Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change Regarding the Applicability and Functionality of Certain Order Types on the Exchange, 60125-60128 [2019-24254]

Download as PDF Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices Regarding the proposed cash settlement, the Exchange would use the same surveillance procedures currently utilized for the Exchange’s other FLEX Options. For surveillance purposes, the Exchange would have access to information regarding trading activity in the pertinent underlying securities. The Exchange believes that limiting cash settlement to options on the 84 underlying securities that would currently be eligible to have cashsettlement as a contract term would minimize the possibility of manipulation due to the robust liquidity in both the equities and options markets. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposal is designed to increase competition for order flow on the Exchange in a manner that is beneficial to investors because it is designed to provide investors seeking to transact in FLEX Equity Options with the opportunity for an alternative method of settling their option contracts at expiration. The Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues who offer similar functionality. The Exchange believes the proposed rule change encourages competition amongst market participants to provide tailored cash-settled FLEX Equity Option contracts. 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 such longer period 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. VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 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 60125 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–24256 Filed 11–6–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEAMER–2019–38 on the subject line. [Release No. 34–87442; File No. SR– NYSEAMER–2019–41] Paper Comments November 1, 2019. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 22, 2019, NYSE American LLC (‘‘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 prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. All submissions should refer to File Number SR–NYSEAMER–2019–38. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEAMER–2019–38, and should be submitted on or before November 29, 2019. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change Regarding the Applicability and Functionality of Certain Order Types on the Exchange I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to clarify the applicability and functionality of certain order types on the Exchange. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 19 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\07NON1.SGM 07NON1 60126 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 900.3NY(Orders Defined) to clarify the applicability and functionality of certain order types. Specifically, the Exchange proposes to amend the definitions of Stop Orders, Stop Limit Orders and All-or None (‘‘AON’’) Orders, as set forth in Rule 900.3NY(d), which describes the Contingency Orders or Working Orders. The Exchange is not proposing to change or alter any obligations, rights, policies or practices enumerated within its rules. Rather, this proposal is designed to reduce any potential investor confusion as to the functionality and applicability of certain order types presently available on the Exchange. Proposed Changes to Order Type Definitions Rule 900.3NY (the ‘‘Rule’’) contains certain definitions of options order types available on the Exchange. Paragraph (d) of the Rule defines Contingency Orders or Working Orders as orders that are ‘‘contingent upon a condition being satisfied or an order with a conditional or undisplayed price and/or size.’’ Contingency Orders and Working Orders are maintained in the Working Order File of the Consolidated Book until they are eligible for execution and/or display.4 The Exchange proposes to amend the definitions of Stop Orders, Stop Limit Orders and AON Orders, which are Contingency Orders/Working Orders. Rule 900.3NY(d)(1)–(2) Stop Orders and Stop Limit Orders. A Stop Order is an order that becomes a Market Order when the market for a particular option contract reaches a specified price.5 A Stop Limit Order is an order that becomes a Limit Order when the market for a particular option contract reaches a specified price.6 Stop Orders and Stop Limit Orders (collectively, ‘‘Stop Orders’’ herein unless otherwise specified) track the price of an option and are generally used to limit losses as prices move up, in the case of buy orders, or down in the case of sell 4 See Rule 900.3NY(d). See Rule 964NY(b)(2)(E) (regarding priority of orders in the Working Order File once eligible for execution and stating that such orders ‘‘do not have any priority or standing until they are eligible for execution and/or display’’) and Rule 964NY(a) (providing, in relevant part, that the Exchange will display ‘‘all nonmarketable limit orders in the Display Order Process, unless indicated otherwise’’). 5 See Rule 900.3NY(d)(1). 