net
debit price of $0.02, and therefore would be rejected.
The Exchange notes that the price check in proposed Commentary
.06(a)(1) to Rule 6.91-O is materially identical to price protections
available on at least one other options exchange, ISE.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 71406 (January 27,
2014), 79 FR 5495, 5496 (January 31, 2014) (SR-ISE-2014-05) (``ISE
Price Reasonability Filing'') (adopting ``minimum net price''
protection feature, providing that the ISE system would ``reject any
complex order strategy where all legs are to buy if it is entered at
a price that is less than the minimum price, which is calculated as
the sum of the ratio on each leg of the complex order multiplied by
$0.01 per leg (e.g., an order to buy 2 calls and buy 1 put would
have a minimum price of $0.03)'').
---------------------------------------------------------------------------
Second, the Exchange proposes Commentary .06(a)(2) to Rule 6.91-O,
pursuant to which, upon entry into the System, the Exchange would
reject any incoming order for a vertical spread strategy (i.e., an
order to sell a call (put) option and to buy another call (put) option
in the same security with the same expiration but at a higher (lower)
strike price) when entered with a net debit price of -$0.01 or less.\9\
---------------------------------------------------------------------------
\9\ See proposed Commentary .06(a)(2) to Rule 6.91-O.
---------------------------------------------------------------------------
For example, if a market participant is entering the following
vertical call credit spread for a debit:
Leg A: April SPY 240 Call: 100 x 1.72 - 1.73 x 100
Leg B: April SPY 241 Call: 100 x 1.36 - 1.37 x 100
Order 1: Sell 1 Leg A, Buy 1 Leg B; Quantity 50; Net price: $
- 0.35
Result: As proposed, Order 1 would be rejected because it priced
less than or equal to -$0.01 (i.e., it has a negative limit price). The
Exchange notes that the lower strike call will always be more
[[Page 42863]]
expensive than the higher strike call within the same expiration.\10\
Thus, entering this sell order with a negative limit price would result
in it being rejected.
---------------------------------------------------------------------------
\10\ The principle behind this check is based on the standard
trading principle of ``buy low, sell high.'' The ability to buy
stock at a lower price is more valuable than the ability to buy
stock at a higher price, and thus a call with a lower strike price
has more value, and thus is more expensive, than a call with a
higher strike price. Similarly, the ability to sell stock at a
higher price is more valuable than the ability to sell stock at a
lower price, and thus a put with a higher strike price has more
value, and thus is more expensive, than a put with a lower strike
price.
---------------------------------------------------------------------------
The Exchange notes that the price check in proposed Commentary
.06(a)(2) to Rule 6.91-O is materially identical to price protections
available on at least one other options exchange, ISE.\11\
---------------------------------------------------------------------------
\11\ See supra note 9 [sic], ISE Price Reasonability Filing
(providing that, subject to certain limitations, the ISE system
would ``reject a vertical spread order (i.e., an order to buy a call
(put) option and to sell another call (put) option in the same
security with the same expiration but at a higher (lower) strike
price) when entered with a net price of less than zero''). The
Exchange notes that ISE amended Supplementary Material .07(c)(1) to
ISE Rule 722 to add a ``pre-set value'' less than zero to allow a
buffer within which certain orders would not be rejected. See, e.g.,
See Securities Exchange Act Release No. 72254 (May 27, 2014), 79 FR
31372, 31373 (June 2, 2014) (SR-ISE-2014-26) (``ISE Price
Reasonability Modification Filing''). The Exchange has opted to hard
code the reject value as $-0.01, which aligns with the ISE Price
Reasonability Filing and, would nonetheless operate in a manner
similar to ISE's current rule, notwithstanding the ``buffer.''
---------------------------------------------------------------------------
Finally, upon entry into the System, the Exchange proposes to
reject any incoming order for a credit calendar spread strategy (i.e.,
an order to sell a call (put) option with a longer expiration and to
buy another call (put) option with a shorter expiration in the same
security at the same strike price) when entered with a net price of -
$0.01 or less.\12\
---------------------------------------------------------------------------
\12\ See proposed Commentary .06(a)(3) to Rule 6.91-O.
---------------------------------------------------------------------------
For example, if a market participant is entering the following
calendar credit spread for a debit:
Leg A: May SPY 240 Call: 100 x 3.41 - 3.43 x 100
Leg B: April SPY 240 Call: 100 x 1.72 - 1.73 x 100
Order 1: Sell 1 Leg A, Buy 1 Leg B; Quantity: 50; Net price: -
$1.68
Result: As proposed, Order 1 would be rejected because it is priced
less than or equal to -$0.01. The Exchange notes that the further out
expiring call being sold will always be more expensive than a nearer
expiring call being bought at the same strike price, and should always
generate a credit.\13\ Thus, any order to sell the far expiration and
buy the near expiration entered with a price of -0.01 or less would
result in this order being rejected.
