Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 915, 11573-11576 [2018-05210]
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Federal Register / Vol. 83, No. 51 / Thursday, March 15, 2018 / Notices
has the largest exposures in extreme but
plausible market conditions.26 As
described above, the proposed rule
change would amend certain
assumptions in ICC’s Guaranty Fund
Methodology, and the calculation of the
Specific Wrong Way Risk component,
by incorporating the new Risk Factor
Group level analysis. Specifically, ICC
would expand its current approach to
assume that credit events used in the
guaranty fund analysis occur at the Risk
Factor Group level, and would also base
the specific wrong-way risk component
of its guaranty fund methodology on the
Risk Factor Group approach.
As with the changes to the LGD
approach, the Commission believes that
the proposed changes to ICC’s Guaranty
Fund Methodology will permit ICC to
consider the particular risks associated
with the products it clears, including
the Standard European Senior NonPreferred Financial Corporate
transaction type that will be cleared as
a result of the proposed changes to ICC’s
Rules described above. As a result, the
Commission believes that the proposed
changes will enable ICC’s to more
accurately measure the risks of
associated with the products it clears
and thereby improve ICC’s ability to
collect and maintain the level of
financial resources necessary to address
the risk of default by its participants.
Therefore, the Commission finds that
the proposed rule change is consistent
with Rule 17Ad–22(b)(3).27
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular with the requirements of
Section 17A of the Act,28 and Rules
17Ad–22(b)(2) and (3) thereunder.29
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 30 that the
proposed rule change (SR–ICC–2018–
001) be, and hereby is, approved.31
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05295 Filed 3–14–18; 8:45 am]
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BILLING CODE 8011–01–P
26 17
CFR 240.17Ad–22(b)(3).
27 Id.
28 15
U.S.C. 78q–1.
CFR 240.17Ad–22(b)(2) and (3).
30 15 U.S.C. 78s(b)(2).
31 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
32 17 CFR 200.30–3(a)(12).
29 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82852; File No. SR–
NYSEAMER–2018–09]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 915
March 9, 2018.
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 March 6,
2018, 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 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rule 915 (Criteria for Underlying
Securities). The proposed rule change is
available on the Exchange’s website 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 purpose of the proposed rule
change is to amend Rule 915 to modify
the criteria for listing options on an
underlying security as defined in
Section 18(b)(1)(A) of the Securities Act
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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11573
of 1933 (each a ‘‘covered security’’;
collectively, ‘‘covered securities’’). In
particular, the Exchange proposes to
modify Rule 915, Commentary .01(4)(a),
which currently requires that to list an
option, the underlying covered security
has to have a market price of at least
$3.00 per share for the previous five
consecutive business days preceding the
date on which the Exchange submits a
certificate to the Options Clearing
Corporation (‘‘OCC’’) for listing and
trading. The proposal would shorten the
current ‘‘look back’’ period of five
consecutive business days to three
consecutive business days.4 The
Exchange does not intend to amend any
other criteria in Rule 915 and the
accompanying Commentary to list an
option on the Exchange. This proposed
rule change is substantively identical to
a recently-approved rule change by
Nasdaq PHLX LLC (‘‘Phlx’’),5 and would
align Exchange listing rules with those
of other options markets.
The Exchange acknowledges that the
Options Listing Procedures Plan
(‘‘OLPP’’) 6 requires that the listing
certificate be provided to OCC no earlier
than 12:01 a.m. and no later than 11:00
a.m. (Chicago time) on the trading day
prior to the day on which trading is to
begin.7 The proposed amendment
would still comport with that
requirement. For example, if an initial
public offering (‘‘IPO’’) occurs at 11 a.m.
on Monday, the earliest date the
Exchange could submit its listing
certificate to OCC would be on
Thursday by 12:01 a.m. (Chicago time),
with the market price determined by the
closing price over the three-day period
4 See proposed Rule 915, Commentary .01(4)(a)
(providing that the market price per share of an
covered security is ‘‘at least $3.00 for the previous
three consecutive business days preceding the date
on which the Exchange submits a certificate to [the
OCC] for listing and trading, as measured by the
closing price reported in the primary market in
which the underlying security is traded’’).
