Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update and Amend its Options Rules, as Described Herein, To Reduce Unnecessary Complexity and To Promote Standardization and Clarity, 45095-45099 [2017-20624]
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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81668; File No. SR–
NASDAQ–2017–074]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of Longer Period for
Commission Action on Proposed Rule
Change, as Modified by Amendment
No. 1, To Adopt the Midpoint Extended
Life Order
September 21, 2017.
On July 21, 2017, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt the Midpoint Extended
Life Order. The proposed rule change
was published for comment in the
Federal Register on August 9, 2017.3 On
August 9, 2017, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 The Commission has received
three comment letters on the proposal.5
Section 19(b)(2) of the Act 6 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81311
(August 3, 2017), 82 FR 37248.
4 In Amendment No. 1, the Exchange updated
Item 2, ‘‘Procedures of the Self-Regulatory
Organization,’’ in Form 19b–4 of the proposal to
reflect the approval of the proposal by the
Exchange’s Board of Directors on July 21, 2017.
When the Exchange filed Amendment No. 1 with
the Commission, it also submitted Amendment No.
1 to the public comment file for SR–NASDAQ–
2017–074 (available at: https://www.sec.gov/
comments/sr-nasdaq-2017-074/nasdaq
2017074.htm). Because Amendment No. 1 is a
technical amendment that does not alter the
substance of the proposed rule change, it is not
subject to notice and comment.
5 See Letters to Brent J. Fields, Secretary,
Commission, from Stephen John Berger, Managing
Director, Government & Regulatory Policy, Citadel
Securities, dated August 30, 2017; Ray Ross, Chief
Technology Officer, The Clearpool Group, dated
September 12, 2017; and Joanna Mallers, Secretary,
FIA Principal Traders Group, dated September 19,
2017.
6 15 U.S.C. 78s(b)(2).
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2 17
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disapproved. The 45th day for this filing
is September 23, 2017.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the Exchange’s proposal, the
comments received, and any response to
the comments by the Exchange.
Accordingly, pursuant to Section
19(b)(2) of the Act 7 and for the reasons
stated above, the Commission
designates November 7, 2017, as the
date by which the Commission shall
either approve or disapprove, or
institute proceedings to determine
whether to disapprove, the proposed
rule change (File No. SR–NASDAQ–
2017–074), as modified by Amendment
No. 1.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–20623 Filed 9–26–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81670; File No. SR–
NYSEAMER–2017–18]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Update and Amend its
Options Rules, as Described Herein,
To Reduce Unnecessary Complexity
and To Promote Standardization and
Clarity
September 21, 2017.
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
September 11, 2017, NYSE American
LLC (the ‘‘Exchange’’ or ‘‘NYSE
American’’) 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
7 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
8 17
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45095
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to update and
amend its options rules, as described
herein, to reduce unnecessary
complexity and to promote
standardization and clarity.
The proposed rule change is available
on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to update and
amend its options rules as follows: (1)
Delete Rules 965 and 970 and replace
them with new Rules 915NY, 915.1NY,
915.2NY and 915.3NY, in order to
update its rules governing the
verification of compared trades and the
reconciliation of uncompared trades,
and simultaneously to conform the
Exchange’s rules to the rules of NYSE
Arca, Inc. (‘‘NYSE Arca’’), its affiliated
exchange, and to update the crossreferences to Rules 965 and 970 in Rules
900F and 900H accordingly; (2) amend
Rule 900.2NY(29) to clarify the
definition of Floor Market Maker; (3)
amend Rule 902NY to replace an
outdated reference to the Options
Surveillance Department; (4) amend
Rule 920NY(a) to clarify the definition
of Market Maker and to conform the
Exchange’s rules to the rules of NYSE
Arca; (5) amend Rule 930NY to replace
the definition of ‘‘Professional
Customer’’ with ‘‘Qualified Customer’’
in connection with the limited public
business that qualified Floor Brokers
and their Floor Clerks may conduct; (6)
amend Rule 934NY to update the
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references to the current Order
Protection Rule; (7) amend Rule 955NY
to replace an outdated reference to a
required timestamp synchronized to the
‘‘NIST Clock’’ with a reference to the
current operative Consolidated Audit
Trail (‘‘CAT’’) clock synchronization
rule; and (8) amend Rule 963NY in
order to conform the Exchange’s rule
governing the priority of complex orders
in open outcry to its rule governing
electronic complex orders. The
Exchange proposes to make these rule
changes in order to update its rules,
reduce complexity and provide
clarification concerning its rules, delete
outdated cross-references, and
standardize and conform its rules to the
rules of its affiliated exchange governing
the same subject matter.
Proposed Rule Changes Governing the
Verification and Reconciliation of
Trades
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In order to update its rules governing
the reconciliation of uncompared trades
and to conform its rules to the rules of
NYSE Arca, its affiliated exchange, the
Exchange proposes to delete Rules 965
and 970 and its commentary,4 and to
replace them with new Rules 915NY
and its commentary, 915.1NY, 915.2NY,
and 915.3NY and its commentary. This
proposal is based upon existing NYSE
Arca Rules 6.17–O and its commentary,
6.18–O, 6.19–O, and 6.21–O and its
commentary, which rules govern the
same subject matter, and that the
Exchange proposes to renumber and
adopt with conforming modifications.5
4 Rule 970 was last amended in 2004 to reflect
then-current data processing and communications
technology for comparing options transactions that
were excluded from clearing and for the timely
resolution of such uncompared trades. See
Securities Exchange Act Release No. 49438 (March
17, 2004), 69 FR 13919 (March 24, 2004) (SR–
AMEX–2003–78). Rule 970 emanates from earlier,
and contains such outdated references and
anachronistic concepts as a Rejected Option
Transaction Notice (‘‘ROTN’’) that must be ‘‘OK’d
or DK’d’’; a ‘‘ROTN Room’’ where members or
member organizations or their representatives must
be present in order to resolve ‘‘prior day’s
business’’; the ‘‘call time’’ deadline for parties to
check their contract sheets to reconcile uncompared
trades and to verify any trades where they are
identified as the contra-side; and a manual
requirement to include the ‘‘badge number’’ of both
the executing and the contra-broker, which required
data elements are now captured electronically in
the electronic order capture rule before an order is
sent electronically or represented in open outcry.
