Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change To Amend Rule 971.1NY To Amend the Duration of a Customer Best Execution Auction, 57322-57325 [2017-25990]

Download as PDF 57322 Federal Register / Vol. 82, No. 231 / Monday, December 4, 2017 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing 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)(iii) of the Act 11 and subparagraph (f)(6) of Rule 19b–4 thereunder.12 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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– GEMX–2017–53 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–GEMX–2017–53. This file 11 15 U.S.C. 78s(b)(3)(A)(iii). 12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. VerDate Sep<11>2014 18:22 Dec 01, 2017 Jkt 244001 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–GEMX–2017–53 and should be submitted on or before December 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–25992 Filed 12–1–17; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–82162; File No. SR– NYSEAMER–2017–26] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change To Amend Rule 971.1NY To Amend the Duration of a Customer Best Execution Auction November 28, 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 November 13 17 CFR 200.30–3(a)(12). U.S.C.78s (b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 Frm 00128 Fmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 971.1NY (Electronic Cross Transactions) to amend the duration of a Customer Best Execution (‘‘CUBE’’) Auction. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION PO 00000 17, 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Sfmt 4703 The Exchange proposes to amend Rule 971.1NY to modify the parameters for the duration of a CUBE Auction. The CUBE Auction is an electronic crossing mechanism for single-leg orders with a price improvement auction on the Exchange. An ATP Holder (‘‘Initiating Participant’’) may initiate a CUBE Auction by electronically submitting for execution a limit order it represents as agent on behalf of a public customer, broker dealer, or any other entity (‘‘CUBE Order’’) against principal interest or against any other order it represents as agent, provided the Initiating Participant complies with Rule 971.1NY. When the Exchange receives a valid CUBE Order for auction processing, a Request for Responses (‘‘RFR’’) detailing the series, the side of E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 82, No. 231 / Monday, December 4, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES the market, the size of the CUBE Order, and the limit price of the CUBE Order is sent to all ATP Holders that subscribe to receive RFR messages. Currently, the Auction lasts for a random period of time between 500–750 milliseconds, unless it is concluded early.4 The Exchange proposes to amend Rule 971.1NY(c)(2)(B) to provide that the duration of a CUBE Auction shall be a random period of time within parameters designated by the Exchange, which random time period [sic] shall be no less than 100 milliseconds and no more than 1 second. This proposed change is consistent with the recently amended rules of other exchanges, such as the NASDAQ International Securities Exchange (‘‘ISE’’), NASDAQ BX (‘‘BX’’), NASDAQ PHLX (‘‘PHLX’’), Miami International Securities Exchange, LLC (‘‘MIAX’’), and Chicago Board Options Exchange (‘‘CBOE’’).5 When approving the change to exposure periods in these mechanisms, the Securities and Exchange Commission (‘‘Commission’’) concluded that reducing the time periods was consistent with the Act.6 The Exchange believes that moving to the proposed range structure provides the Exchange with greater flexibility in establishing the optimal duration for the CUBE Auction. The Exchange believes that permitting a minimum duration as low as 100 milliseconds would reduce market risk for all ATP Holders executing trades on the Exchange via the CUBE Auction. Initiating Participants are required to guarantee an execution at the National Best Bid or Offer (‘‘NBBO’’) or at a better price, and are subject to market risk during the time the CUBE Order is exposed to other ATP Holders.7 While other participants are also subject to market risk, those providing RFR Responses may cancel their responses.8 The Exchange believes that the Initiating Participant plays a critical role in the CUBE Auction process. Their willingness to guarantee that CUBE Orders receive an execution at the NBBO or, in some cases, a better 4 See Rule 971.1NY(c)(2)(B) (providing that the Response Time Interval is ‘‘the period of time during which responses to the RFR may be entered, which will last for a random period of time between 500 and 750 milliseconds’’). See Rule 971.1NY(c)(4)(A)–(F) (providing the scenarios that would result in the early end of a CUBE Auction). 5 See Securities Exchange Act Release Nos. 79733 (January 4, 2017), 82 FR 3055 (January 10, 2017) (SR–ISE–2016–26); 76301 (October 29, 2015), 80 FR 68347 (November 4, 2015) (SR–BX–2015–032); 77557 (April 7, 2016), 81 FR 21935 (April 13, 2016) (SR–PHLX–2016–40); 80570 (May 1, 2017), 82 FR 21288 (May 5, 2017) (SR–MIAX–2017–16); and 80421 (April 10, 2017), 82 FR 18048 (April 14, 2017) (SR–CBOE–2017–029). 