5 See Securities Exchange Act Release No. 82474
(January 9, 2018), 83 FR 2240 (January 16, 2018)
(SR–Phlx–2017–75) (Order approving amendment
to Rule 1009 to modify the criteria for listing an
option on an underlying covered security).
6 The OLPP (a/k/a the Plan for the Purpose of
Developing and Implementing Procedures Designed
to Facilitate the Listing and Trading of
Standardized Options Submitted Pursuant to
Section 11a(2)(3)(B) of the Securities Exchange Act
of 1934) is a national market system plan that,
among other things, sets forth procedures governing
the listing of new options series. See Securities
Exchange Act Release No. 44521 (July 6, 2001), 66
FR 36809 (July 13, 2001) (Order approving OLPP).
The sponsors of OLPP include the Exchange; OCC;
BATS Exchange, Inc.; BOX Options Exchange LLC;
C2 Options Exchange, Inc.; Chicago Board Options
Exchange, Inc.; EDGX Exchange, Inc.; Miami
International Securities Exchange, LLC; MIAX
PEARL, LLC; Phlx; Nasdaq BX, Inc.; Nasdaq GEMX,
LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; and
NYSE Arca, Inc.
7 See OLPP at page 3.
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from Monday through Wednesday. The
option on the IPO would then be
eligible for trading on the Exchange on
Friday. The proposed amendment
would essentially enable options trading
within four business days of an IPO
becoming available instead of six
business days (five consecutive days,
plus the day the listing certificate is
submitted to OCC).
At the time the options industry
adopted the ‘‘look back’’ period of five
consecutive business days, it was
determined that the five-day period was
sufficient to protect against attempts to
manipulate the market price of the
underlying security and would provide
a reliable test for stability.8 Surveillance
technologies and procedures concerning
manipulation have evolved since then
to provide adequate prevention or
detection of rule or securities law
violations within the proposed time
frame, and the Exchange represents that
its existing trading surveillances are
adequate to monitor the trading in the
underlying security and subsequent
trading of options on the Exchange.9
Furthermore, the Exchange notes that
the regulatory program operated by and
overseen by NYSE Regulation includes
cross-market surveillances designed to
identify manipulative and other
improper trading that may occur on the
Exchange and other markets. In
particular, the Financial Industry
Regulatory Authority (‘‘FINRA’’),
pursuant to a regulatory services
agreement and other arrangements,
operates a range of cross-market equity
and options surveillance patterns on
behalf of the Exchange to identify a
variety of potentially manipulative
trading activities. These cross-market
patterns incorporate relevant data from
the Exchange, its affiliates (including
the New York Stock Exchange), and
8 See Securities Exchange Act Release Nos. 47190
(January 15, 2003), 68 FR 3072 (January 22, 2003)
(SR–CBOE–2002–62); 47352 (February 11, 2003), 68
FR 8319 (February 20, 2003) (SR–PCX–2003–06);
47483 (March 11, 2003), 68 FR 13352 (March 19,
2003) (SR–ISE–2003–04); 47613 (April 1, 2003), 68
FR 17120 (April 8, 2003) (SR–Amex–2003–19); and
47794 (May 5, 2003), 68 FR 25076 (May 9, 2003)
(SR–Phlx–2003–27).
9 Such surveillance procedures generally focus on
detecting securities trading subject to opening price
manipulation, closing price manipulation, layering,
spoofing or other unlawful activity impacting an
underlying security, the option, or both. As it
relates to IPOs, the Exchange has price movement
alerts, unusual market activity and order book alerts
active for all trading symbols. These real-time
patterns are active for the new security as soon as
the IPO begins trading. The NYSE Regulation group,
which provides such real-time surveillance on the
Exchange and its affiliated markets, monitors
trading activity in IPOs to see whether the new
issue moves substantially above or below the public
offering price in the first day or several days of
trading.
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markets not affiliated with the
Exchange.
In addition, NYSE Regulation
operates an array of surveillances to
identify potentially manipulative
trading of options on the Exchange and
its affiliated markets. That surveillance
coverage is initiated once options begin
trading on the Exchange or an options
exchange affiliated with the Exchange.