See Rule 955NY Order Format and System Entry
Requirements.
5 To conform the proposed new rules to the
Exchange’s existing rulebook and definitions, the
Exchange proposes to substitute ‘‘ATP Holders’’ for
‘‘OTP Holders and OTP Firms’’, to substitute
‘‘NYSE Amex Trade Processing Department’’ for
‘‘NYSE Arca Trade Processing Department’’, and to
cross-reference Exchange Rule 9200 in lieu of the
cross-reference to NYSE Arca’s disciplinary rule.
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Proposed Rules 915NY et seq. would
update the outdated language of Rules
965 and 970 by clarifying the
requirements and processes of verifying
and comparing trades, including the
requirement that clearing members
verify and reconcile both compared and
uncompared trades promptly, and
routinely compare trades during the
course of a trading session; the issuance
by the Exchange of an unreconciled
trade report after the cut-off hour for the
receipt of reconciliation reports; the
provision by the Exchange of a report of
compared trades to the Options Clearing
Corporation (‘‘OCC’’); the provision of
notice of trades that remained
uncompared overnight, and for the
fixation of the amount of loss; and
would conform the rules of the
Exchange to the rules of NYSE Arca,
thus providing further rule uniformity,
and the attendant clarification of
processes in options marketplaces.6 In
addition, the Exchange believes Rule
970, which includes outdated
language,7 unnecessarily hinders and
delays further technical improvements
and that the requirements of new
proposed Rules 915NY et seq. would
both modernize its rulebook to more
closely describe the existing options
reconciliation process, in addition to
conforming its rulebook to the extant
rules of its affiliated exchange.
Specifically, new proposed Rule
915NY and its associated commentary
(which is based upon NYSE Arca Rule
6.17–O and its commentary) would add
greater specificity in connection with
the obligations of ATP Holders to both
verify compared trades and to reconcile
and report uncompared trades.8 Unlike
6 See generally NYSE Arca Rules 6.17–O, 6.18–O,
6.19–O, and 6.21–O, now proposed as new Rules
915NY, 915.1NY, 915.2NY, and 915.3NY. NYSE
Arca Rule 6.20–O, that addresses time
synchronization, is inapposite to these proposed
rule changes governing the reconciliation of
uncompared trades, and is therefore not included
sequentially in new proposed Rules 915NY et seq.;
but see, infra, the rule change proposed by the
Exchange amending Rule 955NY, that would
replace an outdated reference to a required
timestamp synchronized to the ‘‘NIST Clock’’ with
a reference to the current CAT clock
synchronization rule. Separately, NYSE Arca, the
affiliated Exchange, also intends to file a proposed
rule change amending NYSE Arca Rule 6.20–O to
replace the same outdated timestamp reference in
its rulebook.
7 See Ftnt. 4, supra.
8 New proposed Rule 915NY would provide that
ATP Holders that are clearing members of the OCC
or their delegates shall be obligated to verify the
information shown on the contract lists or on such
electronic display terminals to reconcile all
uncompared trades and advisory trades shown on
the uncompared trade list and to report all
reconciliations, corrections and adjustments to the
Exchange in accordance with such procedures as
may be established by the Exchange from time to
time. Such reconciliation report shall be filed with
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Rule 970’s focus upon trades excluded
from clearance, new proposed Rule
915NY and Commentary .01 describes
existing obligations to verify trade
information in order to reconcile
uncompared trades—to verify and
reconcile compared and uncompared
trades promptly—and to timely report
the resulting reconciliations, corrections
and adjustments to the Exchange.9
New proposed Rule 915.1NY (which
is based upon NYSE Arca Rule 6.18–O)
would replace Rule 965. Rule 965 is
textually identical to NYSE Arca 6.18–
O.10 Consequently, there is no formative
change associated with the replacement
of Rule 965 with proposed Rule
915.1NY but for the replacement of the
cross-reference to Rule 970 with a crossreference to new proposed Rule 915.3,
the successor rule governing the
resolution of uncompared trades.11
New proposed Rule 915.2NY (which
is based upon Arca Rule 6.19–O),
the Exchange prior to such cut-off time as the
Exchange may prescribe and shall be binding on the
clearing member on whose behalf it is filed. New
proposed Commentary to Rule 915NY would
provide that Rule 915NY requires clearing members
to verify and reconcile compared and uncompared
trades promptly in accordance with procedures
established by the Exchange from time to time; that
trades must be routinely compared during the
course of the trading session; that all executing ATP
Holders must be available for the settlement of
uncompared trades throughout the trading day and
until the final trade transmission is sent to the OCC,
either in person or through a designated
representative empowered to negotiate settlement of
any dispute in such ATP Holder’s name and
account; that for purposes of complying with this
provision, the authorized representative must be
physically present on the Trading Floor or be
accessible via telephone or email, until the final
trade transmission is sent to the OCC; that it will
be considered a violation of Rule 915NY if a
responsible ATP Holder is not available to reconcile
an uncompared trade when contacted by NYSE
Amex Trade Processing Department; and that, while
there may be occasional instances when a trade
must remain uncompared overnight, and be
resolved in conformance with Rule 915.3NY, any
ATP Holders responsible for an undue number of
such occurrences will be subject to disciplinary
action pursuant to Rule 9200.
9 Simultaneously, new proposed Rule 915NY
would eliminate the outdated references and
anachronistic concepts rampant throughout
Commentary .01 to Rule 970, thus further clarifying
the rulebook. See Ftnt. 4, supra.
10 New proposed Rule 915.1NY would provide
that on each business day after the cut-off hour for
the receipt of reconciliation reports, the Exchange
shall issue to each ATP Holder which is a clearing
member of the OCC or its delegate, an unreconciled
trade report which will contain a list of any new
or remaining uncompared trades and advisory
trades of such clearing member. If any such trades
are subsequently reconciled between the parties,
they may be submitted for comparison on the next
business day. Trades which are not so reconciled
by the parties shall be closed in accordance with
the provisions of Rule 915.3NY.
11 The Exchange also proposes placing the
requirements of Rule 965, which address the
issuance of an unreconciled trade report, within the
newly grouped sequence of rules that address the
processes of comparison and reconciliation.
