Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Modify Rules 6.60-O and 6.65A-O Regarding the Treatment of Orders Subject to Trade Collar Protection, 46593-46600 [2019-19001]
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Federal Register / Vol. 84, No. 171 / Wednesday, September 4, 2019 / Notices
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 20
Intramarket Competition. The
proposed changes are designed to attract
additional order flow to the Exchange.
The Exchange believes that the
proposed changes would continue to
incentivize market participants to direct
order flow to the Exchange. Greater
liquidity benefits all market participants
on the Exchange by providing more
trading opportunities and encourages
member organizations to send orders,
thereby contributing to robust levels of
liquidity, which benefits all market
participants on the Exchange. The
proposed credits would be available to
all similarly-situated market
participants, and, as such, the proposed
change would not impose a disparate
burden on competition among market
participants on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. As noted, the Exchange’s
market share of intraday trading in Tape
B and C securities (excluding auction
volume) declined from March to June
2019. In such an environment, the
Exchange must continually adjust its
fees and rebates to remain competitive
with other exchanges and with offexchange venues. Because competitors
are free to modify their own fees and
credits in response, and because market
participants may readily adjust their
order routing practices, the Exchange
does not believe its proposed fee change
can impose any burden on intermarket
competition.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar order types
and comparable transaction pricing, by
encouraging additional orders to be sent
to the Exchange for execution. The
Exchange also believes that the
proposed change is designed to provide
the public and investors with a Price
List that is clear and consistent, thereby
reducing burdens on the marketplace
and facilitating investor protection.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 21 of the Act and
subparagraph (f)(2) of Rule 19b–4 22
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 23 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2019–45 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–NYSE–2019–45. 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
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 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–NYSE–2019–45 and should
be submitted on or before September 24,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–18999 Filed 9–3–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86788; File No. SR–
NYSEArca–2019–58]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Modify Rules 6.60–O
and 6.65A–O Regarding the Treatment
of Orders Subject to Trade Collar
Protection
August 28, 2019.
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 August
21, 2019, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) 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
24 17
21 15
20 Regulation
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U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(f)(2).
23 15 U.S.C. 78s(b)(2)(B).
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46593
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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prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify
Rules 6.60–O (Price Protection—Orders)
and 6.65A–O (Limit-Up and LimitDown During Extraordinary Market
Volatility) regarding the treatment of
orders subject to Trade Collar
Protection. The proposed 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 the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to modify
Rules 6.60–O(a) and 6.65A–O regarding
the treatment of orders subject to Trade
Collar Protection.
The Exchange has in place various
price check features that are designed to
help maintain a fair and orderly market,
including Trade Collar Protection.4
Trading Collars mitigate the risks
associated with orders sweeping
through multiple price points (including
during extreme market volatility) and
resulting in executions at prices that are
4 Per Rule 6.60–O(a)(2), Trading Collars are
determined by the Exchange on a class-by-class
basis and, unless announced otherwise via Trader
Update, are the same value as the bid-ask
differential guidelines established pursuant to Rule
6.37–O(b)(4). The Exchange proposes a streamlining
technical change to combine the buy and sell
sections of the Rule into one paragraph since the
Trading Collar value is the same whether a buy or
sell order. See proposed Rule 6.60–O(a)(2)(A). To
conform with this proposed change, the Exchange
proposes to re-number current paragraph (a)(2)(C) to
proposed (a)(2)(B), without any substantive
changes.
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potentially erroneous (i.e., because they
are away from the last sale price or best
bid or offer). By applying Trading
Collars to incoming orders, the
Exchange provides an opportunity to
attract additional liquidity at tighter
spreads and it ‘‘collars’’ affected orders
at successive price points until the bid
and offer are equal to the bid-ask
differential guideline for that option,
i.e., equal to the Trading Collar.
Similarly, by applying Trading Collars
to partially executed orders, the
Exchange prevents the balance of such
orders from executing away from the
prevailing market after exhausting
interest at or near the top of book on
arrival. The Exchange proposes to
modify its rule regarding Trading
Collars (i.e., Rule 6.60–O(a) or the
‘‘Rule’’) to clarify existing functionality
and to adopt enhancements to the
operation of the Trading Collars.
Current Rule 6.60–O(a)(1)(i) states
that Trade Collar Protection prevents
the ‘‘immediate execution’’ of incoming
Market Orders when the difference
between the National Best Offer
(‘‘NBO’’) and the National Best Bid
(‘‘NBB’’) is greater than one Trading
Collar. Rule 6.60–O(a)(1)(ii) states that
Trade Collar Protection prevents the
execution of the balance of an incoming
Market Order or marketable limit order
to buy (sell) if it would execute at a
price that exceeds the width of the
National Best Bid and Offer (‘‘NBBO’’)
plus (minus) the value of one Trading
Collar. Thus, the current rule limits the
application of Trade Collar Protection to
incoming Market Orders and only
expands this protection to include
marketable Limit Orders once there is a
balance of a partially executed order
that is subject to such protection.
The Exchange proposes to modify
Rule 6.60–O(a) to make clear that Trade
Collar Protection may be applied to
marketable Limit Orders on arrival.
Although this reflects current
functionality, the rule is silent in this
regard and focuses solely on any
unexecuted portion of a marketable
Limit Order. Pursuant to proposed Rule
6.60–O(a), the Exchange would ‘‘limit
the immediate execution’’ of incoming
Market Orders and marketable Limit
Orders (collectively, ‘‘Marketable
Orders’’; and each a ‘‘collared order’’) if
the width of the NBBO is greater than
one Trading Collar.5 This proposed
5 See proposed Rule 6.60–O(a)(1)(A). Because the
Exchange is proposing to move the existing text
(albeit modified) into a sub-paragraph, it proposes
to re-number the paragraph in a manner consistent
with the rest of the current rule. See id. Also,
consistent with the clarification that Trade Collar
Protection applies to incoming Marketable Orders,
the Exchange proposes to modify and expand the
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change would clarify how Trade Collar
Protection currently operates and
explicitly state that marketable Limit
Orders may be collared on arrival, in
addition to having any remaining
balance likewise subject to the Trading
Collar (the latter point is already
explicitly stated in the current rule).
The Exchange would continue to apply
Trade Collar Protection to the balance of
Marketable Orders consistent with the
current Rule (as discussed below).6
Current Rule 6.60–O(a)(3) provides
that Trade Collar Protection does not
apply to order types that have
contingencies, namely, IOC, NOW, AON
and FOK orders (the ‘‘Contingent Order
Type Provision’’). The Exchange
proposes to modify the Contingent
Order Type Provision, which currently
indicates that such order types would
receive an ‘‘immediate execution,’’ to
make clear that such incoming orders
would ‘‘receive an execution, depending
upon the availability of an execution
pursuant to the terms of those orders.’’ 7
The Exchange believes this proposed
change (i.e., the removal of the word
‘‘immediate’’) would more accurately
reflect current functionality in regards
to the processing of these contingent
order types, insofar as such orders will
only ‘‘immediately’’ execute if the
contingency is satisfied. The Exchange
believes this proposed wording change
would add clarity, transparency and
internal consistency to Exchange rules.
Current Rule 6.60–O(a)(4) provides
that when a Market Order is subject to
Trade Collar Protection pursuant to
current paragraph (a)(1)(i), the Exchange
does not immediately execute or route
such orders and instead goes on to state
how such orders are processed. The
Exchange proposes to modify this
paragraph to make clear that it relates to
Marketable (as opposed to just Market)
Orders as well as to clarify that the
‘‘execution and/or routing’’ of such
orders would be limited by the
application of paragraph (a)(4). See proposed Rule
6.60–O(a)(4).
6 See proposed Rule 6.60–O(a)(1)(B). Because the
Exchange is proposing to move the existing text
(albeit slightly modified) into a sub-paragraph, it
proposes to re-number the paragraph in a manner
consistent with the rest of the current rule. See id.
In addition, the Exchange proposes to modify this
provision to refer solely to ‘‘Marketable Orders’’
(and to remove now extraneous reference to
marketable Limit Orders), as the Marketable Orders
is already defined in proposed Rule 6.60–
O(a)(1)(A). See proposed Rule 6.60–O(a)(1)(B).
7 See proposed Rule 6.60–O(a)(3). Because the
listed contingency orders are not subject to Trade
Collar Protection, the Exchange believes the current
rule may refer to such orders receiving an
‘‘immediate execution’’ to contrast the treatment of
orders that are subject to such protection—as such
orders (under the current rule) are ‘‘not
immediately executed.’’ See Rule 6.60–O(a)(1) and
(a)(3).
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Exchange as discussed below, as
opposed to stating that they would not
‘‘immediately execute or route’’ which
modifications are consistent with the
changes to Rule 6.60–O(a)(1)(A) (and
consistent with existing functionality).
The Exchange also proposes to make
clear that this provision relates to
‘‘incoming’’ Marketable Orders as
opposed to the balance thereof.8
The Exchange also proposes to modify
the Rule to specify that collared orders
will be assigned a ‘‘collar execution
price,’’ which price depends upon the
order type (Market or Limit) and
whether (when the order arrives) the
Exchange is already in receipt of
another order being collared.9 Current
Rule 6.60–O(a)(4)(A) covers collared
Market Orders to buy (sell), which
would not immediately execute or
route, but would be ‘‘displayed at a
price equal to the NBB (NBO) plus
(minus) one Trading Collar.’’ As
proposed, a Market Order to buy (sell)
‘‘received when there is not already a
collared order to buy (sell)’’ would be
‘‘assigned a collar execution price’’ (as
opposed to being ‘‘displayed’’) equal to
the NBB (NBO) plus (minus) one
Trading Collar.10 The Exchange
proposes to replace ‘‘displayed’’ as used
in the current rule with ‘‘assigned a
collar execution price’’ because, once
collared (and consistent with current
functionality), the order would be
eligible to immediately execute against
available interest before its price is
displayed. Examples illustrating this
(existing) functionality are included at
the end of the description of these
proposed rule changes.
In addition, the Exchange proposes an
exception to the processing of incoming
Market Orders to buy (sell) that arrive
when the NBB (NBO) is zero (the ‘‘Zero
NBBO Collar Exception’’). Specifically,
a Market Order to buy entered when the
NBB is $0.00 would be assigned a collar
execution price equal to the NBB (i.e.,
$0.00) plus one Trading Collar to ensure
8 See proposed Rule 6.60–O(a)(4). See also
proposed Rule 6.60–O(a)(1)(A) (making clear that
incoming marketable Limit Order are subject to
Trading Collar Protection).
9 See proposed Rule 6.60–O(a)(4). The Exchange
also proposes to make a conforming change to
update the cross-reference from Rule 6.60–O(a)(1)(i)
to proposed Rule 6.60–O(a)(1)(A). Also, current
Rule 6.60–O(a)(4)(C)(i)–(iii) address scenarios when
an order arrives while another order is being
collared, but the proposed rule text adds clarity
regarding current functionality and addresses
enhancements to the functionality since the rule
was adopted.
10 See proposed Rule 6.60–O(a)(4)(B). As
discussed further below, proposed Rule 6.60–
O(a)(4)(A) would provide that ‘‘[a] Market Order to
buy (sell) received when there is already a collared
order to buy (sell) will join that collared order and
be processed consistent with paragraphs (a)(4)(C)—
(a)(6),’’ which reflects current functionality.