Accordingly, the Exchange believes that
the cross-market surveillance performed
by FINRA on behalf of the Exchange and
NYSE Regulation’s own monitoring for
violative activity on the Exchange and
its affiliated markets comprise a
comprehensive surveillance program
that is adequate to monitor for
manipulation of options and their
underlying equity securities that could
occur during the proposed three-day
look back period.
Furthermore, the Exchange notes that
the proposed listing criteria would still
require that the underlying security be
listed on NYSE, the American Stock
Exchange (now known as NYSE
American), or the Nasdaq Global Market
(collectively, the ‘‘Named Markets’’), as
provided for in the definition of
‘‘covered security’’ from Section
18(b)(1)(A) of the 1933 Act.10
Accordingly, the Exchange believes that
the proposed rule change would still
ensure that the underlying security
meets the high listing standards of a
Named Market, and would also ensure
that the underlying is covered by the
regulatory protections (including market
surveillance, investigation and
enforcement) offered by these exchanges
for trading in covered securities
conducted on their facilities.
The Exchange also believes that the
proposed look back period can be
implemented in connection with the
other initial listing criteria for
underlying covered securities. In
particular, the Exchange recognizes that
it may be difficult to verify the number
of shareholders in the days immediately
following an IPO due to the fact that
stock trades generally clear within two
business days (T+2) of their trade date
and therefore the shareholder count
would generally not be known until
T+2.11 The Exchange notes that the
current T+2 settlement cycle was
recently reduced from T+3 on
September 5, 2017 in connection with
the Commission’s amendments to
Exchange Rule 15c6–1(a) to adopt the
10 See
15 U.S.C. 77r(b)(1)(A).
number of shareholders of record can be
verified from large clearing agencies such as The
Depository Trust and Clearing Corporation
(‘‘DTCC’’) upon the settlement date (i.e., T+2).
11 The
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shortened settlement cycle,12 and the
look back period of three consecutive
business days proposed herein reflects
this shortened T+2 settlement period.
As proposed, stock trades would clear
within T+2 of their trade date (i.e.,
within three business days) and
therefore the number of shareholders
could be verified within three business
days, thereby enabling options trading
within four business days of an IPO
(three consecutive business days, plus
the day the listing certificate is
submitted to OCC).
Furthermore, the Exchange notes that
it can verify the shareholder count with
various brokerage firms that have a large
retail customer clientele. Such firms can
confirm the number of individual
customers who have a position in the
new issue. The earliest that these firms
can provide confirmation is usually the
day after the first day of trading (T+1)
on an unsettled basis, while others can
confirm on the third day of trading
(T+2). The Exchange has confirmed
with some of these brokerage firms who
provide shareholder numbers to the
Exchange that they are able to provide
these numbers within T+2 after an IPO.
For the foregoing reasons, the Exchange
believes that basing the proposed three
business day look back period on the
T+2 settlement cycle would allow for
sufficient verification of the number of
shareholders.
The proposed rule change would
apply to all covered securities that meet
the relevant criteria in Rule 915.
Pursuant to Rule 915(b), the Exchange’s
Board of Directors (the ‘‘Board’’)
establishes guidelines to be considered
in evaluating the potential underlying
securities for Exchange options
transactions.13 However, the fact that a
particular security may meet the
standards established by the Board does
not necessarily mean that it will be
selected as an underlying security.14 As
part of the established criteria, the
issuer must be in compliance with any
applicable requirements of the Act.15
The Exchange believes that these
measures, together with its existing
surveillance procedures, provide
adequate safeguards in the review of any
12 See Securities Exchange Act Release No. 80295
(March 22, 2017), 82 FR 15564 (March 29, 2017)
(release adopting amendment to securities
transaction settlement cycle) (File No. S7- 22–16).
See also Exchange Act Release No. 78962 (Sep. 28,
2016), 81 FR 69240 (Oct. 5, 2016) (release proposing
amendment to securities transaction settlement
cycle) (File No. S7- 22–16).
13 See Rule 915(b). The Board established specific
criteria to consider by the Exchange in evaluating
potential underlying securities for Exchange option
transactions in its Commentary .01 to Rule 915.