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similarly to new proposed Rule 915NY
and its commentary, would describe
existing processes of the Exchange: To
furnish to the OCC a report of each
clearing member’s compared trades
based on the comparison service
performed by the Exchange on that
business day; thus providing further
rule uniformity and clarification of this
part of the process in the options
marketplaces.12
New proposed Rule 915.3NY and its
commentary (which is based upon Arca
Rule 6.21–O and its commentary) 13
describes calculations of the amounts of
loss on uncompared trades,14 provisions
that Rule 970 did not specify, and that
the Exchange believes would provide
helpful clarification and conformity of
its rulebook and processes.15
Additionally, Commentary .02 to new
proposed Rule 915.3NY also describes
the Exchange’s authority to remove from
record any transactions that have, in
error, been matched but which are
actually uncompared transactions.16
12 New proposed Rule 915.2NY would provide
that on each business day at or prior to such time
as may be prescribed by the OCC, the Exchange
shall furnish the OCC a report of each clearing
member’s compared trades based on the
comparison service performed by the Exchange on
that day. Only trades which have been compared
in accordance with the provisions of this Rule shall
be furnished by the Exchange to the OCC, and the
Exchange shall assume no responsibility with
respect to any uncompared trade nor for any delays
or errors in the reporting of trades for comparison.
13 As noted in Ftnt. 6, supra, NYSE Arca Rule
6.20–O is inapposite to these proposed rule changes
governing the reconciliation of uncompared trades
and is therefore not included sequentially in new
proposed Rules 915NY et seq.
14 New proposed Rule 915.3NY would provide
that the amount of loss as a result of an uncompared
trade would be the opening price for such contract
on the business day following the trade date; where
the uncompared trade side is one for the purchase
of option contracts and no trade occurred on the
opening, the price used in fixing the amount of the
loss would be the offer at the time of the opening;
and, where the uncompared trade side is one for the
sale of option contracts and no trade occurred on
the opening, the price used in fixing the amount of
the loss would be the bid price.
15 New proposed Rule 915.3NY would also
provide that notice of uncompared trades must be
provided no later than the scheduled
commencement of trading unless directed
otherwise by a Trading Official; that in the event
an uncompared transaction involves an option
contract of a series in which trading has been
terminated or suspended before a new Exchange
option transaction can be effected to establish the
amount of any loss, the ATP Holder not at fault may
claim damages against the other party involved in
the transaction based on the terms of such
transaction; and that all such claims shall be made
promptly but in no event shall such claim be made
after the close of trading on the first business day
following the date of the uncompared transaction in
question.
16 New proposed Commentary to Rule 915.3NY
would also provide that in order to ensure that
trades can be resolved by the scheduled
commencement of trading in such series or class of
options on the first business day following the trade
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The Exchange believes that the
deliberate assemblage of the provisions
concerning the resolution of
uncompared trades in a separate new
rule, new proposed Rule 9.15.3NY,
along with the assembly of the
associated rules governing the
verification of compared trades and the
reconciliation of uncompared trades, the
issuance of an unreconciled trade
report, and the reporting of compared
trades to OCC, in new proposed Rules
915NY, 915.1NY and 915.2NY,
respectively, would clarify, update and
make uniform the rules governing the
post-trade processing of options
transactions, and would accelerate the
reconciliation process for uncompared
options transactions, thereby reducing
any potential risks or inefficiencies
inherent in the continued use of
outdated Rules 965 and 970.
Finally, in a further effort at
standardization and clarity, the
Exchange proposes to add the new rules
to the ‘‘NY’’ series of its rulebook,
which contains the rules principally
applicable to the trading of options
contracts. In order to provide further
clarification concerning its rules, the
Exchange also proposes to replace the
cross-references to Rules 965 and 970 in
Rules 900F and Rule 900H with updated
cross-references to proposed Rules
915NY, 915.1NY, 915.2NY, and
915.3NY.
Other Proposed Rule Changes
In addition, the Exchange proposes to
amend Rule 900.2NY(29) to streamline
the definition of Floor Market Maker.
Specifically, the Exchange proposes to
amend Rule 900.2NY(29) so that the
proposed definition would read ‘‘The
term ‘Floor Market Maker’ shall mean a
registered Market Maker who makes
transactions as a dealer-specialist while
on the Floor of the Exchange.’’ In
connection with this change, the
Exchange proposes to eliminate ‘‘and
provides quotations: (A) Manually, by
public outcry, and (B) electronically
through an auto-quoting device’’ as an
unnecessarily repetitive description of a
Floor Market Maker’s activity, in an
effort to promote further clarification in
its rulebook.
In order to further update and clarify
the Exchange’s rules governing conduct
on the options trading floor, the
Exchange proposes to amend Rule
902NY(f) to replace an outdated
reference to the ‘‘Options Surveillance
date, ATP Holder are required to have an
authorized representative of such ATP Holder
available to resolve uncompared trades no later
than 45 minutes from the scheduled
commencement of trading on said business day
following the trade date.
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45097
Department’’ with ‘‘NYSE Regulation’’,
the current operative entity to which
complaints from ATP Holders may be
directed. NYSE Regulation currently
oversees the self-regulatory
responsibilities and functions of the
Exchange.17
In order to add further clarification to
its rulebook, and to conform its
definition of Marker Maker to the rules
of NYSE Arca, its affiliated exchange,
the Exchange also proposes to add
‘‘making transactions as a dealerspecialist on the Floor of the Exchange’’
to the beginning of the first sentence of
Rule 920NY, and to delete ‘‘verbally on
the Trading Floor’’ and ‘‘from on the
Trading Floor or remotely from off the
Trading Floor’’ from the end of that
sentence.18 The proposed sentence
would read ‘‘A Market Maker is an ATP
Holder that is registered with the
Exchange for the purpose of making
transactions as a dealer-specialist on the
Floor of the Exchange or for the purpose
of submitting quotes electronically and
making transactions as a dealerspecialist through the System.’’ In
addition to being consistent with the
definition of a Marker Maker in NYSE
Arca Rule 6.32(a)–O, the Exchange
believes that this modification will
promote greater clarity without affecting
the definition of market maker as a
dealer-specialist that makes transactions
in open outcry on the floor of the
Exchange and electronically through the
System.