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it is collared to avoid executing at an
erroneous price; whereas, a Market
Order to sell entered when the NBO is
$0.00, would be rejected as there is no
market for the incoming order.11 The
Exchange believes the Zero NBBO
Collar Exception would improve the
operation of Trading Collars when the
prevailing market is zero (indicating
market dislocation) at the time an
incoming Market Order arrives. Absent
the proposed Zero NBBO Collar
Exception, a Market Order to buy (sell)
that arrives when the NBB (NBO) is zero
would trade based on the last sale price,
if any; if there is no last sale price, the
order would trade at the contra-side
NBBO which may result in a bad
execution price. The proposal to collar
an incoming buy order when the NBB
is zero is consistent with the handling
of other collared orders to buy when the
NBB is not zero (i.e., the collared order
is assigned a collar execution price
equal to the NBB plus one Trading
Collar).12 In regards to the proposal to
reject (as opposed to collar) incoming
sell orders when the NBO is zero, the
Exchange believes this change in
functionality is necessary because any
attempt to collar such an order would
result in a negative number. In addition,
the Exchange has observed that it is
extremely uncommon to have a no
(zero) offer situation and believes it
could be indicative of unstable market
conditions. To avoid such orders
receiving bad executions in times of
market dislocation, the Exchange
believes it would be appropriate to
reject such orders. Thus, the Zero NBBO
Exception helps maintain fair and
orderly markets. An example illustrating
this new functionality is included at the
end of this section.
In addition, because the rule has been
updated to clarify that (consistent with
current functionality) incoming
marketable Limit Orders may be
collared (i.e., proposed Rule 6.60–
O(a)(1)(A)), the Exchange proposes to
further update the rule to address how
such orders would be collared,
depending upon whether the Exchange
is already in receipt of a collared order.
Specifically, as proposed (and
consistent with current functionality),
modified Rule 6.60–O(a)(4)(C) would
clarify that when the incoming collared
order is a marketable Limit Order to buy
(sell) and there is no other order already
being collared, the order would be
‘‘assigned a collar execution price equal
to the NBO (NBB).’’ If, however, a
marketable Limit Order arrives when
there is already an order being collared,
it would join that collared order and be
processed consistent with proposed
paragraph (a)(6)(B), which is discussed
below.13
The Exchange also proposes to modify
the rule regarding executions of collared
orders. The current rule provides that
the Exchange would ‘‘execute or route
the collared order to buy (sell) against
any contra-interest priced within one
Trading Collar above (below) the
displayed price of the collared order.’’ 14
The Exchange proposes to clarify that a
collared order to buy (sell) would ‘‘trade
against any contra-side interest priced
equal to its collar execution price or at
prices within one Trading Collar above
(below) the collar execution price (‘the
Collar Range’).’’ 15 Consistent with
proposed Rule 6.60–O(a)(4)(B),(C), the
Exchange proposes to refer to the ‘‘collar
execution price’’ (as opposed to a
display price) as the collared order
seeks an execution before it would be
displayed, thus this change clarifies
existing functionality. In addition, the
Exchange believes that clarifying that
the collared order would execute with
contra-side interest priced within a
Collar Range (i.e., equal to, and up to
one Trading Collar above (below) the
collar execution price), provides more
specificity than the current language,
which states only that such order would
execute against interest ‘‘within one
Trading Collar’’ of its price. The
Exchange believes these proposed
changes, which describe current
functionality, would add clarity,
transparency, and internal consistency
to Exchange rules.
The Exchange proposes to add new
paragraph (a)(4)(E) to the Rule to codify
existing functionality and make clear
that the Exchange would cancel a
Market Order, or the balance thereof,
that has been collared pursuant to
proposed Rule 6.60–O(a)(1)(A) or (B) if,
after exhausting trading opportunities
within the Collar Range, the Exchange
determines there are no quotes on the
Exchange and/or no interest on another
market (‘‘Available Interest’’). The
absence of Available Interest, such as a
Market Maker quote in the series, means
that the Exchange would have no
reliable price framework within which
to evaluate the Market Order. Therefore,
the Exchange believes that cancellation
13 See
11 See
proposed Rule 6.60–O(a)(4)(B)(i), (ii).
12 See proposed Rule 6.60–O(a)(4)(B) (providing,
in relevant part, that a Market Order to buy received
when there is not already a collared order to buy
is assigned a collar execution price equal to the
NBB plus one Trading Collar).
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46595
proposed Rule 6.60–O(a)(4)(C).
Rule 6.60–O(a)(4)(B).
15 See proposed Rule 6.60–O(a)(4)(D). The
proposed rule does not repeat the concept of a
collared order being executed or routed in
paragraph (a)(4)(D), because this concept is already
covered in proposed paragraph (a)(4).
14 See
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of the Market Order would be
appropriate and in the best interest of
investors.
Regarding the treatment of the balance
of a Marketable Order (i.e., a Market
Order or a marketable Limit Order) that
is subject to Trade Collar Protection, the
Exchange proposes to clarify and update
the collar functionality, including
making clear when and at what price
the collared order is first displayed.
Current Rule 6.60–O(a)(5) provides that
‘‘[w]hen the balance of a partially
executed Marketable Order’’ is subject
to Trade Collar Protection, such balance
‘‘will be displayed at the last sale
price.’’ Further, ‘‘[i]f there is an
opportunity for trading within a Trading
Collar above (below) the last sale price,
the balance of the buy (sell) order will
be displayed at the NBB (NBO)
established at the time of the initial
execution.’’ 16
The Exchange proposes to replace the
existing text and replace it with new
rule text titled ‘‘Display of collared
orders.’’ Pursuant to new Rule 6.60–
O(a)(5), a Market Order that does not
trade on arrival will be displayed at its
collar execution price whereas the
display price of the balance of a
partially executed Marketable Order
collared pursuant to proposed
paragraph (a)(1)(B) of the Rule, depends
upon eligible contra-side interest.17
Specifically, per proposed paragraph
(a)(5)(A) of the Rule, if the collared
order has traded against all contra-side
interest within the Collar Range, the
order would be displayed at the most
recent execution price.18 This proposed
provision sets forth the same concept as
the first sentence of current paragraph
(a)(5), except that it specifies that the
order would be displayed at the most
recent execution price (i.e., last sale
price) only after it has exhausted trading
opportunities within the Collar Range
(whereas the current rule is silent on
this fact, though it may be inferred given
that the second sentence of the current
Rule discusses the display price when
trading opportunities have not been
exhausted).
Per proposed paragraph (a)(5)(B) of
the Rule, if, however, there is contra16 See
Rule 6.60–O(a)(5).
proposed Rule 6.60–O(a)(5). The Exchange
notes that the proposed new rule does not include
the last sentence of current paragraph (a)(5) which
provides that the balance of Marketable Orders that
are subject to Trade Collar Protection are processed
in the same fashion as incoming collared orders per
current paragraph (a)(4). The Exchange believes that
this language would be redundant of proposed
paragraph (a)(1)(A)–(B), which makes clear what is
deemed a ‘‘collared order’’ as well as proposed rule
(a)(4)(A)–(E), which describes how such orders are
processed.
18 See proposed Rule 6.60–O(a)(5)(A).
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17 See
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side interest priced within one Trading
Collar of the most recent execution
price, the order to buy (sell) would be
displayed at the higher (lower) of its
assigned collar execution price or the
best execution price of the order that is
both within the Collar Range and at
least one Trading Collar away from the
best priced contra-side trading interest
(i.e., lowest sell interest for collared buy
orders/highest buy interest for collared
sell orders).19 This proposed text
modifies the second sentence of current
paragraph (a)(5) by replacing reference
to the NBBO at the time of initial
execution with the concept of the collar
execution price and clarifying that the
display price would be the better of the
collar execution price or keyed off of the
best price contra-side interest. The
Exchange believes this modified
provision, which reflects current
functionality, provides greater
granularity regarding the circumstances
under which the price of a collared
order is first displayed and how that
price is determined, which additional
clarity and transparency is beneficial to
the investing public.
In addition, the Exchange also
proposes to add rule text to new
paragraph (a)(5) of the Rule to make
clear that collared orders would be
displayed at the Minimum Price
Variation (‘‘MPV’’) for the option,
pursuant to Rule 6.72–O (Trading
Differentials) which rule sets forth the
minimum quoting increments for
options traded on the Exchange.20 The
Exchange believes adding this
information to the Rule add
transparency, clarity and internal
consistency to Exchange rules.
Current Rule 6.60–O(a)(4)(C) sets forth
scenarios that would trigger the
‘‘redisplay’’ of a collared order.
Consistent with the foregoing changes,
the Exchange proposes to update this
section with conforming changes for
consistency, with regard to current
functionality, and modify the rule to
adopt new functionality. First, the
Exchange proposes to re-number this
paragraph as (a)(6), title it ‘‘Repricing of
collared orders,’’ and make clear that
the Exchange would ‘‘assign a new
collar execution price’’ to (as opposed to
redisplay) the collared order upon the
happening of one of the listed scenarios
(as modified below).21
19 See
proposed Rule 6.60–O(a)(5)(B).
proposed Rule 6.60–O(a)(5).
21 See proposed Rule 6.60–O(a)(6). Consistent
with this change, the Exchange also proposes to
renumber the existing subparagraphs to proposed
(a)(6) as (A)–(C) and existing paragraphs (a)(4)(D)
and (a)(6) as proposed paragraphs (a)(7) and (a)(8),
respectively. See id.
20 See
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• The first scenario under the current
rule provides that ‘‘an update to the
NBBO (based on another market or a
quote on the Exchange or a Limit Order
on the Exchange priced one Trading
Collar or less away from the collared
order) that improves the same side of
the market as the collared order will
result in the collared order being
redisplayed at the new NBB (for buy
orders) or NBO (for sell orders)’’ 22
Consistent with the foregoing proposed
rule text changes, the Exchange
proposes to modify this provision to
replace the words ‘‘redisplayed at’’ with
‘‘assigned a new collar execution price
equal to’’ the NBB (for buy orders) or
NBO (for sell orders), and to add to the
end of this provision that the repriced
orders would be ‘‘processed at the
updated collar execution price
consistent with paragraphs (a)(4)(D) and
(a)(5) above.’’ 23 The ‘‘new collar
execution price’’ reflects the updated
price at which the collared order is
eligible to trade based on changes in the
market. This concept is consistent with
the current rule except that the updated
price is not (re)displayed until it has
exhausted all trading opportunities
within the Collar Range.
• The second scenario under the
current rule provides that a Marketable
Order to buy (sell) on the same side of
the market as the collared order or a
Limit Order to buy (sell) on the same
side of the market as the collared order
and priced greater than one Trading
Collar above (below) the displayed price
of the collared order will itself become
subject to Trade Collar Protection and
will result in the collared order and the
Limit Order being displayed at one
Trading Collar above (below) the
displayed price of the collared order.24
The Exchange proposes to modify this
rule to remove reference to ‘‘Marketable
Orders to buy (sell) on the same side of
the market as the collared orders,’’
because the functionality has been
updated such that a Market Order
received when there is already a
collared order would join that collared
order (rather than be subject to a
separate collar).25 This proposed
modification would make clear that this
22 See
Rule 6.60–O(a)(4)(C)(i).
proposed Rule 6.60–O(a)(6)(A). The
Exchange also proposes to add a semi-colon to
separate the two clauses regarding what constitutes
a market update event that updates the NBBO (i.e.,
that it must be ‘‘based on another market or a quote
on the Exchange; or a Limit Order on the Exchange
priced one Trading Collar or less away from the
collared order’’). See id.