6 See Rule 900.3NY(d)(2). VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 orders. In each case, the ‘‘triggering event,’’ which converts the order type (to a Market Order or Limit Order, as applicable) occurs once the option trades or is quoted at, or above for a buy (below for a sell), the specified stop price.7 Thus, Stop Orders to buy (sell) may be triggered as the price of an option rises (falls). The current rule provides that a Stop Order to buy (sell) will be rejected if, at the time of arrival, the stop price is below (above) the bid (offer).8 Regarding priority, Stop Orders (including Stop Limit Orders) are not displayed and have no standing in any Order Process in the Consolidated Book.9 As such, Stop Orders ‘‘are not eligible to execute against incoming orders and will become eligible to execute via the Display Order Process only after the incoming order is executed in full or rests in the book or the working order is sent to the Display Order Process at the end of a triggering event.’’ 10 The Exchange proposes to modify the description of Stop Orders to enhance the clarity of the rule text, including by streamlining some of the existing text and adding new text, as appropriate, and deleting existing text to correct an inaccuracy regarding current functionality. First, the Exchange proposes to streamline the description of the order types as follows. The Exchange proposes to revise the first sentence describing each order type (i.e., Rule 900.3NY(d)(1),(2)) to state that the order type converts to a Market or Limit Order, respectively—or ‘‘is triggered’’—when the market for a particular option contract reaches a specified price.11 The Exchange also proposes to modify Rule 900.3NY(d)(1),(2) to combine into one sentence the description of both buy and sell Stop Orders without modifying current functionality. The current rule addresses buy and sell Stop Orders in two sentences and the Exchange thinks the proposed change would streamline the rule and make it easier to navigate. 7 See Rule 900.3NY(d)(1),(2). 8 See Rule 900.3NY(d)(1),(2). 9 See Rule 900.3NY(d)(1) (setting forth details about both Stop Orders and Stop Limit Orders, even though paragraph (d)(1) pertains solely to Stop Orders). See also Rule 964NY(b)(2)(E) (regarding priority of orders in the Working Order File once eligible for execution and stating that such orders ‘‘do not have any priority or standing until they are eligible for execution and/or display’’) and Rule 964NY(a) (providing, in relevant part, that the Exchange will display ‘‘all non-marketable limit orders in the Display Order Process, unless indicated otherwise’’). 10 See Rule 900.3NY(d)(1) (settings forth details about both Stop Orders and Stop Limit Orders, even though paragraph (d)(1) pertains solely to Stop Orders). 11 See proposed Rule 900.3NY(d)(1), (2). PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 Specifically, proposed Rule 900.3NY(d)(1),(2) would provide that a Stop Order (or Stop Limit Order) ‘‘to buy (sell) is triggered’’ such that it becomes a Market Order or Limit Order, respectively, ‘‘when the option contract trades at a price equal to or greater (less) than the specified ‘stop’ price on the Exchange or another Market Center or when the Exchange bid (offer) is quoted at a price equal to or greater (less) than the stop price.’’ 12 The Exchange also proposes to address the display and standing of each type of Stop Order for which information is currently contained only in paragraph (d)(1) of Rule 900.3NY.13 Specifically, the Exchange proposes to modify the current rules to reflect that each type of Stop Order ‘‘is not displayed and has no standing in any Order Process in the Consolidated Book, unless or until it is triggered (i.e., sameside incoming interest trades or quotes at a price equal to or better than the stop price).’’ 14 The Exchange also proposes to add new rule text to clarify that ‘‘[a]fter the triggering event,’’ a Stop Order (per Rule 900.3NY(d)(1)) becomes a new Market Order, and a Stop Limit Order (per Rule 900.3NY(d)(2)) becomes a new Limit Order, and each converted order is processed accordingly.15 Finally, the Exchange proposes to delete as inaccurate the last two sentences in the description of each type of Stop Order, which provides for the rejection of such orders to buy (sell) if entered with a stop price below the bid (or above the offer). This language is not accurate as the Exchange does not reject Stop Orders so priced, but instead would execute such orders once triggered. This proposed change would reflect current functionality and therefore add clarity and consistency to Exchange rules.16 Rule 900.3NY(d)(4) All-Or-None Orders (‘‘AON Orders’’). An AON Order is a Market or Limit Order that is to be executed in its entirety or not at all.17 12 See proposed Rule 900.3NY(d)(1), (2). Consistent with this proposed change to address both buy and sell Stop Orders and Stop Limit Orders in one sentence, the Exchange proposes to delete as unnecessary the sentences in the current definitions that describes the functionality for sell Stop Orders and sell Stop Limit Orders. See id. 13 See Rule 900.3NY(d)(1) (which provides that ‘‘Stop Orders (including Stop Limit Orders) shall not have standing in any Order Process in the Consolidated Book and shall not be displayed’’). 