In order to clarify its rules, the
Exchange also proposes to amend Rule
930NY(b)(1) and Rule 930NY(b)(2) to
replace the definition of ‘‘Professional
Customer’’ with the single-use term
‘‘Qualified Customer’’ in connection
with the limited public business that
qualified Floor Brokers and their Floor
Clerks may conduct. Rule 930NY(b)
defines both the permissible conduct of
a limited public business and also
defines ‘‘Professional Customer’’, for
purposes of Rule 930NY(b), as ‘‘not
includ[ing] those participants defined in
Rule 900.2NY(18A)’’.19 In order to avoid
17 See Regulatory Information Memo No. 15–6
available at: https://www.nyse.com/publicdocs/
nyse/markets/nyse/rule-interpretations/2015/NYSE15-6.pdf
18 The Exchange also proposes deleting ‘‘in
accordance with the Rules of the Exchange’’ from
the end of that first sentence as unnecessary
because adherence to the Exchange’s rules is
intrinsic to all rules in its rulebook.
19 The definition of ‘‘Professional Customer’’ in
Rule 900.2NY(18A), which is broader than the
definition in Rule 930NY (b)(2), defines a
‘‘Professional Customer’’ as an individual or
organization that is not a Broker/Dealer in securities
and places more than 390 orders in listed options
per day on average during a calendar month for its
own beneficial account(s). Rule 900.2NY(18A) also
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unnecessary complexity or confusion
concerning the duplicate definitions of
‘‘Professional Customer’’, the Exchange
proposes to amend Rule 930NY(b) to
replace the definition of ‘‘Professional
Customer’’ with the single-use term
‘‘Qualified Customer’’ in connection
with the limited public business, and to
limit the use of ‘‘Qualified Customer’’ to
Rule 930NY(b).
Furthermore, in order to provide
further clarification concerning its rules,
the Exchange proposes to amend Rule
934NY, its crossing rule, by replacing
outdated references to the requirement
that execution prices ‘‘be equal to or
better than the NBBO’’ with updated
cross-references to the Rule 991NY, the
current plenary Order Protection Rule.
In addition, in connection with both
customer-to-customer cross and nonfacilitation (regular way) crosses, the
Exchange proposes to delete from Rules
934NY(a)(3)(B) and 934NY(b)(3) two
sentences that provide that ‘‘[t]he orders
will be cancelled or posted in the Book
if an execution would take place at a
price that is inferior to the NBBO’’. Rule
991NY would also govern in such
situations, and the orders will not be
cancelled or posted but would trade
through in accord with the exemptions
in Rule 991NY.
In order to update and clarify the
Exchange’s rules governing its order
format and system entry requirements,
the Exchange proposes to amend Rule
955NY to replace an outdated reference
to a required timestamp synchronized to
the ‘‘NIST Clock’’ with a reference to
Rule 6820, the current CAT clock
synchronization rule. Specifically, in
connection with Rule 955NY(d)(2)(A),
which governs contingency reporting
procedures when an exception to the
EOC (Electronic Order Capture System)
applies, the Exchange proposes to delete
an outdated reference to ‘‘(a timestamp
synchronized with the National Institute
of Standards and Technology Atomic
Clock in Boulder Colorado ‘NIST Clock’
will be available at all ATP Holder
booths[sic]’’ and instead add the
requirement that all order events must
conform to the requirements of Rule
6820. For further clarity, the Exchange
also proposes to delete ‘‘immediately’’
from the text of the rule because Rule
6820 sets the operative standard.
Finally, the Exchange proposes to
conform its rule governing the priority
of complex orders in open outcry to its
rule governing Electronic Complex
defines the treatment of a Professional Customer
under various Exchange rules except Rule
930NY(b), and defines how to calculate the number
of Professional Customers orders in connection
with different order types.
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18:59 Sep 26, 2017
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Orders. Specifically, the Exchange
proposes to conform Rule 963NY(d) to
Rule 980NY(b) by amending Rule
963NY(d) to provide that a Complex
Order and Stock/Complex Orders may
be executed at a ‘‘total or’’ net debit or
credit price.
2. Statutory Basis
The proposed rule changes are
consistent with Section 6(b) 20 of the
Act, in general, and furthers the
objectives of Section 6(b)(5),21 in
particular, in that they are 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.
Specifically, the Exchange believes
that conforming its definitional rules to
the rules of an affiliated exchange,
updating its rules by deleting and
updating outdated cross-references,
eliminating extraneous or redundant,
and therefore potentially confusing or
ambiguous, language, clarifying a
duplicative definition, updating a crossreference to a current operative rule or
operative entity, and updating its posttrading verification and reconciliation
rules, and conforming its rules to the
rules of an affiliated exchange governing
the same subject matter, would remove
impediments to and perfect a national
market system by simplifying the
functionality and complexity of its rules
and regulatory requirements. The
Exchange also believes that these
proposed amendments would be
consistent with the public interest and
the protection of investors because
investors would not be harmed and, in
fact, would benefit from this
simplification, updating and
clarification. Further, the Exchange
believes that investors would benefit
from the added transparency and clarity
of the Exchange’s rules.
In addition, the Exchange believes,
that by updating and conforming its
rules governing the verification of
compared trades and the reconciliation
of uncompared trades to the rules of
NYSE Arca, its affiliated exchange, by
streamlining the definition of Floor
Market Maker by eliminating extraneous
language, by updating and clarifying the
Exchange’s rules governing conduct on
the options trading floor by replacing an
outdated reference to the ‘‘Options
20 15
21 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00113
Fmt 4703
Sfmt 4703
Surveillance Department’’ with ‘‘NYSE
Regulation’’, by updating and
conforming its definition of Market
Maker to the definition of NYSE Arca
and deleting redundant and therefore
potentially confusing language, by
replacing the definition of ‘‘Professional
Customer’’ with the single-use term
‘‘Qualified Customer’’ in connection
with the limited public business that
qualified Floor Brokers and their Floor
Clerks may conduct, by amending its
crossing rule by replacing outdated and
potentially ambiguous references to the
NBBO with cross-references to the
current plenary Order Protection Rule,
by updating and clarifying its rules
governing its order format and system
entry requirements by replacing an
outdated reference with a reference to
the current operative CAT time
synchronization rule, and by
conforming its rule governing the
priority of complex orders in open
outcry to its rule governing Electronic
Complex Orders, would also promote
just and equitable principles of trade,
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, would help to
protect investors and the public interest
by providing transparency as to which
rules are operable, and by reducing
potential confusion that may result from
having outdated or redundant rules or
cross-references in the Exchange’s
rulebook. The Exchange further believes
that the proposed rule changes would
remove impediments to and perfect the
mechanism of a free and open market by
ensuring that members, regulators and
the public can more easily navigate and
understand the Exchange’s rulebook.