6 Id. 7 See Rule 971.1NY(a). 8 See Rule 971.1NY(c)(2)(C)(i)(d). VerDate Sep<11>2014 18:22 Dec 01, 2017 Jkt 244001 price, is the catalyst for an order gaining the opportunity for price improvement. The Exchange believes that allowing a CUBE Auction period of no less than 100 milliseconds and no more than 1 second (when the CUBE does not conclude early) 9 would benefit ATP Holders utilizing the CUBE Auction. The Exchange believes it could be in the best interest of Initiating Participants to minimize the CUBE Auction duration while continuing to allow other ATP Holders adequate time to respond with their best priced responses. The Exchange notes the Commission previously approved other exchanges’ rules that provide for a specified auction response time as low as 100 milliseconds and that the Exchange is not proposing to go lower than the lowest previously approved timer range.10 Further, consistent with this proposal, the Commission has likewise allowed other exchanges to retain the flexibility to choose a response period of up to 1 second.11 Accordingly, the Exchange proposes to amend Rule 971.1NY(c)(2)(B) to remove the reference to the duration of the current timer setting and replace it with language providing that ‘‘[t] he Response Time Interval will last for a random period of time within parameters determined by the Exchange and announced by Trader Update. The minimum/maximum parameters for the Response Time Interval will be no less than 100 milliseconds and no more than one (1) second.’’ 12 The Exchange will continue to utilize a random timer for each CUBE Auction, because it believes (as it articulated when adopting the CUBE), that the use of a random time period for RFR Responses provides the CUBE with a functional difference to distinguish it from similar price improvement mechanisms offered by other exchanges.13 The Exchange does not believe that requiring the CUBE Auction to run for a random time of at least 500 milliseconds (absent an early end) is necessary in today’s market where, generally, ATP Holders’ systems have the capability to respond within 100 milliseconds or less. As such, reducing 9 See supra note 4. supra note 5. 11 See, e.g., ISE Rule 723(c)(1) (providing ISE ‘‘will designate via circular a time of no less than 100 milliseconds and no more than 1 second’’ during which its members can submit responses to the ISE price improvement mechanism). 12 See proposed Rule 971.1NY(c)(2)(B). 13 See Securities Exchange Act Release No. 72025 (April 25, 2014), 79 FR 24779, 24782 and 24787 (May 1, 2017) (SR–NYSEMKT–2014–17) (the ‘‘CUBE Approval Order’’) (describing the operation of the random timer for the duration of the Response Timer Interval). 10 See PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 57323 the minimum potential Response Time Interval in the CUBE is appropriate as ATP Holders no longer need 500 milliseconds to respond to an Auction. Further, reducing the potential minimum Response Time Interval would allow ATP Holders the opportunity to seek out liquidity in an expedient manner that is consistent with today’s system capabilities. The Exchange believes that ATP Holders operate electronic systems that enable them to react and respond to orders in a meaningful way in fractions of a second. The Exchange anticipates that its ATP Holders would continue to compete within the proposed Response Time Interval designated by the Exchange. In particular, the Exchange believes that the proposed Response Time Interval—which would be a random period of time no less than 100 milliseconds and no more than 1 second—would continue to provide ATP Holders with sufficient time to respond to, compete for, and provide price improvement for CUBE Orders. As such, the Exchange believes this proposed change would continue to provide the investing public with more timely executions, and reduce their market risk. To substantiate that ATP Holders are able to receive, process and communicate a response to an auction broadcast within 100 milliseconds, the Exchange surveyed all responders to a CUBE Auction over the last three months. Each of these ATP Holders confirmed that they can receive, process and communicate a response back to the Exchange within 100 milliseconds. With regard to the impact of this proposal on system capacity, the Exchange has analyzed its capacity and represents that it has the necessary systems capacity to handle the potential additional traffic associated with the additional transactions that may occur with the implementation of the proposed modification to the Response Time Interval to no less than 100 milliseconds. Additionally, the Exchange represents that its System will be able to sufficiently maintain an audit trail for order and trade information with the reduction in the Response Time Interval. Implementation Pursuant to the modified rule, the Exchange will announce by Trader Update any changes to the current random time period applicable to CUBE Auctions in advance. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) E:\FR\FM\04DEN1.SGM 04DEN1 57324 Federal Register / Vol. 82, No. 231 / Monday, December 4, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES of the Act,14 in general, and furthers the objectives of Section 6(b)(5) of the Act,15 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. In particular, the proposed rule change would provide investors with more timely execution of their option orders, while ensuring that there is an adequate exposure of orders in the mechanisms. Additionally, the proposed change could provide more CUBE Orders an opportunity for price improvement because it would reduce market risk for ATP Holders that participate in CUBE Auctions. Finally, as mentioned above, other exchanges such as ISE, BX, PHLX, MIAX, and CBOE, have already amended their rules to permit response times consistent with the instant proposal—i.e., no less than 100 milliseconds and no more than 1 second.16 As such, the Exchange believes the proposed rule change would help perfect the mechanism for a free and open national market system, and generally help protect investors and the public’s interest.17 The Exchange believes the proposed rule change is not unfairly discriminatory because the Response Time Interval for each CUBE Auction would be the same for all participating ATP Holders. As is the case today, all ATP Holders would continue to have an equal opportunity to receive the broadcast and respond with their best prices during the auction. Additionally, the Exchange believes the proposed modification to the Response Time Interval to be as low as 100 milliseconds would reduce the market risk for all ATP Holders, inclusive of Initiating Participants and those ATP Holders responding to a CUBE Action.18 Finally, the proposal would promote just and equitable principles of trade because it would allow the Exchange to continue to use a random timer for each CUBE Auction (within the outside parameters announced by the 14 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 16 See supra note 5. 17 15 U.S.C. 78f(b)(5). 18 The Exchange notes that, as proposed, the duration of a CUBE Auction could be a maximum of 1 second, as determined and announced by the Exchange. 15 15 VerDate Sep<11>2014 18:22 Dec 01, 2017 Jkt 244001 Exchange), which timer provides the CUBE with a functional difference to distinguish it from similar price improvement mechanisms offered by other exchanges.19 The Exchange believes this flexibility would allow the Exchange to modify the outside parameters of uninterrupted CUBE Auctions to provide ATP Holders with sufficient time to submit RFR Responses and would encourage competition among participants, thereby enhancing the potential for price improvement for the CUBE Order. 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 proposal to provide the Exchange flexibility in determining potentially shorter durations for CUBE Auctions does not impose an undue burden on intramarket competition as the Exchange believes that allowing for a Response Time Interval of no less than 100 milliseconds and no more than 1 second (absent an early end) would benefit all ATP Holders utilizing the CUBE Auctions. Specifically, it is in Initiating Participants’ best interest to minimize the Response Time Interval while continuing to allow other ATP Holders adequate time to electronically respond. The proposed rule would allow ATP Holders to respond quickly at the most favorable price while reducing the risk that the market will move against that response. The Exchange believes that its ATP Holders would be able to compete within a Response Time Interval of no less than 100 milliseconds and no more than 1 second, and that any random duration within this range is a sufficient amount of time to respond to, compete for, and provide price improvement for CUBE Orders, which would, in turn, provide investors and other market participants more timely executions, and reduce their market risk. The Exchange does not believe its proposed rule change would impose an undue burden on inter-market competition as the Exchange notes other exchanges offer similar functionality with similar auction duration lengths.20 For all the reasons stated, the Exchange does not believe that the proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the 19 See CUBE Approval Order, supra note 13. supra note 5. See also ISE Rule 723(c)(1); BX Rules, Chapter VI, Section 9(ii)(A)(3); PHLX Rule 1080(n)(ii)(A)(4); MIAX Rule 515A; and CBOE Rule 6.74A and 6.74B. 20 See PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 purposes of the Act, and believes the proposed change would enhance competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change 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–2017–26 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–NYSEAMER–2017–26. 