14 See proposed Rule 900.3NY(d)(1), (2). The Exchange notes that this proposed text modifies the existing text in paragraph (d)(1) and is new text for paragraph (d)(2) of the Rule. See id. 15 See proposed Rule 900.3NY(d)(1), (2). See also Rule 900.3NY(a), (b) (defining Market Order and Limit Order, respectively). 16 See proposed Rule 900.3NY(d)(1), (2). 17 See Rule 900.3NY(d)(4). E:\FR\FM\07NON1.SGM 07NON1 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices The Exchange is not proposing to modify the functionality of an AON Order, but rather proposes to amplify the definition of an AON Order to clarify its current functionality. Specifically, the Exchange proposes to make clear that an AON Order that does not execute on arrival will not be displayed or routed to another Market Center (i.e., AON Orders may only be executed on the Exchange) and would have no standing in any Order Process in the Consolidated Book.18 Further, the Exchange proposes to clarify that AON Orders are not eligible to execute against incoming interest but rather may execute solely against interest resting in the Consolidated Book when sufficient size is available.19 Finally, the Exchange proposes to specify that the System monitors the Consolidated Book for AON Order execution opportunities.20 The Exchange believes the proposed changes would add transparency to the operation of this order type, without altering the current functionality. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 21 of the Act, in general, and furthers the objectives of Section 6(b)(5),22 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to 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. In particular, the Exchange believes that deleting inaccurate language (regarding Stop Orders) and enhancing the descriptions as to the functionality of Stop Orders and AON Orders types (i.e., the Contingency Orders or Working Orders) would add transparency and clarity to the Exchange’s rules, without altering current functionality. In addition, the Exchange believes that clarifying the definitions and current operation of Stop Orders and AON Orders removes impediments to, and perfects the mechanism of a free and open market by helping to ensure that investors better understand the current functionality of certain orders types available for trading on the Exchange. 18 See proposed Rule 900.3NY(d)(4). See also Rule 964NY(b)(2)(E) (regarding priority orders in the Working Order File and noting that such orders (i.e., AON Orders) have no priority or standing until eligible for execution and/or display). 19 See proposed Rule 900.3NY(d)(4). 20 See id. 21 15 U.S.C. 78f(b). 22 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 60127 The Exchange further believes that the proposal removes impediments to, and perfects the mechanism of a free and open market by ensuring that members, regulators and the public can more easily navigate the Exchange’s rulebook and better understand certain order types available for trading on the Exchange. IV. Solicitation of Comments Technical Changes Electronic Comments 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. • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEAMER–2019–41 on the subject line. B. Self-Regulatory Organization’s Statement on Burden on Competition • Send paper comments in triplicate to: Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. 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. The proposed change is not designed to address any competitive issue but rather revise or amplify incomplete or inaccurate rule text or remove language pertaining to unavailable functionality in the Exchange’s rulebook, thereby reducing confusion and making the Exchange’s rules easier to understand and navigate. The Exchange believes the proposed changes would add transparency to the operation of certain order types, without altering the current functionality. 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. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 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: Paper Comments All submissions should refer to File Number SR–NYSEAMER–2019–41. 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–NYSEAMER–2019–41 and should be submitted on or before November 29, 2019. 23 17 E:\FR\FM\07NON1.SGM CFR 200.30–3(a)(12). 07NON1 60128 Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–24254 Filed 11–6–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87443; File No. SR– NYSEArca–2019–71] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Regarding the Applicability and Functionality of Certain Order Types on the Exchange November 1, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 22, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to clarify the applicability and functionality of certain order types on the Exchange. 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. 