For these reasons, the Exchange
believes that the proposal is consistent
with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed changes are not designed to
address any competitive issue but
would instead update, remove, and
clarify outdated cross-references and
definitions, and redundant language,
and also conform the Exchange’s rules
and definitions to the rules of another
exchange, thereby reducing confusion
and making the Exchange’s rules easier
to understand and navigate.
E:\FR\FM\27SEN1.SGM
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Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices
Electronic Comments
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 22 and Rule
19b–4(f)(6) thereunder.23 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.
A proposed rule change filed under
Rule 19b–4(f)(6) 24 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),25 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
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) 26 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
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:
• 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–
NYSEAMER–2017–18 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–NYSEAMER–2017–18. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEAMER–2017–18, and should be
submitted on or before October 18,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Assistant Secretary.
22 15
[FR Doc. 2017–20624 Filed 9–26–17; 8:45 am]
23 17
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81672; File No. SR–
NYSEAMER–2017–17]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule 7.31E
Relating to the Minimum Trade Size
Modifier for Additional Order Types
and Expanding the Minimum Trade
Size Modifier for Existing Order Types
September 21, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on
September 11, 2017, NYSE American
LLC (‘‘Exchange’’ or ‘‘NYSE American’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.31E relating to the Minimum
Trade
Size modifier.
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.
BILLING CODE 8011–01–P
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
24 17 CFR 240.19b–4(f)(6).
25 17 CFR 240.19b–4(f)(6)(iii).
26 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
18:59 Sep 26, 2017
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
27 17
Jkt 241001
PO 00000
CFR 200.30–3(a)(12).
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45099
E:\FR\FM\27SEN1.SGM
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]]>Agencies
[Federal Register Volume 82, Number 186 (Wednesday, September 27, 2017)]
[Notices]
[Pages 45095-45099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20624]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81670; File No. SR-NYSEAMER-2017-18]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Update
and Amend its Options Rules, as Described Herein, To Reduce Unnecessary
Complexity and To Promote Standardization and Clarity
September 21, 2017.
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 September 11, 2017, NYSE American LLC (the ``Exchange''
or ``NYSE American'') 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 the
Substance of the Proposed Rule Change
The Exchange proposes to update and amend its options rules, as
described herein, to reduce unnecessary complexity and to promote
standardization and clarity.
The proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to update and amend its options rules as
follows: (1) Delete Rules 965 and 970 and replace them with new Rules
915NY, 915.1NY, 915.2NY and 915.3NY, in order to update its rules
governing the verification of compared trades and the reconciliation of
uncompared trades, and simultaneously to conform the Exchange's rules
to the rules of NYSE Arca, Inc. (``NYSE Arca''), its affiliated
exchange, and to update the cross-references to Rules 965 and 970 in
Rules 900F and 900H accordingly; (2) amend Rule 900.2NY(29) to clarify
the definition of Floor Market Maker; (3) amend Rule 902NY to replace
an outdated reference to the Options Surveillance Department; (4) amend
Rule 920NY(a) to clarify the definition of Market Maker and to conform
the Exchange's rules to the rules of NYSE Arca; (5) amend Rule 930NY to
replace the definition of ``Professional Customer'' with ``Qualified
Customer'' in connection with the limited public business that
qualified Floor Brokers and their Floor Clerks may conduct; (6) amend
Rule 934NY to update the
[[Page 45096]]
references to the current Order Protection Rule; (7) amend Rule 955NY
to replace an outdated reference to a required timestamp synchronized
to the ``NIST Clock'' with a reference to the current operative
Consolidated Audit Trail (``CAT'') clock synchronization rule; and (8)
amend Rule 963NY in order to conform the Exchange's rule governing the
priority of complex orders in open outcry to its rule governing
electronic complex orders. The Exchange proposes to make these rule
changes in order to update its rules, reduce complexity and provide
clarification concerning its rules, delete outdated cross-references,
and standardize and conform its rules to the rules of its affiliated
exchange governing the same subject matter.
Proposed Rule Changes Governing the Verification and Reconciliation of
Trades
In order to update its rules governing the reconciliation of
uncompared trades and to conform its rules to the rules of NYSE Arca,
its affiliated exchange, the Exchange proposes to delete Rules 965 and
970 and its commentary,\4\ and to replace them with new Rules 915NY and
its commentary, 915.1NY, 915.2NY, and 915.3NY and its commentary. This
proposal is based upon existing NYSE Arca Rules 6.17-O and its
commentary, 6.18-O, 6.19-O, and 6.21-O and its commentary, which rules
govern the same subject matter, and that the Exchange proposes to
renumber and adopt with conforming modifications.\5\
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\4\ Rule 970 was last amended in 2004 to reflect then-current
data processing and communications technology for comparing options
transactions that were excluded from clearing and for the timely
resolution of such uncompared trades. See Securities Exchange Act
Release No. 49438 (March 17, 2004), 69 FR 13919 (March 24, 2004)
(SR-AMEX-2003-78). Rule 970 emanates from earlier, and contains such
outdated references and anachronistic concepts as a Rejected Option
Transaction Notice (``ROTN'') that must be ``OK'd or DK'd''; a
``ROTN Room'' where members or member organizations or their
representatives must be present in order to resolve ``prior day's
business''; the ``call time'' deadline for parties to check their
contract sheets to reconcile uncompared trades and to verify any
trades where they are identified as the contra-side; and a manual
requirement to include the ``badge number'' of both the executing
and the contra-broker, which required data elements are now captured
electronically in the electronic order capture rule before an order
is sent electronically or represented in open outcry. See Rule 955NY
Order Format and System Entry Requirements.
\5\ To conform the proposed new rules to the Exchange's existing
rulebook and definitions, the Exchange proposes to substitute ``ATP
Holders'' for ``OTP Holders and OTP Firms'', to substitute ``NYSE
Amex Trade Processing Department'' for ``NYSE Arca Trade Processing
Department'', and to cross-reference Exchange Rule 9200 in lieu of
the cross-reference to NYSE Arca's disciplinary rule.