24 See Rule 6.60–O(a)(4)(C)(ii). Consistent with
the Rule, this provision excludes IOC Orders, AON
Orders, FOK Orders and NOW Orders. See id.; see
also Rule 6.60–O(a)(3).
25 See proposed Rule 6.60–O(a)(4)(A).
23 See
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scenario is applicable solely to
marketable Limit Orders received when
there is already an order being collared.
Consistent with the proposed textual
changes to the first scenario, the
Exchange likewise proposes to modify
this provision to replace the words
‘‘displayed at a price’’ with ‘‘assigned a
new collar execution price’’ one Trading
Collar above or below the displayed
price of the collared order, as applicable
(at which new price it will be eligible
to trade), and to add to the end of this
provision that the repriced orders would
be ‘‘processed at the updated collar
execution price consistent with
paragraphs (a)(4)(D) and (a)(5) above.’’ 26
• The third scenario under the
current rule provides that ‘‘upon the
expiration of one second, the collared
order to buy (sell) will redisplay at a
price one Trading Collar above (below)
the displayed price of the collared
order.’’ 27 The Exchange proposes to
modify this provision to add ‘‘and
absent an update to the NBBO’’ after
language regarding the expiration of one
second to distinguish this scenario from
the first scenario where a change in the
market (i.e., an update to the NBBO)
caused the collared order to reprice (and
potentially redisplay). Also, consistent
with the other two scenarios, the
Exchange proposes to modify this
provision to replace the words
‘‘redisplay at a price’’ with ‘‘assigned a
new collar execution price’’ one Trading
Collar above or below the ‘‘current
displayed price’’ of the collared order,
as applicable, and to add to the end of
this provision that the repriced orders
would be ‘‘processed at the update
collar execution price consistent with
paragraphs (a)(4)(D) and (a)(5) above.’’ 28
Thus, the collared order to buy (sell)
would be eligible to trade at a price for
a period of one second, but if market
conditions prevent it from trading, the
order will improve or tick up (down)
and be assigned a new collar execution
price one Trading Collar above (below)
the current display price. The Exchange
proposes to clarify the functionality
under this (third) scenario, however to
provide that ‘‘if the collared order is a
Market Order to sell that has reached
$0.00, it will not reprice but will be
posted in the Consolidated Book at its
MPV (e.g., $0.01 or $0.05),’’ because an
order may never be posted for lower
than its MPV—and the alternative to
holding the order at the MPV would be
to cancel it.29 The Exchange believes
this proposed rule text, which reflects
26 See
proposed Rule 6.60–O(a)(6)(B).
Rule 6.60–O(a)(4)(C)(iii).
28 See proposed Rule 6.60–O(a)(6)(C).
29 See id.
27 See
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current functionality, would allow the
collared order an opportunity for an
execution (rather than being cancelled)
and adds transparency and internal
consistency to Exchange rules.
The Exchange also proposes to clarify
the rule text regarding the priority of
collared orders. Current Rule 6.60–
O(a)(6) states that ‘‘[a]ll orders for which
Trade Collar Protection prevents
immediate execution will be ranked
based on time priority (with all other
orders for which Trade Collar Protection
prevents immediate execution).’’
Because the current rule text does not
make clear that such collared orders,
like other non-collared orders, will be
processed at each price in time priority,
the Exchange proposes to clarify that
such orders would be ‘‘processed in
accordance with Rule 6.76–O.Order
Ranking and Display—OX.’’ 30 This
proposed change to reflect current
functionality and adds clarity,
transparency and internal consistency to
Exchange rules.
*
*
*
*
*
EXAMPLES OF TREATMENT OF
COLLARED ORDERS 31
Example 1: Market Order Received
When No Other Orders Being Collared 32
BOX: 0 × 0¥1.50 × 100 (wide market)
LMM 100 × 0.25¥1.60 × 100
Cust1 Buy Market × 100
Results:
• Cust1 is assigned a collar execution
price of 0.50 (i.e., the NBB (0.25), plus
one Trading Collar, which is 0.25
because the NBB is less than $2.00) 33
• Each second that elapses in which
Cust1 does not trade (and absent
changes to the NBBO), the order
receives a new collar execution price
and is displayed at each successive
collar—0.50, then 0.75, then 1.00 34
• Once the order ticks up to receive a
collar execution price of 1.25, it trades
with BOX at 1.50 (as 1.50 is within
30 See
proposed Rule 6.60–O(a)(8).
Exchange notes that the processing of
collared orders in examples 1–3 reflect current
processing, but that, as noted above, the Exchange
has clarified the rule text used to describe the
processing (i.e., reference to ‘‘collar execution
price’’ versus ‘‘display price’’ as well as removing
reference to ‘‘last sale’’ as the benchmark for
determining display price and adding specificity
about available trading interest impacting display
price determination—which may or may not be the
same as the last sale price, see, e.g., Rule 6.60–
O(a)(5)(A)).
32 See id.
33 See proposed Rule 6.60–O(a)(4)(B) (regarding
collar execution price for Market Orders) and
(a)(2)(A)(i) (regarding Trading Collar).
34 See proposed Rule 6.60–O(a)(6)(C) (regarding
assignment of new collar execution price every one
second that the order does not trade as seconds
elapse and NBBO does not change).
31 The
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the Collar Range, i.e., contra-side
interest within one Trading Collar
above the collar execution price—
resulting in a permissible execution
range of 1.25 up to and including
1.50) 35
Example 2: Limit Order Received When
No Other Orders Being Collared 36
BOX: 100 × 1.50 × 1.60 × 100
T2 Sell 100 @ 1.70
T3 Sell 100 @ 1.80
T4 Sell 100 @ 2.95
T1 Buy 1000 @ 3.00
Results:
• T1 is assigned a collar execution price
of 1.60 (i.e., the NBO) and is eligible
to trade with interest within its Collar
Range (i.e., contra-side interest within
one Trading Collar (0.25) above the
collar execution price—resulting in a
permissible execution range of 1.60
up to and including 1.85) 37
Æ T1 routes 100 to BOX and trades at
1.60
Æ T1 trades 100 with T2 at 1.70
Æ T1 trades 100 with T3 at 1.80
• Since T1 has traded with all eligible
interest within the collar range, the
balance of T1 (i.e.. the remaining 700)
is assigned a collar execution price of
1.80 (the most recent execution price),
is displayed at that price and is
eligible to trade within the Collar
Range 38
• Each second that the T1 does not
trade it receives a new collar
execution price and is displayed at
each successive collar (i.e., 2.05 and
then ticks up based on $0.40 collar—
because price/NBB is over $2.00—to
2.45) 39
Æ Once at 2.85, T1 is eligible to trade
within its Collar Range and trades
100 with T4 at 2.95
• The balance of T1 (i.e., the remaining
600) is assigned a collar execution
price of 2.95, is displayed at that price
and is eligible to trade within the
Collar Range 40
35 See proposed Rule 6.60–O(a)(4)(D) (regarding
Collar Range).
36 See supra note 31.
37 See proposed Rule 6.60–O(a)(4)(C) (regarding
collar execution price for limit orders) and (a)(4)(D)
(regarding Collar Range) and (a)(2)(A)(i) (regarding
Trading Collar).
38 See proposed Rule 6.60–O(a)(5)(A). See also
Rule 6.60–O(a)(5)(A) (regarding collared order that
has traded against all eligible interest in the collar
range being displayed at the most recent execution
price).
39 See proposed Rule 6.60–O(a)(6)(C) (regarding
assignment of new collar execution price every one
second that the order does not trade as seconds
elapse and NBBO does not change) and (a)(2)(A)(i)
(regarding Trading Collar).
40 See also Rule 6.60–O(a)(5)(A) (regarding
collared order that has traded against all eligible
interest in the collar range being displayed at the
most recent execution price).
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• After one second, T1 is displayed at
its limit price of 3.00 and will not be
repriced/subject to further Trade
Collar Protection 41
Example 3: Limit Order Received When
No Other Orders Being Collared 42
MMQ 100 × 5.00¥5.40 × 10 (NBBO)
BD1 Sell Limit Order 10 × 5.70
BD2 Sell Limit Order 10 × 5.95
BD3 Buy Limit Order 100 @6.00
Results:
• BD3 is assigned a collar execution
price of 5.40 (i.e., the NBO) and is
eligible to trade with interest within
its Collar Range (i.e., contra-side
interest within one Trading Collar
(0.40 because the NBB does not
exceed 5.00) above the collar
execution price—resulting in a
permissible execution range of 5.40
up to and including 5.80) resulting in
the following executions:
Æ BD3 trades 10 with MMQ at 5.40
Æ BD3 trades 10 with BD1 at 5.70 43
• The balance of BD3 (i.e., the
remaining 80) is displayed at 5.40
rather than the most recent execution
price of 5.70 (‘‘last sale’’) because
there is contra-side interest priced
within one Trading Collar of the last
sale (i.e., 5.95) 44
• One second elapses, and BD3
receives a new collar execution price of
5.90 (i.e., its collar execution price
(5.40) plus one Trading Collar (0.50))
and is eligible to trade with interest
within its Collar Range (i.e., contra-side
interest within one Trading Collar (0.50)
above the collar execution price—
resulting in a permissible execution
range of 5.90 up to and including 6.40)
resulting in the following execution:
Æ BD4 trades 10 with BD2 at $5.95 45
Example 4: Market Order Received
When the NBB is Zero and No Other
Orders Being Collared (Illustrating the
Proposed Zero NBBO Collar
Exception) 46
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BOX: 0 × 0¥1.50 × 100
Cust1 Buy Market Order × 100
Result:
41 See proposed Rule 6.60–O(a)(7) (regarding a
limit order not being eligible to post beyond its
limit price).
42 See supra note 31.
43 See proposed Rule 6.60–O(a)(4)(C) (regarding
collar execution price for limit orders) and (a)(4)(D)
(regarding Collar Range) and (a)(2)(A)(ii) (regarding
Trading Collar).
44 See proposed Rule 6.60–O(a)(5)(B) (regarding
display price of partially executed collared order
where there is contra-side interesting within on
Trading Collar).
45 See proposed Rule 6.60–O(a)(4)(C) (regarding
collar execution price for limit orders) and (a)(4)(D)
(regarding Collar Range) and (a)(2)(A)(ii) (regarding
Trading Collar).
46 See supra note 31.
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• Cust1 is assigned a collar execution
price of 0.25 (i.e., the NBB (0.00), plus
one Trading Collar which is 0.25
because the NBB is less than $2.00) 47
• Each second that Cust1 does not trade
(and absent changes to the NBBO), it
receives a new collar execution price
and is displayed at each successive
collar (i.e., 0.50, then 0.75, then
1.00) 48
• Once the order ticks up to receive a
collar execution price of 1.25, it seeks
an execution within that collar range
(i.e., 1.25–1.50) and trades with BOX
at 1.50.