1 15 U.S.C.78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 VerDate Sep<11>2014 17:55 Nov 06, 2019 Jkt 250001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 6.62–O (Certain Types of Orders Defined) to clarify the applicability and functionality of certain order types. Specifically, the Exchange proposes to amend the definitions of Contingency Orders, Working Orders, Stop Orders, Stop Limit Orders and All-or None (‘‘AON’’) Orders, as set forth in Rule 6.62–O(d). The Exchange is not proposing to change or alter any obligations, rights, policies or practices enumerated within its rules. Rather, this proposal is designed to reduce any potential investor confusion as to the functionality and applicability of certain order types presently available on the Exchange. Proposed Changes to Order Type Definitions Rule 6.62–O (the ‘‘Rule’’) contains certain definitions of options order types available on the Exchange. Paragraph (d) of the Rule defines Contingency Orders or Working Orders as orders that are ‘‘contingent upon a condition being satisfied or an order with a conditional or undisplayed price and/or size.’’ Although not explicitly stated in the current rule, such Contingency Orders are maintained in the Working Order File of the Consolidated Book until they are eligible for execution and/or display. Because such information would add clarity and transparency to the handling of such orders, the Exchange proposes to add it to the Rule.4 The Exchange also proposes to amend the definitions of Stop Orders, Stop Limit Orders and AON Orders, which are Contingency Orders/Working Orders. Rule 6.62–O(d)(1)–(2) Stop Orders and Stop Limit Orders. A Stop Order is an order that becomes a Market Order when the market for a particular option contract reaches a specified price.5 A Stop Limit Order is an order that becomes a Limit Order when the market for a particular option contract reaches a specified price.6 Stop Orders and Stop Limit Orders (collectively, ‘‘Stop Orders’’ herein unless otherwise specified) track the price of an option and are generally used to limit losses as 4 See proposed Rule 6.62–O(d). See Rule 6.76– O(b) (providing, in relevant part that, unless otherwise specified, the Exchange will display ‘‘all bids and offers at all price levels in the Display Order Process of the OX’’). 5 See Rule 6.62–O(d)(1). 6 See Rule 6.62–O(d)(2). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 prices move up, in the case of buy orders, or down in the case of sell orders. In each case, the ‘‘triggering event,’’ which converts the order type (to a Market Order or Limit Order, as applicable) occurs once the option trades or is (locally) quoted at, or above for a buy (below for a sell), the specified stop price.7 Thus, Stop Orders to buy (sell) may be triggered as the price of an option rises (falls). The current rule provides that a Stop Order to buy (sell) will be rejected if, at the time of arrival, the stop price is below (above) the bid (offer).8 Regarding priority, Stop Orders (including Stop Limit Orders) are not displayed, have no standing in any Order Process in the Consolidated Book.9 The Exchange proposes to modify the description of Stop Orders to enhance the clarity of the rule text, including by streamlining some of the existing text and adding new text, as appropriate, and deleting existing text to correct an inaccuracy regarding current functionality. First, the Exchange proposes to streamline the description of the order types as follows. The Exchange proposes to revise the first sentence describing each order type (i.e., Rule 6.62–O(d)(1),(2)) to state that the order type converts to a Market or Limit Order, respectively—or ‘‘is triggered’’—when the market for a particular option contract reaches a specified price.10 The Exchange also proposes to modify Rule 6.62– O(d)(1),(2) to combine into one sentence the description of both buy and sell Stop Orders without modifying current functionality. The current rule addresses buy and sell Stop Orders in two sentences and the Exchange thinks the proposed change would streamline the rule and make it easier to navigate. Specifically, proposed Rule 6.62– O(d)(1),(2) would provide that a Stop Order (or Stop Limit Order) ‘‘to buy (sell) is triggered’’ such that it becomes a Market Order or Limit Order, respectively, ‘‘when the option contract trades at a price equal to or greater (less) than the specified ’stop’ price on the Exchange or another Market Center or when the Exchange bid (offer) is quoted at a price equal to or greater (less) than the stop price.’’ 11 7 See Rule 6.62–O(d)(1),(2). Rule 6.62–O(d)(1),(2). 9 See Rule 6.62–O(d)(1) (setting forth details about both Stop Orders and Stop Limit Orders, even though paragraph (d)(1) pertains solely to Stop Orders). See also Rule 6.76–O(a)(2)(D) (providing that Stop Orders within the Working Order Process are ‘‘ranked based on the specified stop price and the time of order entry’’). 10 See proposed Rule 6.62–O(d)(1), (2). 11 See proposed Rule 6.62–O(d)(1), (2). Consistent with this proposed change to address both buy and 8 See E:\FR\FM\07NON1.SGM 07NON1