---------------------------------------------------------------------------
Proposed Rules 915NY et seq. would update the outdated language of
Rules 965 and 970 by clarifying the requirements and processes of
verifying and comparing trades, including the requirement that clearing
members verify and reconcile both compared and uncompared trades
promptly, and routinely compare trades during the course of a trading
session; the issuance by the Exchange of an unreconciled trade report
after the cut-off hour for the receipt of reconciliation reports; the
provision by the Exchange of a report of compared trades to the Options
Clearing Corporation (``OCC''); the provision of notice of trades that
remained uncompared overnight, and for the fixation of the amount of
loss; and would conform the rules of the Exchange to the rules of NYSE
Arca, thus providing further rule uniformity, and the attendant
clarification of processes in options marketplaces.\6\ In addition, the
Exchange believes Rule 970, which includes outdated language,\7\
unnecessarily hinders and delays further technical improvements and
that the requirements of new proposed Rules 915NY et seq. would both
modernize its rulebook to more closely describe the existing options
reconciliation process, in addition to conforming its rulebook to the
extant rules of its affiliated exchange.
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\6\ See generally NYSE Arca Rules 6.17-O, 6.18-O, 6.19-O, and
6.21-O, now proposed as new Rules 915NY, 915.1NY, 915.2NY, and
915.3NY. NYSE Arca Rule 6.20-O, that addresses time synchronization,
is inapposite to these proposed rule changes governing the
reconciliation of uncompared trades, and is therefore not included
sequentially in new proposed Rules 915NY et seq.; but see, infra,
the rule change proposed by the Exchange amending Rule 955NY, that
would replace an outdated reference to a required timestamp
synchronized to the ``NIST Clock'' with a reference to the current
CAT clock synchronization rule. Separately, NYSE Arca, the
affiliated Exchange, also intends to file a proposed rule change
amending NYSE Arca Rule 6.20-O to replace the same outdated
timestamp reference in its rulebook.
\7\ See Ftnt. 4, supra.
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Specifically, new proposed Rule 915NY and its associated commentary
(which is based upon NYSE Arca Rule 6.17-O and its commentary) would
add greater specificity in connection with the obligations of ATP
Holders to both verify compared trades and to reconcile and report
uncompared trades.\8\ Unlike Rule 970's focus upon trades excluded from
clearance, new proposed Rule 915NY and Commentary .01 describes
existing obligations to verify trade information in order to reconcile
uncompared trades--to verify and reconcile compared and uncompared
trades promptly--and to timely report the resulting reconciliations,
corrections and adjustments to the Exchange.\9\
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\8\ New proposed Rule 915NY would provide that ATP Holders that
are clearing members of the OCC or their delegates shall be
obligated to verify the information shown on the contract lists or
on such electronic display terminals to reconcile all uncompared
trades and advisory trades shown on the uncompared trade list and to
report all reconciliations, corrections and adjustments to the
Exchange in accordance with such procedures as may be established by
the Exchange from time to time. Such reconciliation report shall be
filed with the Exchange prior to such cut-off time as the Exchange
may prescribe and shall be binding on the clearing member on whose
behalf it is filed. New proposed Commentary to Rule 915NY would
provide that Rule 915NY requires clearing members to verify and
reconcile compared and uncompared trades promptly in accordance with
procedures established by the Exchange from time to time; that
trades must be routinely compared during the course of the trading
session; that all executing ATP Holders must be available for the
settlement of uncompared trades throughout the trading day and until
the final trade transmission is sent to the OCC, either in person or
through a designated representative empowered to negotiate
settlement of any dispute in such ATP Holder's name and account;
that for purposes of complying with this provision, the authorized
representative must be physically present on the Trading Floor or be
accessible via telephone or email, until the final trade
transmission is sent to the OCC; that it will be considered a
violation of Rule 915NY if a responsible ATP Holder is not available
to reconcile an uncompared trade when contacted by NYSE Amex Trade
Processing Department; and that, while there may be occasional
instances when a trade must remain uncompared overnight, and be
resolved in conformance with Rule 915.3NY, any ATP Holders
responsible for an undue number of such occurrences will be subject
to disciplinary action pursuant to Rule 9200.
\9\ Simultaneously, new proposed Rule 915NY would eliminate the
outdated references and anachronistic concepts rampant throughout
Commentary .01 to Rule 970, thus further clarifying the rulebook.
See Ftnt. 4, supra.
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New proposed Rule 915.1NY (which is based upon NYSE Arca Rule 6.18-
O) would replace Rule 965. Rule 965 is textually identical to NYSE Arca
6.18-O.\10\ Consequently, there is no formative change associated with
the replacement of Rule 965 with proposed Rule 915.1NY but for the
replacement of the cross-reference to Rule 970 with a cross-reference
to new proposed Rule 915.3, the successor rule governing the resolution
of uncompared trades.\11\
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\10\ New proposed Rule 915.1NY would provide that on each
business day after the cut-off hour for the receipt of
reconciliation reports, the Exchange shall issue to each ATP Holder
which is a clearing member of the OCC or its delegate, an
unreconciled trade report which will contain a list of any new or
remaining uncompared trades and advisory trades of such clearing
member. If any such trades are subsequently reconciled between the
parties, they may be submitted for comparison on the next business
day. Trades which are not so reconciled by the parties shall be
closed in accordance with the provisions of Rule 915.3NY.
\11\ The Exchange also proposes placing the requirements of Rule
965, which address the issuance of an unreconciled trade report,
within the newly grouped sequence of rules that address the
processes of comparison and reconciliation.
---------------------------------------------------------------------------
New proposed Rule 915.2NY (which is based upon Arca Rule 6.19-O),
[[Page 45097]]
similarly to new proposed Rule 915NY and its commentary, would describe
existing processes of the Exchange: To furnish to the OCC a report of
each clearing member's compared trades based on the comparison service
performed by the Exchange on that business day; thus providing further
rule uniformity and clarification of this part of the process in the
options marketplaces.\12\
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\12\ New proposed Rule 915.2NY would provide that on each
business day at or prior to such time as may be prescribed by the
OCC, the Exchange shall furnish the OCC a report of each clearing
member's compared trades based on the comparison service performed
by the Exchange on that day. Only trades which have been compared in
accordance with the provisions of this Rule shall be furnished by
the Exchange to the OCC, and the Exchange shall assume no
responsibility with respect to any uncompared trade nor for any
delays or errors in the reporting of trades for comparison.