*
*
*
*
*
Rule 6.65A–O: LULD Rule
The Exchange proposes to update the
Rule 6.65A–O, Limit-Up and LimitDown During Extraordinary Market
Volatility, related to the Plan to Address
Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS
(‘‘LULD’’ or the ‘‘LULD Rule’’). The
current rule provides that the Exchange
shall reject Market Orders, as defined in
Rule 6.62–O(a), entered when the
underlying NMS stock is either in a
Limit State or a Straddle State (an
‘‘LULD State’’) and shall notify OTP
Holders of the reason for such
rejection.49 The Exchange proposes to
add rule text to make clear that the
Exchange, under existing functionality,
‘‘will cancel any Market Order that is a
collared order pursuant to Rule 6.60–
O(a)’’ if the underlying NMS stock
enters an LULD State and ‘‘will notify
OTP Holders of the reason for such
cancellation,’’ as the current rule does
not address this scenario.50 A market
order would typically trade upon
47 See proposed Rule 6.60–O(a)(4)(B)(i). See also
current and proposed Rule 6.60–O(a)(2)(i).
48 See proposed Rule 6.60–O(a)(6)(C) (regarding
assignment of new collar execution price every one
second that the order does not trade as seconds
elapse and NBBO does not change) and (a)(2)(A)(i)
(regarding Trading Collar).
49 See Rule 6.65A–O(a)(1). The Exchange notes
that other exchanges provide for the cancellation or
rejection of market orders in such circumstance.
See, e.g., CBOE Rule 6.3A(b)(1) (LULD rule citing
Rule 6.2 regarding order handling); CBOE Rule 6.2,
Interpretations and Policies .07 (providing that if
the underlying security for an option class is in an
LULD State when the class moves to opening
rotation, then all market orders in the system will
be cancelled, except market orders that are
considered limit orders pursuant to CBOE Rule
6.13(b)(vi) and entered the previous trading day).
See also NASDAQ Options Market (‘‘NOM’’) Ch. V,
Sec. 3(d) (providing that if, after the opening, the
underlying NMS stock for an option class is in an
LULD State, NOM will reject market orders and
notify its participants of the reason for such
rejection).
50 See proposed Rule 6.65A–O(a)(1). For
consistency, the Exchange proposes the technical
change of replacing ‘‘shall’’ with ‘‘will’’ each time
in appears in this rule. See proposed Rule 6.65A–
O.
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arrival, unless collared and pending
execution. The Exchange believes this
proposed change would add clarity,
transparency and internal consistency to
Exchange rules as it makes clear that, in
addition to rejecting a Market Order
received when an underlying NMS
stock is in an LULD State, the Exchange
will likewise cancel a resting Market
Order if an underlying NMS stock enters
an LULD State.
Implementation
The Exchange will announce the Zero
NBBO Collar exception in a Trader
Update to be published no later than 60
days following the approval date of this
rule.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 51 of the
Act, in general, and furthers the
objectives of Section 6(b)(5),52 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 facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system.
Overall, the Exchange is proposing
various changes that would promote just
and equitable principles of trade,
because collared orders would be
handled in a fair and orderly manner, as
described above. The various
modifications and clarifications, many
of which are consistent with current
functionality, are intended to improve
the rule overall by adding more
specificity and transparency. The
Exchange believes that the proposed
rule changes would promote just and
equitable principles of trade as well as
protect investors and the public interest
by making more clear what types of
orders may be collared and how such
orders are processed, including the
circumstances that determine collar
execution price(s) and display price(s).
The Exchange believes that the
proposed rule assists with the
maintenance of fair and orderly markets
by clarifying and enhancing the
operation of the Trading Collar
functionality—which is designed to
mitigate the risk of orders sweeping
through multiple price points and
executing at potentially erroneous
prices—as the proposed rule would
continue to protect investors from
receiving bad executions away from
51 15
52 15
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prevailing market prices. The Exchange
notes that Trading Collar functionality
is not new or novel and is available on
other options exchanges.53 The
Exchange believes that the proposed
changes that codify existing
functionality, including how incoming
marketable Limit Orders are collared
and the cancellation of collared Market
Orders—in the absence of Available
Interest or if an NMS stock enters an
LULD State—would add clarity,
transparency and internal consistency to
Exchange rules regarding the handling
of orders accepted by the Exchange (i.e.,
that such orders would be cancelled, not
rejected) and make them easier for
market participants to navigate and
comprehend.
Further, the proposal to codify that
the Exchange would cancel a Market
Order or the balance thereof that has
been collared once it has exhausted
trading opportunities within its collar
execution price plus/minus one Trading
Collar if there is no Available Interest
would protect investors from potentially
erroneous executions because this
scenario means the Exchange would
have no reliable price framework within
which to evaluate the collared orders.
Thus, this proposal would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange believes that the
proposal to codify current functionality
regarding a collared order that is a
Market Order to sell that has reached
$0.00 such that the Exchange post the
order at its MPV (e.g., $0.01 or $0.05)
would promote just and equitable
principles of trade and assist with the
maintenance of fair and orderly markets
because an order may never be posted
for lower than its MPV—and the
alternative to holding the order at the
MPV would be to cancel it. The
53 See, e.g., CBOE Rule 6.13(b)(v) (setting forth its
Hybrid Trading System Automatic Execution
Feature, which prevents the execution of
marketable orders if (a) the width of the NBB and
NBO is not within an ‘‘acceptable price range’’ (as
determined by CBOE) or (b) if an execution would
follow a partial execution and would be beyond an
‘‘acceptable tick distance’’ (as determined by
CBOE), but unlike Trade Collar Protection on the
Exchange, CBOE does not reprice (or redisplay)
orders at narrowing prices. In addition, the
NASDAQ Options Market (‘‘NOM’’) and NASDAQ
OMX BX (‘‘BX’’) each have identical rules (Chapter
VI, Section 18(b)(1) (setting forth the risk protection
feature for quotes and orders, which prevents
executions (partial or otherwise) of orders beyond
an ‘‘acceptable trade range’’ (as calculated by the
exchange) and when an order (or quote) reaches the
limits of the ‘‘acceptable trade range’’, it posts for
a period not to exceed one second and recalculated
a new ‘‘acceptable trade range’’).
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Exchange believes the proposed
clarification of how such orders are
handled provides the collared order an
opportunity for an execution (rather
than being cancelled) and adds
transparency and internal consistency to
Exchange rules.
The Exchange likewise believes that
the proposed enhancements to the
Trading Collar functionality—the Zero
NBBO Collar Exception—likewise
would prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, and remove impediments to and
perfect the mechanisms of a free and
open market and a national market
system. In particular, the proposed Zero
NBBO Collar Exception would improve
the operation of the Trading Collar
when the prevailing market is zero
(indicating market dislocation) at the
time an incoming Market Order arrives.
The Exchange believes the Zero NBBO
Collar Exception would improve the
operation of Trading Collars when the
prevailing market is zero (indicating
market dislocation) at the time an
incoming Market Order arrives. Absent
the proposed Zero NBBO Collar
Exception, a Market Order to buy (sell)
that arrives when the NBB (NBO) is zero
would trade based on the last sale price,
if any; if there is no last sale price, the
order would trade at the contra-side
NBBO which may result in a bad
execution price. In regards to the
proposal to reject (as opposed to collar)
incoming sell orders when the NBO is
zero, the Exchange believes this change
in functionality is necessary because
any attempt to collar such an order
would result in a negative number. In
addition, the Exchange has observed
that it is extremely uncommon to have
a no (zero) offer situation and believes
it could be indicative of unstable market
conditions. To avoid such orders
receiving bad executions in times of
market dislocation, the Exchange
believes it would be appropriate to
reject such orders. Thus, the Zero NBBO
Exception helps maintain fair and
orderly markets.
LULD
The Exchange believes it is
appropriate that the Exchange cancel a
Market Order that is collared when an
NMS stock enters an LULD State
because when the underlying NMS
stock enters an LULD State, there may
not be a reliable underlying reference
price, there may be a wide bid/ask
quotation differential in the option, and
there may be less liquidity in the
options markets. Thus, allowing a
collared Market Order to execute (as
opposed to cancel) in such
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46599
circumstances could lead to executions
at unintended prices (i.e., inferior to the
NBBO), and could add to volatility in
the options markets during times of
extraordinary market volatility. The
Exchange believes that this current
treatment of collared market orders, and
the proposal to explicitly state this
treatment in the rule text, would
provide certainty to the treatment of
Market Orders during these times and
add clarity and transparency to
Exchange rules, thus promoting just and
equitable principles of trade and
removing impediments to, and
perfecting the mechanism of, a free and
open market and a national market
system. The proposed rule amendments
would also provide internal consistency
within Exchange rules and operate to
protect investors and the investing
public by making the Exchange rules
easier to navigate and comprehend. The
Exchange notes that the proposed
cancellation of an options order if the
underlying NMS security is in an LULD
State is not new or novel and is
available on other options exchanges
that offer collar functionality similar to
the Exchange’s.54 However, the
Exchange believes that the rules of these
other exchanges do not specifically
contemplate the underlying security
entering an LULD state while a market
order is resting on the book, because
such orders typically execute on arrival.
The Exchange nonetheless believes that
the handling such orders, as well as the
proposed rule clarification, adds
transparency and specificity to
Exchange rules.
Technical Changes
The Exchange notes that the proposed
organizational and non-substantive
changes to the rule text would provide
clarity and transparency to Exchange
rules and would promote just and
equitable principles of trade and remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system. The
proposed rule amendments would also
provide internal consistency within
Exchange rules and operate to protect
investors and the investing public by
making the Exchange rules easier to
navigate and comprehend.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
this proposed rule change would
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. Instead, the
Exchange believes the proposal provides
54 See
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clarity (including defining the collar
execution price) and enhancement to
the Trading Collars that provide market
participants with protection from
anomalous executions. Thus, the
Exchange does not believe the proposal
creates any significant impact on
competition.
The proposed enhancements to the
Trading Collars (i.e., the Zero NBBO
Collar Exception) would improve the
operation of the Trading Collars thereby
further protecting investors against the
execution of orders at erroneous prices.
As such, the proposal does not impose
any burden on competition. To the
contrary, the Exchange believes that the
proposed enhancements may foster
more competition. Specifically, the
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues. The Exchange’s
proposed rule change would enhance its
ability to compete with other exchanges
that already offer similar trading collar
functionality.55 Thus, the Exchange
believes that this type of competition
amongst exchanges is beneficial to the
market place as a whole as it can result
in enhanced processes, functionality,
and technologies. The Exchange further
believes that because the proposed rule
change would be applicable to all OTP
Holders it would not impose any burden
on intra-market competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
jbell on DSK3GLQ082PROD with NOTICES
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.
55 See
id.
VerDate Sep<11>2014
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:
Jkt 247001
[FR Doc. 2019–19001 Filed 9–3–19; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
SMALL BUSINESS ADMINISTRATION
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2019–58 on the subject line.
[Disaster Declaration #16095 and #16096;
Wisconsin Disaster Number WI–00069]
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–NYSEArca–2019–58. 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
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 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–NYSEArca–2019–58 and
should be submitted on or before
September 25, 2019.
56 17
19:08 Sep 03, 2019
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.56
Jill M. Peterson,
Assistant Secretary.
PO 00000
CFR 200.30–3(a)(12).
Frm 00099
Fmt 4703
Sfmt 4703
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Wisconsin
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of WISCONSIN (FEMA–4459–
DR), dated 08/27/2019.
Incident: Severe Storms, Tornadoes,
Straight-line Winds, and Flooding.
Incident Period: 07/18/2019 through
07/20/2019.