Agencies

[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Notices]
[Pages 60125-60128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87442; File No. SR-NYSEAMER-2019-41]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing of Proposed Rule Change Regarding the Applicability and 
Functionality of Certain Order Types on the Exchange

November 1, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on October 22, 2019, NYSE American LLC (``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 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 amend its rules to clarify the 
applicability and functionality of certain order types on the Exchange. 
The proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

[[Page 60126]]

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

1. Purpose
    The Exchange proposes to amend Rule 900.3NY(Orders Defined) to 
clarify the applicability and functionality of certain order types. 
Specifically, the Exchange proposes to amend the definitions of Stop 
Orders, Stop Limit Orders and All-or None (``AON'') Orders, as set 
forth in Rule 900.3NY(d), which describes the Contingency Orders or 
Working Orders. The Exchange is not proposing to change or alter any 
obligations, rights, policies or practices enumerated within its rules. 
Rather, this proposal is designed to reduce any potential investor 
confusion as to the functionality and applicability of certain order 
types presently available on the Exchange.
Proposed Changes to Order Type Definitions
    Rule 900.3NY (the ``Rule'') contains certain definitions of options 
order types available on the Exchange. Paragraph (d) of the Rule 
defines Contingency Orders or Working Orders as orders that are 
``contingent upon a condition being satisfied or an order with a 
conditional or undisplayed price and/or size.'' Contingency Orders and 
Working Orders are maintained in the Working Order File of the 
Consolidated Book until they are eligible for execution and/or 
display.\4\ The Exchange proposes to amend the definitions of Stop 
Orders, Stop Limit Orders and AON Orders, which are Contingency Orders/
Working Orders.
---------------------------------------------------------------------------

    \4\ See Rule 900.3NY(d). See Rule 964NY(b)(2)(E) (regarding 
priority of orders in the Working Order File once eligible for 
execution and stating that such orders ``do not have any priority or 
standing until they are eligible for execution and/or display'') and 
Rule 964NY(a) (providing, in relevant part, that the Exchange will 
display ``all non-marketable limit orders in the Display Order 
Process, unless indicated otherwise'').
---------------------------------------------------------------------------