14 Id.
15 See Rule 915, Commentary .01(5).
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covered security that may meet the
proposed criteria for consideration of
the option within the timeframe
contained in this proposal.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,16 in general, and furthers the
objectives of Section 6(b)(5) of the Act,17
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Exchange believes that the
proposed changes to its listing standards
for covered securities would allow the
Exchange to more quickly list options
on a qualifying covered security that has
met the $3.00 eligibility price without
sacrificing investor protection. As
discussed above, the Exchange believes
that its existing trading surveillances
provide a sufficient measure of
protection against potential price
manipulation within the proposed three
consecutive business day timeframe.
Furthermore, the established guidelines
to be considered by the Exchange in
evaluating the potential underlying
securities for Exchange option
transactions,18 together with existing
trading surveillances, provide adequate
safeguards in the review of any covered
security that may meet the proposed
criteria for consideration of the option
within the proposed timeframe.
In addition, the Exchange believes
that basing the proposed timeframe on
the T+2 settlement cycle adequately
addresses the potential difficulties in
confirming the number of shareholders
of the underlying covered security.
Having some of the largest brokerage
firms that provide these shareholder
counts to the Exchange confirm that
they are able to provide these numbers
within T+2 further demonstrates that
the 2,000 shareholder requirement can
be sufficiently verified within the
proposed timeframe. For the foregoing
reasons, the Exchange believes that the
proposed amendments will remove and
perfect the mechanism of a free and
open market and a national market
system by providing an avenue for
investors to swiftly hedge their
investment in the stock in a shorter
amount of time than what is currently
in place.19
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
18 See supra notes 13–15.
19 This proposed rule change does not alter any
obligations of issuers or other investors of an IPO
17 15
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change reduces the
number of days to list options on an
underlying security, and is intended to
bring new options listings to the
marketplace quicker.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 22 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 23
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the proposed
rule change may become effective and
operative upon filing. The Exchange
states that waiver of the operative delay
would be consistent with the protection
of investors and the public interest
because it would allow the Exchange to
implement the modified rule, which
aligns with the rules of other options
exchanges,24 without delay. The
Commission believes that waiving the
that may be subject to a lock-up or other restrictions
on trading related securities.
20 15 U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
24 See supra note 5.
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30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposal as operative upon filing.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
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–
NYSEAMER–2018–09 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–2018–09. 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 website (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
25 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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available for website 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.
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–2018–09, and
should be submitted on or before April
5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05210 Filed 3–14–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82851; File No. SR–
NYSEArca–2018–16]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 5.3–O
March 9, 2018.
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 March 6,
2018, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I 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.
sradovich on DSK3GMQ082PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rule 5.3–O (Criteria for Underlying
Securities). The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
26 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
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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 purpose of the proposed rule
change is to amend Rule 5.3–O to
modify the criteria for listing options on
an underlying security as defined in
Section 18(b)(1)(A) of the Securities Act
of 1933 (each a ‘‘covered security’’;
collectively, ‘‘covered securities’’). In
particular, the Exchange proposes to
modify Rule 5.3–(a)(4)(A), which
currently requires that to list an option,
the underlying covered security has to
have a market price of at least $3.00 per
share for the previous five consecutive
business days preceding the date on
which the Exchange submits a
certificate to the Options Clearing
Corporation (‘‘OCC’’) for listing and
trading. The proposal would shorten the
current ‘‘look back’’ period of five
consecutive business days to three
consecutive business days.4 The
Exchange does not intend to amend any
other criteria in Rule 5.3–O. This
proposed rule change is substantively
identical to a recently-approved rule
change by Nasdaq PHLX LLC (‘‘Phlx’’),5
and would align Exchange listing rules
with those of other options markets.
The Exchange acknowledges that the
Options Listing Procedures Plan
4 See proposed Rule 5.3–O(a)(4)(A) (providing
that the market price per share of an covered
security is ‘‘at least $3.00 for the previous three
consecutive business days preceding the date on
which the Exchange submits a certificate to [the
OCC] for listing and trading, as measured by the
closing price reported in the primary market in
which the underlying security is traded’’).