DATES: Issued on 08/27/2019.
Physical Loan Application Deadline
Date: 10/28/2019.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/27/2020.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
08/27/2019, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Areas: Barron, Clark, Forest, La
Crosse, Langlade, Menominee,
Monroe, Oconto, Oneida,
Outagamie, Polk, Portage, Rusk,
Shawano, Vernon, Waupaca, Wood
Counties and the Menominee
Indian Tribe of Wisconsin and the
St. Croix Chippewa Indians of
Wisconsin.
The Interest Rates are:
SUMMARY:
E:\FR\FM\04SEN1.SGM
04SEN1
]]>Agencies
[Federal Register Volume 84, Number 171 (Wednesday, September 4, 2019)]
[Notices]
[Pages 46593-46600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19001]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86788; File No. SR-NYSEArca-2019-58]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Modify Rules 6.60-O and 6.65A-O Regarding
the Treatment of Orders Subject to Trade Collar Protection
August 28, 2019.
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 August 21, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') 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
[[Page 46594]]
prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Rules 6.60-O (Price Protection--
Orders) and 6.65A-O (Limit-Up and Limit-Down During Extraordinary
Market Volatility) regarding the treatment of orders subject to Trade
Collar Protection. The proposed 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify Rules 6.60-O(a) and 6.65A-O
regarding the treatment of orders subject to Trade Collar Protection.
The Exchange has in place various price check features that are
designed to help maintain a fair and orderly market, including Trade
Collar Protection.\4\ Trading Collars mitigate the risks associated
with orders sweeping through multiple price points (including during
extreme market volatility) and resulting in executions at prices that
are potentially erroneous (i.e., because they are away from the last
sale price or best bid or offer). By applying Trading Collars to
incoming orders, the Exchange provides an opportunity to attract
additional liquidity at tighter spreads and it ``collars'' affected
orders at successive price points until the bid and offer are equal to
the bid-ask differential guideline for that option, i.e., equal to the
Trading Collar. Similarly, by applying Trading Collars to partially
executed orders, the Exchange prevents the balance of such orders from
executing away from the prevailing market after exhausting interest at
or near the top of book on arrival. The Exchange proposes to modify its
rule regarding Trading Collars (i.e., Rule 6.60-O(a) or the ``Rule'')
to clarify existing functionality and to adopt enhancements to the
operation of the Trading Collars.
---------------------------------------------------------------------------
\4\ Per Rule 6.60-O(a)(2), Trading Collars are determined by the
Exchange on a class-by-class basis and, unless announced otherwise
via Trader Update, are the same value as the bid-ask differential
guidelines established pursuant to Rule 6.37-O(b)(4). The Exchange
proposes a streamlining technical change to combine the buy and sell
sections of the Rule into one paragraph since the Trading Collar
value is the same whether a buy or sell order. See proposed Rule
6.60-O(a)(2)(A). To conform with this proposed change, the Exchange
proposes to re-number current paragraph (a)(2)(C) to proposed
(a)(2)(B), without any substantive changes.
---------------------------------------------------------------------------
Current Rule 6.60-O(a)(1)(i) states that Trade Collar Protection
prevents the ``immediate execution'' of incoming Market Orders when the
difference between the National Best Offer (``NBO'') and the National
Best Bid (``NBB'') is greater than one Trading Collar. Rule 6.60-
O(a)(1)(ii) states that Trade Collar Protection prevents the execution
of the balance of an incoming Market Order or marketable limit order to
buy (sell) if it would execute at a price that exceeds the width of the
National Best Bid and Offer (``NBBO'') plus (minus) the value of one
Trading Collar. Thus, the current rule limits the application of Trade
Collar Protection to incoming Market Orders and only expands this
protection to include marketable Limit Orders once there is a balance
of a partially executed order that is subject to such protection.
The Exchange proposes to modify Rule 6.60-O(a) to make clear that
Trade Collar Protection may be applied to marketable Limit Orders on
arrival. Although this reflects current functionality, the rule is
silent in this regard and focuses solely on any unexecuted portion of a
marketable Limit Order. Pursuant to proposed Rule 6.60-O(a), the
Exchange would ``limit the immediate execution'' of incoming Market
Orders and marketable Limit Orders (collectively, ``Marketable
Orders''; and each a ``collared order'') if the width of the NBBO is
greater than one Trading Collar.\5\ This proposed change would clarify
how Trade Collar Protection currently operates and explicitly state
that marketable Limit Orders may be collared on arrival, in addition to
having any remaining balance likewise subject to the Trading Collar
(the latter point is already explicitly stated in the current rule).
The Exchange would continue to apply Trade Collar Protection to the
balance of Marketable Orders consistent with the current Rule (as
discussed below).\6\
---------------------------------------------------------------------------
\5\ See proposed Rule 6.60-O(a)(1)(A). Because the Exchange is
proposing to move the existing text (albeit modified) into a sub-
paragraph, it proposes to re-number the paragraph in a manner
consistent with the rest of the current rule. See id. Also,
consistent with the clarification that Trade Collar Protection
applies to incoming Marketable Orders, the Exchange proposes to
modify and expand the application of paragraph (a)(4). See proposed
Rule 6.60-O(a)(4).
\6\ See proposed Rule 6.60-O(a)(1)(B). Because the Exchange is
proposing to move the existing text (albeit slightly modified) into
a sub-paragraph, it proposes to re-number the paragraph in a manner
consistent with the rest of the current rule. See id. In addition,
the Exchange proposes to modify this provision to refer solely to
``Marketable Orders'' (and to remove now extraneous reference to
marketable Limit Orders), as the Marketable Orders is already
defined in proposed Rule 6.60-O(a)(1)(A). See proposed Rule 6.60-
O(a)(1)(B).
---------------------------------------------------------------------------
Current Rule 6.60-O(a)(3) provides that Trade Collar Protection
does not apply to order types that have contingencies, namely, IOC,
NOW, AON and FOK orders (the ``Contingent Order Type Provision''). The
Exchange proposes to modify the Contingent Order Type Provision, which
currently indicates that such order types would receive an ``immediate
execution,'' to make clear that such incoming orders would ``receive an
execution, depending upon the availability of an execution pursuant to
the terms of those orders.'' \7\ The Exchange believes this proposed
change (i.e., the removal of the word ``immediate'') would more
accurately reflect current functionality in regards to the processing
of these contingent order types, insofar as such orders will only
``immediately'' execute if the contingency is satisfied. The Exchange
believes this proposed wording change would add clarity, transparency
and internal consistency to Exchange rules.
---------------------------------------------------------------------------
\7\ See proposed Rule 6.60-O(a)(3). Because the listed
contingency orders are not subject to Trade Collar Protection, the
Exchange believes the current rule may refer to such orders
receiving an ``immediate execution'' to contrast the treatment of
orders that are subject to such protection--as such orders (under
the current rule) are ``not immediately executed.'' See Rule 6.60-
O(a)(1) and (a)(3).
---------------------------------------------------------------------------
Current Rule 6.60-O(a)(4) provides that when a Market Order is
subject to Trade Collar Protection pursuant to current paragraph
(a)(1)(i), the Exchange does not immediately execute or route such
orders and instead goes on to state how such orders are processed. The
Exchange proposes to modify this paragraph to make clear that it
relates to Marketable (as opposed to just Market) Orders as well as to
clarify that the ``execution and/or routing'' of such orders would be
limited by the
[[Page 46595]]
Exchange as discussed below, as opposed to stating that they would not
``immediately execute or route'' which modifications are consistent
with the changes to Rule 6.60-O(a)(1)(A) (and consistent with existing
functionality). The Exchange also proposes to make clear that this
provision relates to ``incoming'' Marketable Orders as opposed to the
balance thereof.\8\
---------------------------------------------------------------------------
\8\ See proposed Rule 6.60-O(a)(4). See also proposed Rule 6.60-
O(a)(1)(A) (making clear that incoming marketable Limit Order are
subject to Trading Collar Protection).
---------------------------------------------------------------------------
The Exchange also proposes to modify the Rule to specify that
collared orders will be assigned a ``collar execution price,'' which
price depends upon the order type (Market or Limit) and whether (when
the order arrives) the Exchange is already in receipt of another order
being collared.\9\ Current Rule 6.60-O(a)(4)(A) covers collared Market
Orders to buy (sell), which would not immediately execute or route, but
would be ``displayed at a price equal to the NBB (NBO) plus (minus) one
Trading Collar.'' As proposed, a Market Order to buy (sell) ``received
when there is not already a collared order to buy (sell)'' would be
``assigned a collar execution price'' (as opposed to being
``displayed'') equal to the NBB (NBO) plus (minus) one Trading
Collar.\10\ The Exchange proposes to replace ``displayed'' as used in
the current rule with ``assigned a collar execution price'' because,
once collared (and consistent with current functionality), the order
would be eligible to immediately execute against available interest
before its price is displayed. Examples illustrating this (existing)
functionality are included at the end of the description of these
proposed rule changes.
---------------------------------------------------------------------------
\9\ See proposed Rule 6.60-O(a)(4). The Exchange also proposes
to make a conforming change to update the cross-reference from Rule
6.60-O(a)(1)(i) to proposed Rule 6.60-O(a)(1)(A). Also, current Rule
6.60-O(a)(4)(C)(i)-(iii) address scenarios when an order arrives
while another order is being collared, but the proposed rule text
adds clarity regarding current functionality and addresses
enhancements to the functionality since the rule was adopted.
\10\ See proposed Rule 6.60-O(a)(4)(B). As discussed further
below, proposed Rule 6.60-O(a)(4)(A) would provide that ``[a] Market
Order to buy (sell) received when there is already a collared order
to buy (sell) will join that collared order and be processed
consistent with paragraphs (a)(4)(C)--(a)(6),'' which reflects
current functionality.
---------------------------------------------------------------------------
In addition, the Exchange proposes an exception to the processing
of incoming Market Orders to buy (sell) that arrive when the NBB (NBO)
is zero (the ``Zero NBBO Collar Exception''). Specifically, a Market
Order to buy entered when the NBB is $0.00 would be assigned a collar
execution price equal to the NBB (i.e., $0.00) plus one Trading Collar
to ensure it is collared to avoid executing at an erroneous price;
whereas, a Market Order to sell entered when the NBO is $0.00, would be
rejected as there is no market for the incoming order.\11\ The Exchange
believes the Zero NBBO Collar Exception would improve the operation of
Trading Collars when the prevailing market is zero (indicating market
dislocation) at the time an incoming Market Order arrives. Absent the
proposed Zero NBBO Collar Exception, a Market Order to buy (sell) that
arrives when the NBB (NBO) is zero would trade based on the last sale
price, if any; if there is no last sale price, the order would trade at
the contra-side NBBO which may result in a bad execution price. The
proposal to collar an incoming buy order when the NBB is zero is
consistent with the handling of other collared orders to buy when the
NBB is not zero (i.e., the collared order is assigned a collar
execution price equal to the NBB plus one Trading Collar).\12\ In
regards to the proposal to reject (as opposed to collar) incoming sell
orders when the NBO is zero, the Exchange believes this change in
functionality is necessary because any attempt to collar such an order
would result in a negative number. In addition, the Exchange has
observed that it is extremely uncommon to have a no (zero) offer
situation and believes it could be indicative of unstable market
conditions. To avoid such orders receiving bad executions in times of
market dislocation, the Exchange believes it would be appropriate to
reject such orders. Thus, the Zero NBBO Exception helps maintain fair
and orderly markets. An example illustrating this new functionality is
included at the end of this section.