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 E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 82, No. 231 / Monday, December 4, 2017 / Notices 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEAMER–2017–26 and should be submitted on or before December 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–25990 Filed 12–1–17; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice 10159] Guidance on Specified Persons Under Section 231 of the Countering Russian Influence in Europe and Eurasia Act of 2017 Guidance to specify persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation; notice. ACTION: The Department of State is issuing this guidance to specify the persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation. This guidance, including the list specifying persons, was developed through a robust interagency process and may be updated or amended as circumstances warrant. Applicable Dates: The specification of persons identified in this notice pursuant to the Act is applicable on December 4, 2017. FOR FURTHER INFORMATION CONTACT: Philip A. Foley, Director, Office of Counterproliferation Initiatives, Bureau sradovich on DSK3GMQ082PROD with NOTICES SUMMARY: 21 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:22 Dec 01, 2017 Jkt 244001 of International Security and Nonproliferation, Department of State, Washington, DC 20520, tel.: 202–647– 5193, FOLEYPH@STATE.GOV. Background Pursuant to the authority in Section 231(d) of the Countering Russian Influence in Europe and Eurasia Act of 2017 (Pub. L. 115–44), (‘‘the Act’’), the Secretary of State is issuing this guidance to specify the following as persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation: Section 231(d) List regarding the Russian Defense Sector of the Government of the Russian Federation Admiralty Shipyard JSC Almaz-Antey Air and Space Defense Corporation JSC Dolgoprudny Research Production JSC Federal Research and Production Center Titan Barrikady JSC (Titan Design Bureau) Izhevsk Mechanical Plant (Baikal) Izhmash Concern JSC Kalashnikov Concern JSC Kalinin Machine Building Plant JSC (KMZ) KBP Instrument Design Bureau MIC NPO Mashinostroyenia Molot Oruzhie Mytishchinski Mashinostroitelny Zavod Novator Experimental Design Bureau NPO High Precision Systems JSC NPO Splav JSC Oboronprom OJSC Radio-Electronic Technologies (KRET) Radiotechnical and Information Systems (RTI) Concern Research and Production Corporation Uralvagonzavod JSC Rosoboronexport OJSC (ROE) Rostec (Russian Technologies State Corporation) Russian Aircraft Corporation MiG Russian Helicopters JSC Sozvezdie Concern JSC State Research and Production Enterprise Bazalt JSC Sukhoi Aviation JSC Tactical Missiles Corporation JSC Tikhomirov Scientific Research Institute JSC Tupolev JSC United Aircraft Corporation United Engine Corporation United Instrument Manufacturing Corporation United Shipbuilding Corporation Section 231(d) List regarding the Russian Intelligence Sector of the Government of the Russian Federation Autonomous Noncommercial Professional Organization/ Professional Association of Designers of Data Processing (ANO PO KSI) PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 57325 Federal Security Service (FSB) Foreign Intelligence Service (SVR) Main Intelligence Directorate of the General Staff of the Russian Armed Forces (GRU) Special Technology Center Zorsecurity Dated: October 26, 2017. Rex W. Tillerson, Secretary of State. [FR Doc. 2017–26087 Filed 12–1–17; 8:45 am] BILLING CODE 4710–27–P DEPARTMENT OF STATE [Public Notice: 10210] Notice of Determinations; Culturally Significant Objects Imported for Exhibition Determinations: ‘‘Palmyra: Loss and Remembrance’’ Exhibition Notice is hereby given of the following determinations: I hereby determine that certain objects to be included in the exhibition ‘‘Palmyra: Loss and Remembrance,’’ imported from abroad for temporary exhibition within the United States, are of cultural significance. The objects are imported pursuant to a loan agreement with the foreign owner or custodian. I also determine that the exhibition or display of the exhibit objects at The J. Paul Getty Museum at the Getty Villa, Malibu, California, from on or about April 18, 2018, until on or about May 27, 2019, and at possible additional exhibitions or venues yet to be determined, is in the national interest. SUMMARY: FOR FURTHER INFORMATION CONTACT: Elliot Chiu in the Office of the Legal Adviser, U.S. Department of State (telephone: 202–632–6471; email: section2459@state.gov). The mailing address is U.S. Department of State, L/PD, SA–5, Suite 5H03, Washington, DC 20522–0505. The foregoing determinations were made pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), E.O. 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, et seq.; 22 U.S.C. 6501 note, et seq.), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236–3 of August 28, 2000 (and, as appropriate, Delegation of Authority No. 257–1 of December 11, 2015). I have ordered that Public Notice SUPPLEMENTARY INFORMATION: E:\FR\FM\04DEN1.SGM 04DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 231 (Monday, December 4, 2017)]
[Notices]
[Pages 57322-57325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25990]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82162; File No. SR-NYSEAMER-2017-26]

Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of Proposed Rule Change To Amend Rule 971.1NY To Amend the
Duration of a Customer Best Execution Auction

November 28, 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 November 17, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend Rule 971.1NY (Electronic Cross
Transactions) to amend the duration of a Customer Best Execution
(``CUBE'') Auction. The proposed rule change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
The Exchange proposes to amend Rule 971.1NY to modify the
parameters for the duration of a CUBE Auction. The CUBE Auction is an
electronic crossing mechanism for single-leg orders with a price
improvement auction on the Exchange.
An ATP Holder (``Initiating Participant'') may initiate a CUBE
Auction by electronically submitting for execution a limit order it
represents as agent on behalf of a public customer, broker dealer, or
any other entity (``CUBE Order'') against principal interest or against
any other order it represents as agent, provided the Initiating
Participant complies with Rule 971.1NY. When the Exchange receives a
valid CUBE Order for auction processing, a Request for Responses
(``RFR'') detailing the series, the side of

[[Page 57323]]

the market, the size of the CUBE Order, and the limit price of the CUBE
Order is sent to all ATP Holders that subscribe to receive RFR
messages. Currently, the Auction lasts for a random period of time
between 500-750 milliseconds, unless it is concluded early.\4\ The
Exchange proposes to amend Rule 971.1NY(c)(2)(B) to provide that the
duration of a CUBE Auction shall be a random period of time within
parameters designated by the Exchange, which random time period [sic]
shall be no less than 100 milliseconds and no more than 1 second. This
proposed change is consistent with the recently amended rules of other
exchanges, such as the NASDAQ International Securities Exchange
(``ISE''), NASDAQ BX (``BX''), NASDAQ PHLX (``PHLX''), Miami
International Securities Exchange, LLC (``MIAX''), and Chicago Board
Options Exchange (``CBOE'').\5\ When approving the change to exposure
periods in these mechanisms, the Securities and Exchange Commission
(``Commission'') concluded that reducing the time periods was
consistent with the Act.\6\
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\4\ See Rule 971.1NY(c)(2)(B) (providing that the Response Time
Interval is ``the period of time during which responses to the RFR
may be entered, which will last for a random period of time between
500 and 750 milliseconds''). See Rule 971.1NY(c)(4)(A)-(F)
(providing the scenarios that would result in the early end of a
CUBE Auction).
\5\ See Securities Exchange Act Release Nos. 79733 (January 4,
2017), 82 FR 3055 (January 10, 2017) (SR-ISE-2016-26); 76301
(October 29, 2015), 80 FR 68347 (November 4, 2015) (SR-BX-2015-032);
77557 (April 7, 2016), 81 FR 21935 (April 13, 2016) (SR-PHLX-2016-
40); 80570 (May 1, 2017), 82 FR 21288 (May 5, 2017) (SR-MIAX-2017-
16); and 80421 (April 10, 2017), 82 FR 18048 (April 14, 2017) (SR-
CBOE-2017-029).
\6\ Id.
---------------------------------------------------------------------------

The Exchange believes that moving to the proposed range structure
provides the Exchange with greater flexibility in establishing the
optimal duration for the CUBE Auction. The Exchange believes that
permitting a minimum duration as low as 100 milliseconds would reduce
market risk for all ATP Holders executing trades on the Exchange via
the CUBE Auction. Initiating Participants are required to guarantee an
execution at the National Best Bid or Offer (``NBBO'') or at a better
price, and are subject to market risk during the time the CUBE Order is
exposed to other ATP Holders.\7\ While other participants are also
subject to market risk, those providing RFR Responses may cancel their
responses.\8\ The Exchange believes that the Initiating Participant
plays a critical role in the CUBE Auction process. Their willingness to
guarantee that CUBE Orders receive an execution at the NBBO or, in some
cases, a better price, is the catalyst for an order gaining the
opportunity for price improvement. The Exchange believes that allowing
a CUBE Auction period of no less than 100 milliseconds and no more than
1 second (when the CUBE does not conclude early) \9\ would benefit ATP
Holders utilizing the CUBE Auction. The Exchange believes it could be
in the best interest of Initiating Participants to minimize the CUBE
Auction duration while continuing to allow other ATP Holders adequate
time to respond with their best priced responses.
---------------------------------------------------------------------------