---------------------------------------------------------------------------
\13\ The principle behind this check is based on the general
concept that locking in a price further into the future involves
more risk for the buyer and seller and thus is more valuable, making
an option (call or put) with a farther expiration more expensive
than an option with a nearer expiration. This is similar, for
example, to interest rates for mortgages: In general, an interest
rate on a 30-year mortgage is higher than the interest rate on a 15-
year mortgage due to the risk of potential interest rate changes
over the longer period of time to both the mortgagor and mortgagee.
---------------------------------------------------------------------------
The Exchange notes that the price check in proposed Commentary
.06(a)(3) to Rule 6.91-O is materially identical to price protections
available on at least one other options exchange, ISE.\14\
---------------------------------------------------------------------------
\14\ See, e.g., ISE Rule 722, Supplementary Material .07(c)(3)
(providing, in part, that the ISE system will ``reject a calendar
spread order (i.e., an order to buy a call (put) option with a
longer expiration and to sell another call (put) option with a
shorter expiration in the same security at the same strike price)
when entered with a net price of less than zero (minus a pre-set
value).'' See also supra note 12 [sic], ISE Price Reasonability
Modification Filing (adopting ISE Rule 722, Supplementary Material
.07(c)(2)). Rather than utilize a ``pre-set value'' (or buffer), the
Exchange has opted to hard code the reject value as $-0.01. See id.
---------------------------------------------------------------------------
Regarding calendar spread orders, the Exchange also proposes to
retain discretion to deactivate this price check in the interest of
fair and orderly markets.\15\ For example, the Exchange may deactivate
this price check if there is a corporate action in a complex symbol
that would result in an otherwise valid strategy being rejected by the
proposed check.\16\ The Exchange believes this discretion to deactivate
the Reasonability Check would be consistent with its obligation to
assure a fair and orderly market, and that the need for such
flexibility is recognized in other Exchange rules, such as those
related to position limits, quote-width differentials and price
protection filters.\17\ As proposed, the Exchange would announce by
electronic message to ATP Holders that request to receive such messages
if the Exchange deactivates (and later reactivates) the Reasonability
Check for calendar spread orders.
---------------------------------------------------------------------------
\15\ See proposed Commentary .06(a)(3)(i) to Rule 6.91-O.
\16\ The Exchange has not similarly retained discretion to
deactivate the Reasonability Checks for minimum price and vertical
spreads because corporate actions will not create a scenario where a
lower strike call would be cheaper than a higher strike call, or a
higher strike put will be cheaper than a lower strike put.
\17\ See, e.g., Rules 6.8-O (regarding position limits); 6.37A-O
(regarding maximum quotation spreads); 6.60-O (regarding price
protection for orders); 6.61-O (regarding price protection for
Market Maker quotes) and Commentary .05 to Rule 6.91-O (regarding
the Price Protection Filter for ECOs).
---------------------------------------------------------------------------
Further, the Exchange does not propose to apply the Reasonability
Check on calendar orders entered on the Trading Floor, as such orders
are subject to manual handling by individuals who will have evaluated
the price of an order based on then-market conditions.\18\ The Exchange
notes that other exchanges that offer price protections similar to
those proposed for calendar spreads have similarly retained discretion
to limit the application of this check.\19\
---------------------------------------------------------------------------
\18\ See proposed Commentary .06(a)(3)(i) to Rule 6.91-O.
\19\ See, e.g., CBOE Rule 6.53C, Interpretations and Policies
.08(c)(6) (excluding from debit/credit reasonability checks ``orders
routed from a PAR workstation or order management terminal'' because
such orders would be subject to manual handling). The Exchange notes
that CBOE's exclusion of complex orders entered on the floor from
its debit/credit reasonability checks is not limited to calendar
spreads but applies to all such orders entered from the floor of the
CBOE.
---------------------------------------------------------------------------
The Exchange notes that ECOs that are not rejected by the
Reasonability Checks would still be subject to the Price Protection
Filter.\20\
---------------------------------------------------------------------------
\20\ See proposed Commentary .06(b) to Rule 6.91-O; see also
supra note 6 [sic].
---------------------------------------------------------------------------
Implementation
The Exchange will announce by Trader Update the implementation date
of the proposed rule change within 90 days of the effective date of
this rule filing.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\21\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\22\
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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed Reasonability
Checks would protect investors and the public interest and maintain
fair and orderly markets by mitigating potential risks associated with
market participants entering Complex Orders at clearly unintended
prices that are inconsistent with their strategies. Specifically, a
Complex Order strategy where all legs are to sell (buy) will be
rejected if it is entered at a price that is less (more) than the
minimum (maximum) price. The Exchange believes it is reasonable to
reject such orders upon entry as they are not executable. Allowing such
orders to be entered would create investor confusion; as such orders
would not receive an execution and would remain pending until canceled.