---------------------------------------------------------------------------
\11\ See proposed Rule 6.60-O(a)(4)(B)(i), (ii).
\12\ See proposed Rule 6.60-O(a)(4)(B) (providing, in relevant
part, that a Market Order to buy received when there is not already
a collared order to buy is assigned a collar execution price equal
to the NBB plus one Trading Collar).
---------------------------------------------------------------------------
In addition, because the rule has been updated to clarify that
(consistent with current functionality) incoming marketable Limit
Orders may be collared (i.e., proposed Rule 6.60-O(a)(1)(A)), the
Exchange proposes to further update the rule to address how such orders
would be collared, depending upon whether the Exchange is already in
receipt of a collared order. Specifically, as proposed (and consistent
with current functionality), modified Rule 6.60-O(a)(4)(C) would
clarify that when the incoming collared order is a marketable Limit
Order to buy (sell) and there is no other order already being collared,
the order would be ``assigned a collar execution price equal to the NBO
(NBB).'' If, however, a marketable Limit Order arrives when there is
already an order being collared, it would join that collared order and
be processed consistent with proposed paragraph (a)(6)(B), which is
discussed below.\13\
---------------------------------------------------------------------------
\13\ See proposed Rule 6.60-O(a)(4)(C).
---------------------------------------------------------------------------
The Exchange also proposes to modify the rule regarding executions
of collared orders. The current rule provides that the Exchange would
``execute or route the collared order to buy (sell) against any contra-
interest priced within one Trading Collar above (below) the displayed
price of the collared order.'' \14\ The Exchange proposes to clarify
that a collared order to buy (sell) would ``trade against any contra-
side interest priced equal to its collar execution price or at prices
within one Trading Collar above (below) the collar execution price
(`the Collar Range').'' \15\ Consistent with proposed Rule 6.60-
O(a)(4)(B),(C), the Exchange proposes to refer to the ``collar
execution price'' (as opposed to a display price) as the collared order
seeks an execution before it would be displayed, thus this change
clarifies existing functionality. In addition, the Exchange believes
that clarifying that the collared order would execute with contra-side
interest priced within a Collar Range (i.e., equal to, and up to one
Trading Collar above (below) the collar execution price), provides more
specificity than the current language, which states only that such
order would execute against interest ``within one Trading Collar'' of
its price. The Exchange believes these proposed changes, which describe
current functionality, would add clarity, transparency, and internal
consistency to Exchange rules.
---------------------------------------------------------------------------
\14\ See Rule 6.60-O(a)(4)(B).
\15\ See proposed Rule 6.60-O(a)(4)(D). The proposed rule does
not repeat the concept of a collared order being executed or routed
in paragraph (a)(4)(D), because this concept is already covered in
proposed paragraph (a)(4).
---------------------------------------------------------------------------
The Exchange proposes to add new paragraph (a)(4)(E) to the Rule to
codify existing functionality and make clear that the Exchange would
cancel a Market Order, or the balance thereof, that has been collared
pursuant to proposed Rule 6.60-O(a)(1)(A) or (B) if, after exhausting
trading opportunities within the Collar Range, the Exchange determines
there are no quotes on the Exchange and/or no interest on another
market (``Available Interest''). The absence of Available Interest,
such as a Market Maker quote in the series, means that the Exchange
would have no reliable price framework within which to evaluate the
Market Order. Therefore, the Exchange believes that cancellation
[[Page 46596]]
of the Market Order would be appropriate and in the best interest of
investors.
Regarding the treatment of the balance of a Marketable Order (i.e.,
a Market Order or a marketable Limit Order) that is subject to Trade
Collar Protection, the Exchange proposes to clarify and update the
collar functionality, including making clear when and at what price the
collared order is first displayed. Current Rule 6.60-O(a)(5) provides
that ``[w]hen the balance of a partially executed Marketable Order'' is
subject to Trade Collar Protection, such balance ``will be displayed at
the last sale price.'' Further, ``[i]f there is an opportunity for
trading within a Trading Collar above (below) the last sale price, the
balance of the buy (sell) order will be displayed at the NBB (NBO)
established at the time of the initial execution.'' \16\
---------------------------------------------------------------------------
\16\ See Rule 6.60-O(a)(5).
---------------------------------------------------------------------------
The Exchange proposes to replace the existing text and replace it
with new rule text titled ``Display of collared orders.'' Pursuant to
new Rule 6.60-O(a)(5), a Market Order that does not trade on arrival
will be displayed at its collar execution price whereas the display
price of the balance of a partially executed Marketable Order collared
pursuant to proposed paragraph (a)(1)(B) of the Rule, depends upon
eligible contra-side interest.\17\ Specifically, per proposed paragraph
(a)(5)(A) of the Rule, if the collared order has traded against all
contra-side interest within the Collar Range, the order would be
displayed at the most recent execution price.\18\ This proposed
provision sets forth the same concept as the first sentence of current
paragraph (a)(5), except that it specifies that the order would be
displayed at the most recent execution price (i.e., last sale price)
only after it has exhausted trading opportunities within the Collar
Range (whereas the current rule is silent on this fact, though it may
be inferred given that the second sentence of the current Rule
discusses the display price when trading opportunities have not been
exhausted).
---------------------------------------------------------------------------
\17\ See proposed Rule 6.60-O(a)(5). The Exchange notes that the
proposed new rule does not include the last sentence of current
paragraph (a)(5) which provides that the balance of Marketable
Orders that are subject to Trade Collar Protection are processed in
the same fashion as incoming collared orders per current paragraph
(a)(4). The Exchange believes that this language would be redundant
of proposed paragraph (a)(1)(A)-(B), which makes clear what is
deemed a ``collared order'' as well as proposed rule (a)(4)(A)-(E),
which describes how such orders are processed.
\18\ See proposed Rule 6.60-O(a)(5)(A).
---------------------------------------------------------------------------
Per proposed paragraph (a)(5)(B) of the Rule, if, however, there is
contra-side interest priced within one Trading Collar of the most
recent execution price, the order to buy (sell) would be displayed at
the higher (lower) of its assigned collar execution price or the best
execution price of the order that is both within the Collar Range and
at least one Trading Collar away from the best priced contra-side
trading interest (i.e., lowest sell interest for collared buy orders/
highest buy interest for collared sell orders).\19\ This proposed text
modifies the second sentence of current paragraph (a)(5) by replacing
reference to the NBBO at the time of initial execution with the concept
of the collar execution price and clarifying that the display price
would be the better of the collar execution price or keyed off of the
best price contra-side interest. The Exchange believes this modified
provision, which reflects current functionality, provides greater
granularity regarding the circumstances under which the price of a
collared order is first displayed and how that price is determined,
which additional clarity and transparency is beneficial to the
investing public.
---------------------------------------------------------------------------
\19\ See proposed Rule 6.60-O(a)(5)(B).
---------------------------------------------------------------------------
In addition, the Exchange also proposes to add rule text to new
paragraph (a)(5) of the Rule to make clear that collared orders would
be displayed at the Minimum Price Variation (``MPV'') for the option,
pursuant to Rule 6.72-O (Trading Differentials) which rule sets forth
the minimum quoting increments for options traded on the Exchange.\20\
The Exchange believes adding this information to the Rule add
transparency, clarity and internal consistency to Exchange rules.
---------------------------------------------------------------------------
\20\ See proposed Rule 6.60-O(a)(5).
---------------------------------------------------------------------------
Current Rule 6.60-O(a)(4)(C) sets forth scenarios that would
trigger the ``redisplay'' of a collared order. Consistent with the
foregoing changes, the Exchange proposes to update this section with
conforming changes for consistency, with regard to current
functionality, and modify the rule to adopt new functionality. First,
the Exchange proposes to re-number this paragraph as (a)(6), title it
``Repricing of collared orders,'' and make clear that the Exchange
would ``assign a new collar execution price'' to (as opposed to
redisplay) the collared order upon the happening of one of the listed
scenarios (as modified below).\21\
---------------------------------------------------------------------------
\21\ See proposed Rule 6.60-O(a)(6). Consistent with this
change, the Exchange also proposes to renumber the existing
subparagraphs to proposed (a)(6) as (A)-(C) and existing paragraphs
(a)(4)(D) and (a)(6) as proposed paragraphs (a)(7) and (a)(8),
respectively. See id.
---------------------------------------------------------------------------
The first scenario under the current rule provides that
``an update to the NBBO (based on another market or a quote on the
Exchange or a Limit Order on the Exchange priced one Trading Collar or
less away from the collared order) that improves the same side of the
market as the collared order will result in the collared order being
redisplayed at the new NBB (for buy orders) or NBO (for sell orders)''
\22\ Consistent with the foregoing proposed rule text changes, the
Exchange proposes to modify this provision to replace the words
``redisplayed at'' with ``assigned a new collar execution price equal
to'' the NBB (for buy orders) or NBO (for sell orders), and to add to
the end of this provision that the repriced orders would be ``processed
at the updated collar execution price consistent with paragraphs
(a)(4)(D) and (a)(5) above.'' \23\ The ``new collar execution price''
reflects the updated price at which the collared order is eligible to
trade based on changes in the market. This concept is consistent with
the current rule except that the updated price is not (re)displayed
until it has exhausted all trading opportunities within the Collar
Range.
---------------------------------------------------------------------------
\22\ See Rule 6.60-O(a)(4)(C)(i).
\23\ See proposed Rule 6.60-O(a)(6)(A). The Exchange also
proposes to add a semi-colon to separate the two clauses regarding
what constitutes a market update event that updates the NBBO (i.e.,
that it must be ``based on another market or a quote on the
Exchange; or a Limit Order on the Exchange priced one Trading Collar
or less away from the collared order''). See id.
---------------------------------------------------------------------------
The second scenario under the current rule provides that a
Marketable Order to buy (sell) on the same side of the market as the
collared order or a Limit Order to buy (sell) on the same side of the
market as the collared order and priced greater than one Trading Collar
above (below) the displayed price of the collared order will itself
become subject to Trade Collar Protection and will result in the
collared order and the Limit Order being displayed at one Trading
Collar above (below) the displayed price of the collared order.\24\ The
Exchange proposes to modify this rule to remove reference to
``Marketable Orders to buy (sell) on the same side of the market as the
collared orders,'' because the functionality has been updated such that
a Market Order received when there is already a collared order would
join that collared order (rather than be subject to a separate
collar).\25\ This proposed modification would make clear that this
[[Page 46597]]
scenario is applicable solely to marketable Limit Orders received when
there is already an order being collared. Consistent with the proposed
textual changes to the first scenario, the Exchange likewise proposes
to modify this provision to replace the words ``displayed at a price''
with ``assigned a new collar execution price'' one Trading Collar above
or below the displayed price of the collared order, as applicable (at
which new price it will be eligible to trade), and to add to the end of
this provision that the repriced orders would be ``processed at the
updated collar execution price consistent with paragraphs (a)(4)(D) and
(a)(5) above.'' \26\
---------------------------------------------------------------------------
\24\ See Rule 6.60-O(a)(4)(C)(ii). Consistent with the Rule,
this provision excludes IOC Orders, AON Orders, FOK Orders and NOW
Orders. See id.; see also Rule 6.60-O(a)(3).