\7\ See Rule 971.1NY(a).
\8\ See Rule 971.1NY(c)(2)(C)(i)(d).
\9\ See supra note 4.
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The Exchange notes the Commission previously approved other
exchanges' rules that provide for a specified auction response time as
low as 100 milliseconds and that the Exchange is not proposing to go
lower than the lowest previously approved timer range.\10\ Further,
consistent with this proposal, the Commission has likewise allowed
other exchanges to retain the flexibility to choose a response period
of up to 1 second.\11\
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\10\ See supra note 5.
\11\ See, e.g., ISE Rule 723(c)(1) (providing ISE ``will
designate via circular a time of no less than 100 milliseconds and
no more than 1 second'' during which its members can submit
responses to the ISE price improvement mechanism).
---------------------------------------------------------------------------

Accordingly, the Exchange proposes to amend Rule 971.1NY(c)(2)(B)
to remove the reference to the duration of the current timer setting
and replace it with language providing that ``[t] he Response Time
Interval will last for a random period of time within parameters
determined by the Exchange and announced by Trader Update. The minimum/
maximum parameters for the Response Time Interval will be no less than
100 milliseconds and no more than one (1) second.'' \12\ The Exchange
will continue to utilize a random timer for each CUBE Auction, because
it believes (as it articulated when adopting the CUBE), that the use of
a random time period for RFR Responses provides the CUBE with a
functional difference to distinguish it from similar price improvement
mechanisms offered by other exchanges.\13\
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\12\ See proposed Rule 971.1NY(c)(2)(B).
\13\ See Securities Exchange Act Release No. 72025 (April 25,
2014), 79 FR 24779, 24782 and 24787 (May 1, 2017) (SR-NYSEMKT-2014-
17) (the ``CUBE Approval Order'') (describing the operation of the
random timer for the duration of the Response Timer Interval).
---------------------------------------------------------------------------

The Exchange does not believe that requiring the CUBE Auction to
run for a random time of at least 500 milliseconds (absent an early
end) is necessary in today's market where, generally, ATP Holders'
systems have the capability to respond within 100 milliseconds or less.
As such, reducing the minimum potential Response Time Interval in the
CUBE is appropriate as ATP Holders no longer need 500 milliseconds to
respond to an Auction. Further, reducing the potential minimum Response
Time Interval would allow ATP Holders the opportunity to seek out
liquidity in an expedient manner that is consistent with today's system
capabilities.
The Exchange believes that ATP Holders operate electronic systems
that enable them to react and respond to orders in a meaningful way in
fractions of a second. The Exchange anticipates that its ATP Holders
would continue to compete within the proposed Response Time Interval
designated by the Exchange. In particular, the Exchange believes that
the proposed Response Time Interval--which would be a random period of
time no less than 100 milliseconds and no more than 1 second--would
continue to provide ATP Holders with sufficient time to respond to,
compete for, and provide price improvement for CUBE Orders. As such,
the Exchange believes this proposed change would continue to provide
the investing public with more timely executions, and reduce their
market risk.
To substantiate that ATP Holders are able to receive, process and
communicate a response to an auction broadcast within 100 milliseconds,
the Exchange surveyed all responders to a CUBE Auction over the last
three months. Each of these ATP Holders confirmed that they can
receive, process and communicate a response back to the Exchange within
100 milliseconds.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it has the
necessary systems capacity to handle the potential additional traffic
associated with the additional transactions that may occur with the
implementation of the proposed modification to the Response Time
Interval to no less than 100 milliseconds. Additionally, the Exchange
represents that its System will be able to sufficiently maintain an
audit trail for order and trade information with the reduction in the
Response Time Interval.
Implementation
Pursuant to the modified rule, the Exchange will announce by Trader
Update any changes to the current random time period applicable to CUBE
Auctions in advance.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b)