5 See Securities Exchange Act Release No. 82474
(January 9, 2018), 83 FR 2240 (January 16, 2018)
(SR–Phlx–2017–75) (Order approving amendment
to Rule 1009 to modify the criteria for listing an
option on an underlying covered security).
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(‘‘OLPP’’) 6 requires that the listing
certificate be provided to OCC no earlier
than 12:01 a.m. and no later than 11:00
a.m. (Chicago time) on the trading day
prior to the day on which trading is to
begin.7 The proposed amendment
would still comport with that
requirement. For example, if an initial
public offering (‘‘IPO’’) occurs at 11 a.m.
on Monday, the earliest date the
Exchange could submit its listing
certificate to OCC would be on
Thursday by 12:01 a.m. (Chicago time),
with the market price determined by the
closing price over the three-day period
from Monday through Wednesday. The
option on the IPO would then be
eligible for trading on the Exchange on
Friday. The proposed amendment
would essentially enable options trading
within four business days of an IPO
becoming available instead of six
business days (five consecutive days,
plus the day the listing certificate is
submitted to OCC).
At the time the options industry
adopted the ‘‘look back’’ period of five
consecutive business days, it was
determined that the five-day period was
sufficient to protect against attempts to
manipulate the market price of the
underlying security and would provide
a reliable test for stability.8 Surveillance
technologies and procedures concerning
manipulation have evolved since then
to provide adequate prevention or
detection of rule or securities law
violations within the proposed time
frame, and the Exchange represents that
its existing trading surveillances are
adequate to monitor the trading in the
underlying security and subsequent
trading of options on the Exchange.9
6 The OLPP (a/k/a the Plan for the Purpose of
Developing and Implementing Procedures Designed
to Facilitate the Listing and Trading of
Standardized Options Submitted Pursuant to
Section 11a(2)(3)(B) of the Securities Exchange Act
of 1934) is a national market system plan that,
among other things, sets forth procedures governing
the listing of new options series. See Securities
Exchange Act Release No. 44521 (July 6, 2001), 66
FR 36809 (July 13, 2001) (Order approving OLPP).
The sponsors of OLPP include the Exchange; OCC;
BATS Exchange, Inc.; BOX Options Exchange LLC;
C2 Options Exchange, Inc.; Chicago Board Options
Exchange, Inc.; EDGX Exchange, Inc.; Miami
International Securities Exchange, LLC; MIAX
PEARL, LLC; Phlx; Nasdaq BX, Inc.; Nasdaq GEMX,
LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; and
NYSE American LLC.
7 See OLPP at page 3.
8 See Securities Exchange Act Release Nos. 47190
(January 15, 2003), 68 FR 3072 (January 22, 2003)
(SR–CBOE–2002–62); 47352 (February 11, 2003), 68
FR 8319 (February 20, 2003) (SR–PCX–2003–06);
47483 (March 11, 2003), 68 FR 13352 (March 19,
2003) (SR–ISE–2003–04); 47613 (April 1, 2003), 68
FR 17120 (April 8, 2003) (SR–Amex–2003–19); and
47794 (May 5, 2003), 68 FR 25076 (May 9, 2003)
(SR–Phlx–2003–27).
9 Such surveillance procedures generally focus on
detecting securities trading subject to opening price
E:\FR\FM\15MRN1.SGM
15MRN1
]]>Agencies
[Federal Register Volume 83, Number 51 (Thursday, March 15, 2018)]
[Notices]
[Pages 11573-11576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05210]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82852; File No. SR-NYSEAMER-2018-09]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 915
March 9, 2018.
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 March 6, 2018, 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
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.