\25\ See proposed Rule 6.60-O(a)(4)(A).
\26\ See proposed Rule 6.60-O(a)(6)(B).
---------------------------------------------------------------------------
The third scenario under the current rule provides that
``upon the expiration of one second, the collared order to buy (sell)
will redisplay at a price one Trading Collar above (below) the
displayed price of the collared order.'' \27\ The Exchange proposes to
modify this provision to add ``and absent an update to the NBBO'' after
language regarding the expiration of one second to distinguish this
scenario from the first scenario where a change in the market (i.e., an
update to the NBBO) caused the collared order to reprice (and
potentially redisplay). Also, consistent with the other two scenarios,
the Exchange proposes to modify this provision to replace the words
``redisplay at a price'' with ``assigned a new collar execution price''
one Trading Collar above or below the ``current displayed price'' of
the collared order, as applicable, and to add to the end of this
provision that the repriced orders would be ``processed at the update
collar execution price consistent with paragraphs (a)(4)(D) and (a)(5)
above.'' \28\ Thus, the collared order to buy (sell) would be eligible
to trade at a price for a period of one second, but if market
conditions prevent it from trading, the order will improve or tick up
(down) and be assigned a new collar execution price one Trading Collar
above (below) the current display price. The Exchange proposes to
clarify the functionality under this (third) scenario, however to
provide that ``if the collared order is a Market Order to sell that has
reached $0.00, it will not reprice but will be posted in the
Consolidated Book at its MPV (e.g., $0.01 or $0.05),'' because an order
may never be posted for lower than its MPV--and the alternative to
holding the order at the MPV would be to cancel it.\29\ The Exchange
believes this proposed rule text, which reflects current functionality,
would allow the collared order an opportunity for an execution (rather
than being cancelled) and adds transparency and internal consistency to
Exchange rules.
---------------------------------------------------------------------------
\27\ See Rule 6.60-O(a)(4)(C)(iii).
\28\ See proposed Rule 6.60-O(a)(6)(C).
\29\ See id.
---------------------------------------------------------------------------
The Exchange also proposes to clarify the rule text regarding the
priority of collared orders. Current Rule 6.60-O(a)(6) states that
``[a]ll orders for which Trade Collar Protection prevents immediate
execution will be ranked based on time priority (with all other orders
for which Trade Collar Protection prevents immediate execution).''
Because the current rule text does not make clear that such collared
orders, like other non-collared orders, will be processed at each price
in time priority, the Exchange proposes to clarify that such orders
would be ``processed in accordance with Rule 6.76-O.Order Ranking and
Display--OX.'' \30\ This proposed change to reflect current
functionality and adds clarity, transparency and internal consistency
to Exchange rules.
---------------------------------------------------------------------------
\30\ See proposed Rule 6.60-O(a)(8).
---------------------------------------------------------------------------
* * * * *
EXAMPLES OF TREATMENT OF COLLARED ORDERS 31
---------------------------------------------------------------------------
\31\ The Exchange notes that the processing of collared orders
in examples 1-3 reflect current processing, but that, as noted
above, the Exchange has clarified the rule text used to describe the
processing (i.e., reference to ``collar execution price'' versus
``display price'' as well as removing reference to ``last sale'' as
the benchmark for determining display price and adding specificity
about available trading interest impacting display price
determination--which may or may not be the same as the last sale
price, see, e.g., Rule 6.60-O(a)(5)(A)).
---------------------------------------------------------------------------
Example 1: Market Order Received When No Other Orders Being Collared
32
---------------------------------------------------------------------------
\32\ See id.
---------------------------------------------------------------------------
BOX: 0 x 0-1.50 x 100 (wide market)
LMM 100 x 0.25-1.60 x 100
Cust1 Buy Market x 100
Results:
Cust1 is assigned a collar execution price of 0.50 (i.e., the
NBB (0.25), plus one Trading Collar, which is 0.25 because the NBB is
less than $2.00) \33\
---------------------------------------------------------------------------
\33\ See proposed Rule 6.60-O(a)(4)(B) (regarding collar
execution price for Market Orders) and (a)(2)(A)(i) (regarding
Trading Collar).
---------------------------------------------------------------------------
Each second that elapses in which Cust1 does not trade (and
absent changes to the NBBO), the order receives a new collar execution
price and is displayed at each successive collar--0.50, then 0.75, then
1.00 \34\
---------------------------------------------------------------------------
\34\ See proposed Rule 6.60-O(a)(6)(C) (regarding assignment of
new collar execution price every one second that the order does not
trade as seconds elapse and NBBO does not change).
---------------------------------------------------------------------------
Once the order ticks up to receive a collar execution price of
1.25, it trades with BOX at 1.50 (as 1.50 is within the Collar Range,
i.e., contra-side interest within one Trading Collar above the collar
execution price--resulting in a permissible execution range of 1.25 up
to and including 1.50) \35\
---------------------------------------------------------------------------
\35\ See proposed Rule 6.60-O(a)(4)(D) (regarding Collar Range).
---------------------------------------------------------------------------
Example 2: Limit Order Received When No Other Orders Being Collared
\36\
---------------------------------------------------------------------------
\36\ See supra note 31.
---------------------------------------------------------------------------
BOX: 100 x 1.50 x 1.60 x 100
T2 Sell 100 @ 1.70
T3 Sell 100 @ 1.80
T4 Sell 100 @ 2.95
T1 Buy 1000 @ 3.00
Results:
T1 is assigned a collar execution price of 1.60 (i.e., the
NBO) and is eligible to trade with interest within its Collar Range
(i.e., contra-side interest within one Trading Collar (0.25) above the
collar execution price--resulting in a permissible execution range of
1.60 up to and including 1.85) \37\
---------------------------------------------------------------------------
\37\ See proposed Rule 6.60-O(a)(4)(C) (regarding collar
execution price for limit orders) and (a)(4)(D) (regarding Collar
Range) and (a)(2)(A)(i) (regarding Trading Collar).
---------------------------------------------------------------------------
[cir] T1 routes 100 to BOX and trades at 1.60
[cir] T1 trades 100 with T2 at 1.70
[cir] T1 trades 100 with T3 at 1.80
Since T1 has traded with all eligible interest within the
collar range, the balance of T1 (i.e.. the remaining 700) is assigned a
collar execution price of 1.80 (the most recent execution price), is
displayed at that price and is eligible to trade within the Collar
Range \38\
---------------------------------------------------------------------------
\38\ See proposed Rule 6.60-O(a)(5)(A). See also Rule 6.60-
O(a)(5)(A) (regarding collared order that has traded against all
eligible interest in the collar range being displayed at the most
recent execution price).
---------------------------------------------------------------------------
Each second that the T1 does not trade it receives a new
collar execution price and is displayed at each successive collar
(i.e., 2.05 and then ticks up based on $0.40 collar--because price/NBB
is over $2.00--to 2.45) \39\
---------------------------------------------------------------------------
\39\ See proposed Rule 6.60-O(a)(6)(C) (regarding assignment of
new collar execution price every one second that the order does not
trade as seconds elapse and NBBO does not change) and (a)(2)(A)(i)
(regarding Trading Collar).
---------------------------------------------------------------------------
[cir] Once at 2.85, T1 is eligible to trade within its Collar Range
and trades 100 with T4 at 2.95
The balance of T1 (i.e., the remaining 600) is assigned a
collar execution price of 2.95, is displayed at that price and is
eligible to trade within the Collar Range \40\
---------------------------------------------------------------------------
\40\ See also Rule 6.60-O(a)(5)(A) (regarding collared order
that has traded against all eligible interest in the collar range
being displayed at the most recent execution price).
---------------------------------------------------------------------------
[[Page 46598]]
After one second, T1 is displayed at its limit price of 3.00
and will not be repriced/subject to further Trade Collar Protection
\41\
---------------------------------------------------------------------------
\41\ See proposed Rule 6.60-O(a)(7) (regarding a limit order not
being eligible to post beyond its limit price).
---------------------------------------------------------------------------
Example 3: Limit Order Received When No Other Orders Being Collared
\42\
---------------------------------------------------------------------------
\42\ See supra note 31.
---------------------------------------------------------------------------
MMQ 100 x 5.00-5.40 x 10 (NBBO)
BD1 Sell Limit Order 10 x 5.70
BD2 Sell Limit Order 10 x 5.95
BD3 Buy Limit Order 100 @6.00
Results:
BD3 is assigned a collar execution price of 5.40 (i.e., the
NBO) and is eligible to trade with interest within its Collar Range
(i.e., contra-side interest within one Trading Collar (0.40 because the
NBB does not exceed 5.00) above the collar execution price--resulting
in a permissible execution range of 5.40 up to and including 5.80)
resulting in the following executions:
[cir] BD3 trades 10 with MMQ at 5.40
[cir] BD3 trades 10 with BD1 at 5.70 \43\
---------------------------------------------------------------------------
\43\ See proposed Rule 6.60-O(a)(4)(C) (regarding collar
execution price for limit orders) and (a)(4)(D) (regarding Collar
Range) and (a)(2)(A)(ii) (regarding Trading Collar).
---------------------------------------------------------------------------
The balance of BD3 (i.e., the remaining 80) is displayed at
5.40 rather than the most recent execution price of 5.70 (``last
sale'') because there is contra-side interest priced within one Trading
Collar of the last sale (i.e., 5.95) \44\
---------------------------------------------------------------------------
\44\ See proposed Rule 6.60-O(a)(5)(B) (regarding display price
of partially executed collared order where there is contra-side
interesting within on Trading Collar).
---------------------------------------------------------------------------
One second elapses, and BD3 receives a new collar
execution price of 5.90 (i.e., its collar execution price (5.40) plus
one Trading Collar (0.50)) and is eligible to trade with interest
within its Collar Range (i.e., contra-side interest within one Trading
Collar (0.50) above the collar execution price--resulting in a
permissible execution range of 5.90 up to and including 6.40) resulting
in the following execution:
[cir] BD4 trades 10 with BD2 at $5.95 \45\
---------------------------------------------------------------------------
\45\ See proposed Rule 6.60-O(a)(4)(C) (regarding collar
execution price for limit orders) and (a)(4)(D) (regarding Collar
Range) and (a)(2)(A)(ii) (regarding Trading Collar).
---------------------------------------------------------------------------
Example 4: Market Order Received When the NBB is Zero and No Other
Orders Being Collared (Illustrating the Proposed Zero NBBO Collar
Exception) 46
---------------------------------------------------------------------------
\46\ See supra note 31.
---------------------------------------------------------------------------
BOX: 0 x 0-1.50 x 100
Cust1 Buy Market Order x 100
Result:
Cust1 is assigned a collar execution price of 0.25 (i.e., the
NBB (0.00), plus one Trading Collar which is 0.25 because the NBB is
less than $2.00) \47\
---------------------------------------------------------------------------
\47\ See proposed Rule 6.60-O(a)(4)(B)(i). See also current and
proposed Rule 6.60-O(a)(2)(i).
---------------------------------------------------------------------------
Each second that Cust1 does not trade (and absent changes to
the NBBO), it receives a new collar execution price and is displayed at
each successive collar (i.e., 0.50, then 0.75, then 1.00) \48\
---------------------------------------------------------------------------
\48\ See proposed Rule 6.60-O(a)(6)(C) (regarding assignment of
new collar execution price every one second that the order does not
trade as seconds elapse and NBBO does not change) and (a)(2)(A)(i)
(regarding Trading Collar).