---------------------------------------------------------------------------
New proposed Rule 915.3NY and its commentary (which is based upon
Arca Rule 6.21-O and its commentary) \13\ describes calculations of the
amounts of loss on uncompared trades,\14\ provisions that Rule 970 did
not specify, and that the Exchange believes would provide helpful
clarification and conformity of its rulebook and processes.\15\
Additionally, Commentary .02 to new proposed Rule 915.3NY also
describes the Exchange's authority to remove from record any
transactions that have, in error, been matched but which are actually
uncompared transactions.\16\
---------------------------------------------------------------------------
\13\ As noted in Ftnt. 6, supra, NYSE Arca Rule 6.20-O is
inapposite to these proposed rule changes governing the
reconciliation of uncompared trades and is therefore not included
sequentially in new proposed Rules 915NY et seq.
\14\ New proposed Rule 915.3NY would provide that the amount of
loss as a result of an uncompared trade would be the opening price
for such contract on the business day following the trade date;
where the uncompared trade side is one for the purchase of option
contracts and no trade occurred on the opening, the price used in
fixing the amount of the loss would be the offer at the time of the
opening; and, where the uncompared trade side is one for the sale of
option contracts and no trade occurred on the opening, the price
used in fixing the amount of the loss would be the bid price.
\15\ New proposed Rule 915.3NY would also provide that notice of
uncompared trades must be provided no later than the scheduled
commencement of trading unless directed otherwise by a Trading
Official; that in the event an uncompared transaction involves an
option contract of a series in which trading has been terminated or
suspended before a new Exchange option transaction can be effected
to establish the amount of any loss, the ATP Holder not at fault may
claim damages against the other party involved in the transaction
based on the terms of such transaction; and that all such claims
shall be made promptly but in no event shall such claim be made
after the close of trading on the first business day following the
date of the uncompared transaction in question.
\16\ New proposed Commentary to Rule 915.3NY would also provide
that in order to ensure that trades can be resolved by the scheduled
commencement of trading in such series or class of options on the
first business day following the trade date, ATP Holder are required
to have an authorized representative of such ATP Holder available to
resolve uncompared trades no later than 45 minutes from the
scheduled commencement of trading on said business day following the
trade date.
---------------------------------------------------------------------------
The Exchange believes that the deliberate assemblage of the
provisions concerning the resolution of uncompared trades in a separate
new rule, new proposed Rule 9.15.3NY, along with the assembly of the
associated rules governing the verification of compared trades and the
reconciliation of uncompared trades, the issuance of an unreconciled
trade report, and the reporting of compared trades to OCC, in new
proposed Rules 915NY, 915.1NY and 915.2NY, respectively, would clarify,
update and make uniform the rules governing the post-trade processing
of options transactions, and would accelerate the reconciliation
process for uncompared options transactions, thereby reducing any
potential risks or inefficiencies inherent in the continued use of
outdated Rules 965 and 970.
Finally, in a further effort at standardization and clarity, the
Exchange proposes to add the new rules to the ``NY'' series of its
rulebook, which contains the rules principally applicable to the
trading of options contracts. In order to provide further clarification
concerning its rules, the Exchange also proposes to replace the cross-
references to Rules 965 and 970 in Rules 900F and Rule 900H with
updated cross-references to proposed Rules 915NY, 915.1NY, 915.2NY, and
915.3NY.
Other Proposed Rule Changes
In addition, the Exchange proposes to amend Rule 900.2NY(29) to
streamline the definition of Floor Market Maker. Specifically, the
Exchange proposes to amend Rule 900.2NY(29) so that the proposed
definition would read ``The term `Floor Market Maker' shall mean a
registered Market Maker who makes transactions as a dealer-specialist
while on the Floor of the Exchange.'' In connection with this change,
the Exchange proposes to eliminate ``and provides quotations: (A)
Manually, by public outcry, and (B) electronically through an auto-
quoting device'' as an unnecessarily repetitive description of a Floor
Market Maker's activity, in an effort to promote further clarification
in its rulebook.
In order to further update and clarify the Exchange's rules
governing conduct on the options trading floor, the Exchange proposes
to amend Rule 902NY(f) to replace an outdated reference to the
``Options Surveillance Department'' with ``NYSE Regulation'', the
current operative entity to which complaints from ATP Holders may be
directed. NYSE Regulation currently oversees the self-regulatory
responsibilities and functions of the Exchange.\17\
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\17\ See Regulatory Information Memo No. 15-6 available at:
https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-interpretations/2015/NYSE-15-6.pdf
---------------------------------------------------------------------------
In order to add further clarification to its rulebook, and to
conform its definition of Marker Maker to the rules of NYSE Arca, its
affiliated exchange, the Exchange also proposes to add ``making
transactions as a dealer-specialist on the Floor of the Exchange'' to
the beginning of the first sentence of Rule 920NY, and to delete
``verbally on the Trading Floor'' and ``from on the Trading Floor or
remotely from off the Trading Floor'' from the end of that
sentence.\18\ The proposed sentence would read ``A Market Maker is an
ATP Holder that is registered with the Exchange for the purpose of
making transactions as a dealer-specialist on the Floor of the Exchange
or for the purpose of submitting quotes electronically and making
transactions as a dealer-specialist through the System.'' In addition
to being consistent with the definition of a Marker Maker in NYSE Arca
Rule 6.32(a)-O, the Exchange believes that this modification will
promote greater clarity without affecting the definition of market
maker as a dealer-specialist that makes transactions in open outcry on
the floor of the Exchange and electronically through the System.
---------------------------------------------------------------------------
\18\ The Exchange also proposes deleting ``in accordance with
the Rules of the Exchange'' from the end of that first sentence as
unnecessary because adherence to the Exchange's rules is intrinsic
to all rules in its rulebook.