---------------------------------------------------------------------------
\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 amend Rule 915 (Criteria for Underlying
Securities). The proposed rule change is available on the Exchange's
website 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 purpose of the proposed rule change is to amend Rule 915 to
modify the criteria for listing options on an underlying security as
defined in Section 18(b)(1)(A) of the Securities Act of 1933 (each a
``covered security''; collectively, ``covered securities''). In
particular, the Exchange proposes to modify Rule 915, Commentary
.01(4)(a), which currently requires that to list an option, the
underlying covered security has to have a market price of at least
$3.00 per share for the previous five consecutive business days
preceding the date on which the Exchange submits a certificate to the
Options Clearing Corporation (``OCC'') for listing and trading. The
proposal would shorten the current ``look back'' period of five
consecutive business days to three consecutive business days.\4\ The
Exchange does not intend to amend any other criteria in Rule 915 and
the accompanying Commentary to list an option on the Exchange. This
proposed rule change is substantively identical to a recently-approved
rule change by Nasdaq PHLX LLC (``Phlx''),\5\ and would align Exchange
listing rules with those of other options markets.
---------------------------------------------------------------------------
\4\ See proposed Rule 915, Commentary .01(4)(a) (providing that
the market price per share of an covered security is ``at least
$3.00 for the previous three consecutive business days preceding the
date on which the Exchange submits a certificate to [the OCC] for
listing and trading, as measured by the closing price reported in
the primary market in which the underlying security is traded'').
\5\ See Securities Exchange Act Release No. 82474 (January 9,
2018), 83 FR 2240 (January 16, 2018) (SR-Phlx-2017-75) (Order
approving amendment to Rule 1009 to modify the criteria for listing
an option on an underlying covered security).
---------------------------------------------------------------------------
The Exchange acknowledges that the Options Listing Procedures Plan
(``OLPP'') \6\ requires that the listing certificate be provided to OCC
no earlier than 12:01 a.m. and no later than 11:00 a.m. (Chicago time)
on the trading day prior to the day on which trading is to begin.\7\
The proposed amendment would still comport with that requirement. For
example, if an initial public offering (``IPO'') occurs at 11 a.m. on
Monday, the earliest date the Exchange could submit its listing
certificate to OCC would be on Thursday by 12:01 a.m. (Chicago time),
with the market price determined by the closing price over the three-
day period
[[Page 11574]]
from Monday through Wednesday. The option on the IPO would then be
eligible for trading on the Exchange on Friday. The proposed amendment
would essentially enable options trading within four business days of
an IPO becoming available instead of six business days (five
consecutive days, plus the day the listing certificate is submitted to
OCC).
---------------------------------------------------------------------------
\6\ The OLPP (a/k/a the Plan for the Purpose of Developing and
Implementing Procedures Designed to Facilitate the Listing and
Trading of Standardized Options Submitted Pursuant to Section
11a(2)(3)(B) of the Securities Exchange Act of 1934) is a national
market system plan that, among other things, sets forth procedures
governing the listing of new options series. See Securities Exchange
Act Release No. 44521 (July 6, 2001), 66 FR 36809 (July 13, 2001)
(Order approving OLPP). The sponsors of OLPP include the Exchange;
OCC; BATS Exchange, Inc.; BOX Options Exchange LLC; C2 Options
Exchange, Inc.; Chicago Board Options Exchange, Inc.; EDGX Exchange,
Inc.; Miami International Securities Exchange, LLC; MIAX PEARL, LLC;
Phlx; Nasdaq BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq
MRX, LLC; and NYSE Arca, Inc.
\7\ See OLPP at page 3.
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At the time the options industry adopted the ``look back'' period
of five consecutive business days, it was determined that the five-day
period was sufficient to protect against attempts to manipulate the
market price of the underlying security and would provide a reliable
test for stability.\8\ Surveillance technologies and procedures
concerning manipulation have evolved since then to provide adequate
prevention or detection of rule or securities law violations within the
proposed time frame, and the Exchange represents that its existing
trading surveillances are adequate to monitor the trading in the
underlying security and subsequent trading of options on the
Exchange.\9\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release Nos. 47190 (January 15,
2003), 68 FR 3072 (January 22, 2003) (SR-CBOE-2002-62); 47352
(February 11, 2003), 68 FR 8319 (February 20, 2003) (SR-PCX-2003-
06); 47483 (March 11, 2003), 68 FR 13352 (March 19, 2003) (SR-ISE-
2003-04); 47613 (April 1, 2003), 68 FR 17120 (April 8, 2003) (SR-
Amex-2003-19); and 47794 (May 5, 2003), 68 FR 25076 (May 9, 2003)
(SR-Phlx-2003-27).