---------------------------------------------------------------------------
Once the order ticks up to receive a collar execution price of
1.25, it seeks an execution within that collar range (i.e., 1.25-1.50)
and trades with BOX at 1.50.
* * * * *
Rule 6.65A-O: LULD Rule
The Exchange proposes to update the Rule 6.65A-O, Limit-Up and
Limit-Down During Extraordinary Market Volatility, related to the Plan
to Address Extraordinary Market Volatility Pursuant to Rule 608 of
Regulation NMS (``LULD'' or the ``LULD Rule''). The current rule
provides that the Exchange shall reject Market Orders, as defined in
Rule 6.62-O(a), entered when the underlying NMS stock is either in a
Limit State or a Straddle State (an ``LULD State'') and shall notify
OTP Holders of the reason for such rejection.\49\ The Exchange proposes
to add rule text to make clear that the Exchange, under existing
functionality, ``will cancel any Market Order that is a collared order
pursuant to Rule 6.60-O(a)'' if the underlying NMS stock enters an LULD
State and ``will notify OTP Holders of the reason for such
cancellation,'' as the current rule does not address this scenario.\50\
A market order would typically trade upon arrival, unless collared and
pending execution. The Exchange believes this proposed change would add
clarity, transparency and internal consistency to Exchange rules as it
makes clear that, in addition to rejecting a Market Order received when
an underlying NMS stock is in an LULD State, the Exchange will likewise
cancel a resting Market Order if an underlying NMS stock enters an LULD
State.
---------------------------------------------------------------------------
\49\ See Rule 6.65A-O(a)(1). The Exchange notes that other
exchanges provide for the cancellation or rejection of market orders
in such circumstance. See, e.g., CBOE Rule 6.3A(b)(1) (LULD rule
citing Rule 6.2 regarding order handling); CBOE Rule 6.2,
Interpretations and Policies .07 (providing that if the underlying
security for an option class is in an LULD State when the class
moves to opening rotation, then all market orders in the system will
be cancelled, except market orders that are considered limit orders
pursuant to CBOE Rule 6.13(b)(vi) and entered the previous trading
day). See also NASDAQ Options Market (``NOM'') Ch. V, Sec. 3(d)
(providing that if, after the opening, the underlying NMS stock for
an option class is in an LULD State, NOM will reject market orders
and notify its participants of the reason for such rejection).
\50\ See proposed Rule 6.65A-O(a)(1). For consistency, the
Exchange proposes the technical change of replacing ``shall'' with
``will'' each time in appears in this rule. See proposed Rule 6.65A-
O.
---------------------------------------------------------------------------
Implementation
The Exchange will announce the Zero NBBO Collar exception in a
Trader Update to be published no later than 60 days following the
approval date of this rule.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \51\ of
the Act, in general, and furthers the objectives of Section
6(b)(5),\52\ 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system.
---------------------------------------------------------------------------
\51\ 15 U.S.C. 78f(b).
\52\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Overall, the Exchange is proposing various changes that would
promote just and equitable principles of trade, because collared orders
would be handled in a fair and orderly manner, as described above. The
various modifications and clarifications, many of which are consistent
with current functionality, are intended to improve the rule overall by
adding more specificity and transparency. The Exchange believes that
the proposed rule changes would promote just and equitable principles
of trade as well as protect investors and the public interest by making
more clear what types of orders may be collared and how such orders are
processed, including the circumstances that determine collar execution
price(s) and display price(s).
The Exchange believes that the proposed rule assists with the
maintenance of fair and orderly markets by clarifying and enhancing the
operation of the Trading Collar functionality--which is designed to
mitigate the risk of orders sweeping through multiple price points and
executing at potentially erroneous prices--as the proposed rule would
continue to protect investors from receiving bad executions away from
[[Page 46599]]
prevailing market prices. The Exchange notes that Trading Collar
functionality is not new or novel and is available on other options
exchanges.\53\ The Exchange believes that the proposed changes that
codify existing functionality, including how incoming marketable Limit
Orders are collared and the cancellation of collared Market Orders--in
the absence of Available Interest or if an NMS stock enters an LULD
State--would add clarity, transparency and internal consistency to
Exchange rules regarding the handling of orders accepted by the
Exchange (i.e., that such orders would be cancelled, not rejected) and
make them easier for market participants to navigate and comprehend.
---------------------------------------------------------------------------
\53\ See, e.g., CBOE Rule 6.13(b)(v) (setting forth its Hybrid
Trading System Automatic Execution Feature, which prevents the
execution of marketable orders if (a) the width of the NBB and NBO
is not within an ``acceptable price range'' (as determined by CBOE)
or (b) if an execution would follow a partial execution and would be
beyond an ``acceptable tick distance'' (as determined by CBOE), but
unlike Trade Collar Protection on the Exchange, CBOE does not
reprice (or redisplay) orders at narrowing prices. In addition, the
NASDAQ Options Market (``NOM'') and NASDAQ OMX BX (``BX'') each have
identical rules (Chapter VI, Section 18(b)(1) (setting forth the
risk protection feature for quotes and orders, which prevents
executions (partial or otherwise) of orders beyond an ``acceptable
trade range'' (as calculated by the exchange) and when an order (or
quote) reaches the limits of the ``acceptable trade range'', it
posts for a period not to exceed one second and recalculated a new
``acceptable trade range'').
---------------------------------------------------------------------------
Further, the proposal to codify that the Exchange would cancel a
Market Order or the balance thereof that has been collared once it has
exhausted trading opportunities within its collar execution price plus/
minus one Trading Collar if there is no Available Interest would
protect investors from potentially erroneous executions because this
scenario means the Exchange would have no reliable price framework
within which to evaluate the collared orders. Thus, this proposal would
foster cooperation and coordination with persons engaged in
facilitating transactions in securities, and remove impediments to and
perfect the mechanism of a free and open market and a national market
system.
The Exchange believes that the proposal to codify current
functionality regarding a collared order that is a Market Order to sell
that has reached $0.00 such that the Exchange post the order at its MPV
(e.g., $0.01 or $0.05) would promote just and equitable principles of
trade and assist with the maintenance of fair and orderly markets
because an order may never be posted for lower than its MPV--and the
alternative to holding the order at the MPV would be to cancel it. The
Exchange believes the proposed clarification of how such orders are
handled provides the collared order an opportunity for an execution
(rather than being cancelled) and adds transparency and internal
consistency to Exchange rules.
The Exchange likewise believes that the proposed enhancements to
the Trading Collar functionality--the Zero NBBO Collar Exception--
likewise would prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, and remove impediments
to and perfect the mechanisms of a free and open market and a national
market system. In particular, the proposed Zero NBBO Collar Exception
would improve the operation of the Trading Collar when the prevailing
market is zero (indicating market dislocation) at the time an incoming
Market Order arrives. The Exchange believes the Zero NBBO Collar
Exception would improve the operation of Trading Collars when the
prevailing market is zero (indicating market dislocation) at the time
an incoming Market Order arrives. Absent the proposed Zero NBBO Collar
Exception, a Market Order to buy (sell) that arrives when the NBB (NBO)
is zero would trade based on the last sale price, if any; if there is
no last sale price, the order would trade at the contra-side NBBO which
may result in a bad execution price. In regards to the proposal to
reject (as opposed to collar) incoming sell orders when the NBO is
zero, the Exchange believes this change in functionality is necessary
because any attempt to collar such an order would result in a negative
number. In addition, the Exchange has observed that it is extremely
uncommon to have a no (zero) offer situation and believes it could be
indicative of unstable market conditions. To avoid such orders
receiving bad executions in times of market dislocation, the Exchange
believes it would be appropriate to reject such orders. Thus, the Zero
NBBO Exception helps maintain fair and orderly markets.
LULD
The Exchange believes it is appropriate that the Exchange cancel a
Market Order that is collared when an NMS stock enters an LULD State
because when the underlying NMS stock enters an LULD State, there may
not be a reliable underlying reference price, there may be a wide bid/
ask quotation differential in the option, and there may be less
liquidity in the options markets. Thus, allowing a collared Market
Order to execute (as opposed to cancel) in such circumstances could
lead to executions at unintended prices (i.e., inferior to the NBBO),
and could add to volatility in the options markets during times of
extraordinary market volatility. The Exchange believes that this
current treatment of collared market orders, and the proposal to
explicitly state this treatment in the rule text, would provide
certainty to the treatment of Market Orders during these times and add
clarity and transparency to Exchange rules, thus promoting just and
equitable principles of trade and removing impediments to, and
perfecting the mechanism of, a free and open market and a national
market system. The proposed rule amendments would also provide internal
consistency within Exchange rules and operate to protect investors and
the investing public by making the Exchange rules easier to navigate
and comprehend. The Exchange notes that the proposed cancellation of an
options order if the underlying NMS security is in an LULD State is not
new or novel and is available on other options exchanges that offer
collar functionality similar to the Exchange's.\54\ However, the
Exchange believes that the rules of these other exchanges do not
specifically contemplate the underlying security entering an LULD state
while a market order is resting on the book, because such orders
typically execute on arrival. The Exchange nonetheless believes that
the handling such orders, as well as the proposed rule clarification,
adds transparency and specificity to Exchange rules.
---------------------------------------------------------------------------
\54\ See supra note 49.
---------------------------------------------------------------------------
Technical Changes
The Exchange notes that the proposed organizational and non-
substantive changes to the rule text would provide clarity and
transparency to Exchange rules and would promote just and equitable
principles of trade and remove impediments to, and perfect the
mechanism of, a free and open market and a national market system. The
proposed rule amendments would also provide internal consistency within
Exchange rules and operate to protect investors and the investing
public by making the Exchange rules easier to navigate and comprehend.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that this proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Instead, the Exchange believes
the proposal provides
[[Page 46600]]
clarity (including defining the collar execution price) and enhancement
to the Trading Collars that provide market participants with protection
from anomalous executions. Thus, the Exchange does not believe the
proposal creates any significant impact on competition.
The proposed enhancements to the Trading Collars (i.e., the Zero
NBBO Collar Exception) would improve the operation of the Trading
Collars thereby further protecting investors against the execution of
orders at erroneous prices. As such, the proposal does not impose any
burden on competition. To the contrary, the Exchange believes that the
proposed enhancements may foster more competition. Specifically, the
Exchange notes that it operates in a highly competitive market in which
market participants can readily favor competing venues. The Exchange's
proposed rule change would enhance its ability to compete with other
exchanges that already offer similar trading collar functionality.\55\
Thus, the Exchange believes that this type of competition amongst
exchanges is beneficial to the market place as a whole as it can result
in enhanced processes, functionality, and technologies. The Exchange
further believes that because the proposed rule change would be
applicable to all OTP Holders it would not impose any burden on intra-
market competition that is not necessary or appropriate in furtherance
of the purposes of the Act.
---------------------------------------------------------------------------
\55\ See id.
---------------------------------------------------------------------------
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 [email protected]. Please include
File Number SR-NYSEArca-2019-58 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-NYSEArca-2019-58. 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 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 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-NYSEArca-2019-58 and should be submitted
on or before September 25, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\56\
---------------------------------------------------------------------------
\56\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19001 Filed 9-3-19; 8:45 am]
BILLING CODE 8011-01-P