Similarly, the
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Exchange believes that rejecting orders for vertical spread
strategies--as well as calendar spread strategies--that are entered at
a negative price also protects investors from executing orders that
were likely entered in error.
Regarding orders for calendar spreads, the Exchange recognizes that
it may not be appropriate to apply the Reasonability Checks to calendar
spreads in unusual market conditions, such as corporate actions that
result in changes in price to the underlying security.\23\ The Exchange
therefore believes it would remove impediments and perfect the
mechanism of a free and open market and a national market system for
the Exchange to temporarily deactivate the checks in the event of
unusual market conditions, which flexibility is consistent with other
exchange rules.\24\ Further, the Exchange also recognizes that the
applicable protections are not appropriate for orders entered manually
on the Trading Floor, because such orders would be subject to an
additional check of then-market conditions by the individual entering
the order, which flexibility is consistent with the rules of other
exchanges.\25\
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\23\ See supra note 17 [sic].
\24\ See supra note 18 [sic].
\25\ See supra note 20 [sic].
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The Exchange's proposed Reasonability Checks are similar to similar
protections offered on other options exchanges, including ISE. To the
extent there are differences between the proposed Reasonability Checks,
as described above (see supra notes12 and 15) [sic], the Exchange does
not believe such differences raise any new or significant policy
concerns. Further, despite the differences, the proposed Reasonability
Checks would otherwise operate in a similar manner to the checks on
ISE. As such, the Exchange merely desires to adopt functionality that
is similar to what already exists on ISE.\26\ Permitting the Exchange
to operate on an even playing field relative to other exchanges that
have similar functionality removes impediments to and perfects the
mechanism for a free and open market and a national market system.
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\26\ See supra note 7 [sic].
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B. Self-Regulatory Organization's Statement on Burden on Competition
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.
The proposed Reasonability Checks specify circumstances in which
the Exchange would reject certain ECOs in the interest of protecting
investors against the execution of erroneous orders or the execution of
orders at erroneous prices. As such, the proposal does not impose any
burden on competition. To the contrary, the Exchange believes that the
proposed Reasonability Checks may foster more competition.
Specifically, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. The Exchange's proposed rule change would enhance its
ability to compete with other exchanges that already offer similar
reasonability checks. Thus, the Exchange believes that this type of
competition amongst exchanges is beneficial to the market place as a
whole as it can result in enhanced processes, functionality, and
technologies. The Exchange further believes that because the proposed
rule change would be applicable to all OTP Holders and OTP Firms, it
would not impose any burden on intra-market competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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
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 for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \27\ and Rule 19b-4(f)(6) thereunder.\28\
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \29\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \30\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. NYSE Arca has
asked the Commission to waive the 30-day operative delay. NYSE Arcs
believes that waiving the operative delay would protect investors by
enabling the Exchange to provide greater protections from potentially
erroneous executions and potentially reduce the attendant risks of such
executions. As noted above, the proposal provides that a Complex Order
strategy where all legs are to sell (buy) will be rejected if it is
entered at a price that is less (more) than the minimum (maximum)
price. NYSE Arca notes that such an order is not executable, and that
allowing such an order to be entered would create investor confusion
because the order would not receive an execution and would remain
pending until canceled. Similarly, the Exchange believes that rejecting
orders for vertical and calendar spread strategies that are entered at
a negative price will protect investors from executing orders that were
likely entered in error.\31\ The Commission believes that waiver of the
operative delay is consistent with the protection of investors and the
public interest because the proposed rules are designed to reduce
investor confusion and to prevent the entry and execution of
erroneously priced ECOs. Therefore, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\32\
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\29\ 17 CFR 240.19b-4(f)(6).
\30\ 17 CFR 240.19b-4(f)(6)(iii).
\31\ As discussed above, the proposal also allows the Exchange
to deactivate the Reasonability Check for calendar spread
strategies. The Exchange will notify OTP Holders and OTP Firms by
electronic message of any such deactivation or re-activation. The
Exchange believes that this discretion is necessary because a
corporate action, for example, could result in the Reasonability
Check for calendar spread strategies rejecting an otherwise valid
strategy. The proposal also provides that the Reasonability Check
for calendar spread strategies will not apply to ECOs that are
entered on the Trading Floor. The Exchange notes that such orders
are subject to manual handling by individuals who will have
evaluated the price of the order based on market conditions. The
Exchange further notes that another exchange has adopted a similar
rule. See note 19, supra.
\32\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the
[[Page 42865]]
Commission shall institute proceedings to determine whether the
proposed rule change should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-2017-93 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2017-93. 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-2017-93 and should
be submitted on or before October 3, 2017.
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\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19241 Filed 9-11-17; 8:45 am]
BILLING CODE 8011-01-P