\9\ Such surveillance procedures generally focus on detecting
securities trading subject to opening price manipulation, closing
price manipulation, layering, spoofing or other unlawful activity
impacting an underlying security, the option, or both. As it relates
to IPOs, the Exchange has price movement alerts, unusual market
activity and order book alerts active for all trading symbols. These
real-time patterns are active for the new security as soon as the
IPO begins trading. The NYSE Regulation group, which provides such
real-time surveillance on the Exchange and its affiliated markets,
monitors trading activity in IPOs to see whether the new issue moves
substantially above or below the public offering price in the first
day or several days of trading.
---------------------------------------------------------------------------
Furthermore, the Exchange notes that the regulatory program
operated by and overseen by NYSE Regulation includes cross-market
surveillances designed to identify manipulative and other improper
trading that may occur on the Exchange and other markets. In
particular, the Financial Industry Regulatory Authority (``FINRA''),
pursuant to a regulatory services agreement and other arrangements,
operates a range of cross-market equity and options surveillance
patterns on behalf of the Exchange to identify a variety of potentially
manipulative trading activities. These cross-market patterns
incorporate relevant data from the Exchange, its affiliates (including
the New York Stock Exchange), and markets not affiliated with the
Exchange.
In addition, NYSE Regulation operates an array of surveillances to
identify potentially manipulative trading of options on the Exchange
and its affiliated markets. That surveillance coverage is initiated
once options begin trading on the Exchange or an options exchange
affiliated with the Exchange. Accordingly, the Exchange believes that
the cross-market surveillance performed by FINRA on behalf of the
Exchange and NYSE Regulation's own monitoring for violative activity on
the Exchange and its affiliated markets comprise a comprehensive
surveillance program that is adequate to monitor for manipulation of
options and their underlying equity securities that could occur during
the proposed three-day look back period.
Furthermore, the Exchange notes that the proposed listing criteria
would still require that the underlying security be listed on NYSE, the
American Stock Exchange (now known as NYSE American), or the Nasdaq
Global Market (collectively, the ``Named Markets''), as provided for in
the definition of ``covered security'' from Section 18(b)(1)(A) of the
1933 Act.\10\ Accordingly, the Exchange believes that the proposed rule
change would still ensure that the underlying security meets the high
listing standards of a Named Market, and would also ensure that the
underlying is covered by the regulatory protections (including market
surveillance, investigation and enforcement) offered by these exchanges
for trading in covered securities conducted on their facilities.
---------------------------------------------------------------------------
\10\ See 15 U.S.C. 77r(b)(1)(A).
---------------------------------------------------------------------------
The Exchange also believes that the proposed look back period can
be implemented in connection with the other initial listing criteria
for underlying covered securities. In particular, the Exchange
recognizes that it may be difficult to verify the number of
shareholders in the days immediately following an IPO due to the fact
that stock trades generally clear within two business days (T+2) of
their trade date and therefore the shareholder count would generally
not be known until T+2.\11\ The Exchange notes that the current T+2
settlement cycle was recently reduced from T+3 on September 5, 2017 in
connection with the Commission's amendments to Exchange Rule 15c6-1(a)
to adopt the shortened settlement cycle,\12\ and the look back period
of three consecutive business days proposed herein reflects this
shortened T+2 settlement period. As proposed, stock trades would clear
within T+2 of their trade date (i.e., within three business days) and
therefore the number of shareholders could be verified within three
business days, thereby enabling options trading within four business
days of an IPO (three consecutive business days, plus the day the
listing certificate is submitted to OCC).
---------------------------------------------------------------------------
\11\ The number of shareholders of record can be verified from
large clearing agencies such as The Depository Trust and Clearing
Corporation (``DTCC'') upon the settlement date (i.e., T+2).
\12\ See Securities Exchange Act Release No. 80295 (March 22,
2017), 82 FR 15564 (March 29, 2017) (release adopting amendment to
securities transaction settlement cycle) (File No. S7- 22-16). See
also Exchange Act Release No. 78962 (Sep. 28, 2016), 81 FR 69240
(Oct. 5, 2016) (release proposing amendment to securities
transaction settlement cycle) (File No. S7- 22-16).