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In order to clarify its rules, the Exchange also proposes to amend
Rule 930NY(b)(1) and Rule 930NY(b)(2) to replace the definition of
``Professional Customer'' with the single-use term ``Qualified
Customer'' in connection with the limited public business that
qualified Floor Brokers and their Floor Clerks may conduct. Rule
930NY(b) defines both the permissible conduct of a limited public
business and also defines ``Professional Customer'', for purposes of
Rule 930NY(b), as ``not includ[ing] those participants defined in Rule
900.2NY(18A)''.\19\ In order to avoid
[[Page 45098]]
unnecessary complexity or confusion concerning the duplicate
definitions of ``Professional Customer'', the Exchange proposes to
amend Rule 930NY(b) to replace the definition of ``Professional
Customer'' with the single-use term ``Qualified Customer'' in
connection with the limited public business, and to limit the use of
``Qualified Customer'' to Rule 930NY(b).
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\19\ The definition of ``Professional Customer'' in Rule
900.2NY(18A), which is broader than the definition in Rule 930NY
(b)(2), defines a ``Professional Customer'' as an individual or
organization that is not a Broker/Dealer in securities and places
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). Rule 900.2NY(18A)
also defines the treatment of a Professional Customer under various
Exchange rules except Rule 930NY(b), and defines how to calculate
the number of Professional Customers orders in connection with
different order types.
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Furthermore, in order to provide further clarification concerning
its rules, the Exchange proposes to amend Rule 934NY, its crossing
rule, by replacing outdated references to the requirement that
execution prices ``be equal to or better than the NBBO'' with updated
cross-references to the Rule 991NY, the current plenary Order
Protection Rule. In addition, in connection with both customer-to-
customer cross and non-facilitation (regular way) crosses, the Exchange
proposes to delete from Rules 934NY(a)(3)(B) and 934NY(b)(3) two
sentences that provide that ``[t]he orders will be cancelled or posted
in the Book if an execution would take place at a price that is
inferior to the NBBO''. Rule 991NY would also govern in such
situations, and the orders will not be cancelled or posted but would
trade through in accord with the exemptions in Rule 991NY.
In order to update and clarify the Exchange's rules governing its
order format and system entry requirements, the Exchange proposes to
amend Rule 955NY to replace an outdated reference to a required
timestamp synchronized to the ``NIST Clock'' with a reference to Rule
6820, the current CAT clock synchronization rule. Specifically, in
connection with Rule 955NY(d)(2)(A), which governs contingency
reporting procedures when an exception to the EOC (Electronic Order
Capture System) applies, the Exchange proposes to delete an outdated
reference to ``(a timestamp synchronized with the National Institute of
Standards and Technology Atomic Clock in Boulder Colorado `NIST Clock'
will be available at all ATP Holder booths[sic]'' and instead add the
requirement that all order events must conform to the requirements of
Rule 6820. For further clarity, the Exchange also proposes to delete
``immediately'' from the text of the rule because Rule 6820 sets the
operative standard.
Finally, the Exchange proposes to conform its rule governing the
priority of complex orders in open outcry to its rule governing
Electronic Complex Orders. Specifically, the Exchange proposes to
conform Rule 963NY(d) to Rule 980NY(b) by amending Rule 963NY(d) to
provide that a Complex Order and Stock/Complex Orders may be executed
at a ``total or'' net debit or credit price.
2. Statutory Basis
The proposed rule changes are consistent with Section 6(b) \20\ of
the Act, in general, and furthers the objectives of Section
6(b)(5),\21\ in particular, in that they are 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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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that conforming its
definitional rules to the rules of an affiliated exchange, updating its
rules by deleting and updating outdated cross-references, eliminating
extraneous or redundant, and therefore potentially confusing or
ambiguous, language, clarifying a duplicative definition, updating a
cross-reference to a current operative rule or operative entity, and
updating its post-trading verification and reconciliation rules, and
conforming its rules to the rules of an affiliated exchange governing
the same subject matter, would remove impediments to and perfect a
national market system by simplifying the functionality and complexity
of its rules and regulatory requirements. The Exchange also believes
that these proposed amendments would be consistent with the public
interest and the protection of investors because investors would not be
harmed and, in fact, would benefit from this simplification, updating
and clarification. Further, the Exchange believes that investors would
benefit from the added transparency and clarity of the Exchange's
rules.
In addition, the Exchange believes, that by updating and conforming
its rules governing the verification of compared trades and the
reconciliation of uncompared trades to the rules of NYSE Arca, its
affiliated exchange, by streamlining the definition of Floor Market
Maker by eliminating extraneous language, by updating and clarifying
the Exchange's rules governing conduct on the options trading floor by
replacing an outdated reference to the ``Options Surveillance
Department'' with ``NYSE Regulation'', by updating and conforming its
definition of Market Maker to the definition of NYSE Arca and deleting
redundant and therefore potentially confusing language, by replacing
the definition of ``Professional Customer'' with the single-use term
``Qualified Customer'' in connection with the limited public business
that qualified Floor Brokers and their Floor Clerks may conduct, by
amending its crossing rule by replacing outdated and potentially
ambiguous references to the NBBO with cross-references to the current
plenary Order Protection Rule, by updating and clarifying its rules
governing its order format and system entry requirements by replacing
an outdated reference with a reference to the current operative CAT
time synchronization rule, and by conforming its rule governing the
priority of complex orders in open outcry to its rule governing
Electronic Complex Orders, would also promote just and equitable
principles of trade, would remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, would help to protect investors and the public interest by
providing transparency as to which rules are operable, and by reducing
potential confusion that may result from having outdated or redundant
rules or cross-references in the Exchange's rulebook. The Exchange
further believes that the proposed rule changes would remove
impediments to and perfect the mechanism of a free and open market by
ensuring that members, regulators and the public can more easily
navigate and understand the Exchange's rulebook.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed changes are not
designed to address any competitive issue but would instead update,
remove, and clarify outdated cross-references and definitions, and
redundant language, and also conform the Exchange's rules and
definitions to the rules of another exchange, thereby reducing
confusion and making the Exchange's rules easier to understand and
navigate.
[[Page 45099]]
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 \22\ and Rule 19b-4(f)(6) thereunder.\23\
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.
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\22\ 15 U.S.C. 78s(b)(3)(A)(iii).
\23\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\25\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\24\ 17 CFR 240.19b-4(f)(6).
\25\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\26\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEAMER-2017-18 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-NYSEAMER-2017-18. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEAMER-2017-18, and should
be submitted on or before October 18, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Eduardo A. Aleman,
Assistant Secretary.
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\27\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-20624 Filed 9-26-17; 8:45 am]
BILLING CODE 8011-01-P