[[Page 57324]]

of the Act,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

In particular, the proposed rule change would provide investors
with more timely execution of their option orders, while ensuring that
there is an adequate exposure of orders in the mechanisms.
Additionally, the proposed change could provide more CUBE Orders an
opportunity for price improvement because it would reduce market risk
for ATP Holders that participate in CUBE Auctions. Finally, as
mentioned above, other exchanges such as ISE, BX, PHLX, MIAX, and CBOE,
have already amended their rules to permit response times consistent
with the instant proposal--i.e., no less than 100 milliseconds and no
more than 1 second.\16\ As such, the Exchange believes the proposed
rule change would help perfect the mechanism for a free and open
national market system, and generally help protect investors and the
public's interest.\17\
---------------------------------------------------------------------------

\16\ See supra note 5.
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange believes the proposed rule change is not unfairly
discriminatory because the Response Time Interval for each CUBE Auction
would be the same for all participating ATP Holders. As is the case
today, all ATP Holders would continue to have an equal opportunity to
receive the broadcast and respond with their best prices during the
auction. Additionally, the Exchange believes the proposed modification
to the Response Time Interval to be as low as 100 milliseconds would
reduce the market risk for all ATP Holders, inclusive of Initiating
Participants and those ATP Holders responding to a CUBE Action.\18\
---------------------------------------------------------------------------

\18\ The Exchange notes that, as proposed, the duration of a
CUBE Auction could be a maximum of 1 second, as determined and
announced by the Exchange.
---------------------------------------------------------------------------

Finally, the proposal would promote just and equitable principles
of trade because it would allow the Exchange to continue to use a
random timer for each CUBE Auction (within the outside parameters
announced by the Exchange), which timer provides the CUBE with a
functional difference to distinguish it from similar price improvement
mechanisms offered by other exchanges.\19\ The Exchange believes this
flexibility would allow the Exchange to modify the outside parameters
of uninterrupted CUBE Auctions to provide ATP Holders with sufficient
time to submit RFR Responses and would encourage competition among
participants, thereby enhancing the potential for price improvement for
the CUBE Order.
---------------------------------------------------------------------------

\19\ See CUBE Approval Order, supra note 13.
---------------------------------------------------------------------------

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 proposal to provide the
Exchange flexibility in determining potentially shorter durations for
CUBE Auctions does not impose an undue burden on intra-market
competition as the Exchange believes that allowing for a Response Time
Interval of no less than 100 milliseconds and no more than 1 second
(absent an early end) would benefit all ATP Holders utilizing the CUBE
Auctions. Specifically, it is in Initiating Participants' best interest
to minimize the Response Time Interval while continuing to allow other
ATP Holders adequate time to electronically respond.
The proposed rule would allow ATP Holders to respond quickly at the
most favorable price while reducing the risk that the market will move
against that response. The Exchange believes that its ATP Holders would
be able to compete within a Response Time Interval of no less than 100
milliseconds and no more than 1 second, and that any random duration
within this range is a sufficient amount of time to respond to, compete
for, and provide price improvement for CUBE Orders, which would, in
turn, provide investors and other market participants more timely
executions, and reduce their market risk.
The Exchange does not believe its proposed rule change would impose
an undue burden on inter-market competition as the Exchange notes other
exchanges offer similar functionality with similar auction duration
lengths.\20\
---------------------------------------------------------------------------

\20\ See supra note 5. See also ISE Rule 723(c)(1); BX Rules,
Chapter VI, Section 9(ii)(A)(3); PHLX Rule 1080(n)(ii)(A)(4); MIAX
Rule 515A; and CBOE Rule 6.74A and 6.74B.
---------------------------------------------------------------------------

For all the reasons stated, the Exchange does not believe that the
proposed rule change would impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act, and
believes the proposed change would enhance competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change 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-2017-26 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-NYSEAMER-2017-26. 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

[[Page 57325]]

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. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEAMER-2017-26 and should
be submitted on or before December 26, 2017.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
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\21\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-25990 Filed 12-1-17; 8:45 am]
BILLING CODE 8011-01-P

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