    Rule 900.3NY(d)(1)-(2) Stop Orders and Stop Limit Orders. A Stop 
Order is an order that becomes a Market Order when the market for a 
particular option contract reaches a specified price.\5\ A Stop Limit 
Order is an order that becomes a Limit Order when the market for a 
particular option contract reaches a specified price.\6\ Stop Orders 
and Stop Limit Orders (collectively, ``Stop Orders'' herein unless 
otherwise specified) track the price of an option and are generally 
used to limit losses as prices move up, in the case of buy orders, or 
down in the case of sell orders. In each case, the ``triggering 
event,'' which converts the order type (to a Market Order or Limit 
Order, as applicable) occurs once the option trades or is quoted at, or 
above for a buy (below for a sell), the specified stop price.\7\ Thus, 
Stop Orders to buy (sell) may be triggered as the price of an option 
rises (falls). The current rule provides that a Stop Order to buy 
(sell) will be rejected if, at the time of arrival, the stop price is 
below (above) the bid (offer).\8\ Regarding priority, Stop Orders 
(including Stop Limit Orders) are not displayed and have no standing in 
any Order Process in the Consolidated Book.\9\ As such, Stop Orders 
``are not eligible to execute against incoming orders and will become 
eligible to execute via the Display Order Process only after the 
incoming order is executed in full or rests in the book or the working 
order is sent to the Display Order Process at the end of a triggering 
event.'' \10\
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    \5\ See Rule 900.3NY(d)(1).
    \6\ See Rule 900.3NY(d)(2).
    \7\ See Rule 900.3NY(d)(1),(2).
    \8\ See Rule 900.3NY(d)(1),(2).
    \9\ See Rule 900.3NY(d)(1) (setting forth details about both 
Stop Orders and Stop Limit Orders, even though paragraph (d)(1) 
pertains solely to Stop Orders). See also Rule 964NY(b)(2)(E) 
(regarding priority of orders in the Working Order File once 
eligible for execution and stating that such orders ``do not have 
any priority or standing until they are eligible for execution and/
or display'') and Rule 964NY(a) (providing, in relevant part, that 
the Exchange will display ``all non-marketable limit orders in the 
Display Order Process, unless indicated otherwise'').
    \10\ See Rule 900.3NY(d)(1) (settings forth details about both 
Stop Orders and Stop Limit Orders, even though paragraph (d)(1) 
pertains solely to Stop Orders).
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    The Exchange proposes to modify the description of Stop Orders to 
enhance the clarity of the rule text, including by streamlining some of 
the existing text and adding new text, as appropriate, and deleting 
existing text to correct an inaccuracy regarding current functionality. 
First, the Exchange proposes to streamline the description of the order 
types as follows. The Exchange proposes to revise the first sentence 
describing each order type (i.e., Rule 900.3NY(d)(1),(2)) to state that 
the order type converts to a Market or Limit Order, respectively--or 
``is triggered''--when the market for a particular option contract 
reaches a specified price.\11\ The Exchange also proposes to modify 
Rule 900.3NY(d)(1),(2) to combine into one sentence the description of 
both buy and sell Stop Orders without modifying current functionality. 
The current rule addresses buy and sell Stop Orders in two sentences 
and the Exchange thinks the proposed change would streamline the rule 
and make it easier to navigate. Specifically, proposed Rule 
900.3NY(d)(1),(2) would provide that a Stop Order (or Stop Limit Order) 
``to buy (sell) is triggered'' such that it becomes a Market Order or 
Limit Order, respectively, ``when the option contract trades at a price 
equal to or greater (less) than the specified `stop' price on the 
Exchange or another Market Center or when the Exchange bid (offer) is 
quoted at a price equal to or greater (less) than the stop price.'' 
\12\
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    \11\ See proposed Rule 900.3NY(d)(1), (2).
    \12\ See proposed Rule 900.3NY(d)(1), (2). Consistent with this 
proposed change to address both buy and sell Stop Orders and Stop 
Limit Orders in one sentence, the Exchange proposes to delete as 
unnecessary the sentences in the current definitions that describes 
the functionality for sell Stop Orders and sell Stop Limit Orders. 
See id.
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    The Exchange also proposes to address the display and standing of 
each type of Stop Order for which information is currently contained 
only in paragraph (d)(1) of Rule 900.3NY.\13\ Specifically, the 
Exchange proposes to modify the current rules to reflect that each type 
of Stop Order ``is not displayed and has no standing in any Order 
Process in the Consolidated Book, unless or until it is triggered 
(i.e., same-side incoming interest trades or quotes at a price equal to 
or better than the stop price).'' \14\ The Exchange also proposes to 
add new rule text to clarify that ``[a]fter the triggering event,'' a 
Stop Order (per Rule 900.3NY(d)(1)) becomes a new Market Order, and a 
Stop Limit Order (per Rule 900.3NY(d)(2)) becomes a new Limit Order, 
and each converted order is processed accordingly.\15\
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    \13\ See Rule 900.3NY(d)(1) (which provides that ``Stop Orders 
(including Stop Limit Orders) shall not have standing in any Order 
Process in the Consolidated Book and shall not be displayed'').
    \14\ See proposed Rule 900.3NY(d)(1), (2). The Exchange notes 
that this proposed text modifies the existing text in paragraph 
(d)(1) and is new text for paragraph (d)(2) of the Rule. See id.
    \15\ See proposed Rule 900.3NY(d)(1), (2). See also Rule 
900.3NY(a), (b) (defining Market Order and Limit Order, 
respectively).
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    Finally, the Exchange proposes to delete as inaccurate the last two 
sentences in the description of each type of Stop Order, which provides 
for the rejection of such orders to buy (sell) if entered with a stop 
price below the bid (or above the offer). This language is not accurate 
as the Exchange does not reject Stop Orders so priced, but instead 
would execute such orders once triggered. This proposed change would 
reflect current functionality and therefore add clarity and consistency 
to Exchange rules.\16\
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    \16\ See proposed Rule 900.3NY(d)(1), (2).
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    Rule 900.3NY(d)(4) All-Or-None Orders (``AON Orders''). An AON 
Order is a Market or Limit Order that is to be executed in its entirety 
or not at all.\17\