---------------------------------------------------------------------------
Furthermore, the Exchange notes that it can verify the shareholder
count with various brokerage firms that have a large retail customer
clientele. Such firms can confirm the number of individual customers
who have a position in the new issue. The earliest that these firms can
provide confirmation is usually the day after the first day of trading
(T+1) on an unsettled basis, while others can confirm on the third day
of trading (T+2). The Exchange has confirmed with some of these
brokerage firms who provide shareholder numbers to the Exchange that
they are able to provide these numbers within T+2 after an IPO. For the
foregoing reasons, the Exchange believes that basing the proposed three
business day look back period on the T+2 settlement cycle would allow
for sufficient verification of the number of shareholders.
The proposed rule change would apply to all covered securities that
meet the relevant criteria in Rule 915. Pursuant to Rule 915(b), the
Exchange's Board of Directors (the ``Board'') establishes guidelines to
be considered in evaluating the potential underlying securities for
Exchange options transactions.\13\ However, the fact that a particular
security may meet the standards established by the Board does not
necessarily mean that it will be selected as an underlying
security.\14\ As part of the established criteria, the issuer must be
in compliance with any applicable requirements of the Act.\15\ The
Exchange believes that these measures, together with its existing
surveillance procedures, provide adequate safeguards in the review of
any
[[Page 11575]]
covered security that may meet the proposed criteria for consideration
of the option within the timeframe contained in this proposal.
---------------------------------------------------------------------------
\13\ See Rule 915(b). The Board established specific criteria to
consider by the Exchange in evaluating potential underlying
securities for Exchange option transactions in its Commentary .01 to
Rule 915.
\14\ Id.
\15\ See Rule 915, Commentary .01(5).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\16\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\17\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed changes to its listing
standards for covered securities would allow the Exchange to more
quickly list options on a qualifying covered security that has met the
$3.00 eligibility price without sacrificing investor protection. As
discussed above, the Exchange believes that its existing trading
surveillances provide a sufficient measure of protection against
potential price manipulation within the proposed three consecutive
business day timeframe. Furthermore, the established guidelines to be
considered by the Exchange in evaluating the potential underlying
securities for Exchange option transactions,\18\ together with existing
trading surveillances, provide adequate safeguards in the review of any
covered security that may meet the proposed criteria for consideration
of the option within the proposed timeframe.
---------------------------------------------------------------------------
\18\ See supra notes 13-15.
---------------------------------------------------------------------------
In addition, the Exchange believes that basing the proposed
timeframe on the T+2 settlement cycle adequately addresses the
potential difficulties in confirming the number of shareholders of the
underlying covered security. Having some of the largest brokerage firms
that provide these shareholder counts to the Exchange confirm that they
are able to provide these numbers within T+2 further demonstrates that
the 2,000 shareholder requirement can be sufficiently verified within
the proposed timeframe. For the foregoing reasons, the Exchange
believes that the proposed amendments will remove and perfect the
mechanism of a free and open market and a national market system by
providing an avenue for investors to swiftly hedge their investment in
the stock in a shorter amount of time than what is currently in
place.\19\
---------------------------------------------------------------------------
\19\ This proposed rule change does not alter any obligations of
issuers or other investors of an IPO that may be subject to a lock-
up or other restrictions on trading related securities.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change
reduces the number of days to list options on an underlying security,
and is intended to bring new options listings to the marketplace
quicker.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \22\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposed rule change may become effective and operative upon
filing. The Exchange states that waiver of the operative delay would be
consistent with the protection of investors and the public interest
because it would allow the Exchange to implement the modified rule,
which aligns with the rules of other options exchanges,\24\ without
delay. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the operative delay and
designates the proposal as operative upon filing.\25\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ See supra note 5.
\25\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the 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 [email protected]. Please include
File Number SR-NYSEAMER-2018-09 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-2018-09. 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 website (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
[[Page 11576]]
available for website 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. 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-2018-09, and should be submitted on or before April 5, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05210 Filed 3-14-18; 8:45 am]
BILLING CODE 8011-01-P