[[Page 60127]]

The Exchange is not proposing to modify the functionality of an AON 
Order, but rather proposes to amplify the definition of an AON Order to 
clarify its current functionality. Specifically, the Exchange proposes 
to make clear that an AON Order that does not execute on arrival will 
not be displayed or routed to another Market Center (i.e., AON Orders 
may only be executed on the Exchange) and would have no standing in any 
Order Process in the Consolidated Book.\18\ Further, the Exchange 
proposes to clarify that AON Orders are not eligible to execute against 
incoming interest but rather may execute solely against interest 
resting in the Consolidated Book when sufficient size is available.\19\ 
Finally, the Exchange proposes to specify that the System monitors the 
Consolidated Book for AON Order execution opportunities.\20\ The 
Exchange believes the proposed changes would add transparency to the 
operation of this order type, without altering the current 
functionality.
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    \17\ See Rule 900.3NY(d)(4).
    \18\ See proposed Rule 900.3NY(d)(4). See also Rule 
964NY(b)(2)(E) (regarding priority orders in the Working Order File 
and noting that such orders (i.e., AON Orders) have no priority or 
standing until eligible for execution and/or display).
    \19\ See proposed Rule 900.3NY(d)(4).
    \20\ See id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \21\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\22\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to 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.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that deleting inaccurate 
language (regarding Stop Orders) and enhancing the descriptions as to 
the functionality of Stop Orders and AON Orders types (i.e., the 
Contingency Orders or Working Orders) would add transparency and 
clarity to the Exchange's rules, without altering current 
functionality. In addition, the Exchange believes that clarifying the 
definitions and current operation of Stop Orders and AON Orders removes 
impediments to, and perfects the mechanism of a free and open market by 
helping to ensure that investors better understand the current 
functionality of certain orders types available for trading on the 
Exchange.
    The Exchange further believes that the proposal removes impediments 
to, and perfects the mechanism of a free and open market by ensuring 
that members, regulators and the public can more easily navigate the 
Exchange's rulebook and better understand certain order types available 
for trading on the Exchange.

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.

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. The proposed change is not 
designed to address any competitive issue but rather revise or amplify 
incomplete or inaccurate rule text or remove language pertaining to 
unavailable functionality in the Exchange's rulebook, thereby reducing 
confusion and making the Exchange's rules easier to understand and 
navigate. The Exchange believes the proposed changes would add 
transparency to the operation of certain order types, without altering 
the current functionality.

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-NYSEAMER-2019-41 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSEAMER-2019-41. 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-NYSEAMER-2019-41 and should be submitted 
on or before November 29, 2019.
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    \23\ 17 CFR 200.30-3(a)(12).



[[Page 60128]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24254 Filed 11-6-19; 8:45 am]
 BILLING CODE 8011-01-P
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