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, 60128-60130 [2019-24255]
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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
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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).
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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
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Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices
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 6.62–O.12
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).’’ 13 The Exchange also proposes
to add new rule text to clarify that
‘‘[a]fter the triggering event,’’ a Stop
Order (per Rule 6.62–O(d)(1)) becomes a
new Market Order, and a Stop Limit
Order (per Rule 6.62–O(d)(2)) becomes a
new Limit Order, and each converted
order is processed accordingly.14
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.15
Rule 6.62–O(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.16
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
sell Stop Orders and Stop Limit Orders in one
sentence, the Exchange proposes to delete as
unnecessary the sentences in the current definitions
that describe the functionality for sell Stop Orders
and sell Stop Limit Orders. See id. For internal
consistently, the Exchange also proposes to replace
reference to NYSE Arca with the ‘‘Exchange.’’ See
id.
12 See Rule 6.62–O(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’’).
13 See proposed Rule 6.62–O(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.
14 See proposed Rule 6.62–O(d)(1), (2). See also
Rule 6.62–O(a), (b) (defining Market Order and
Limit Order, respectively).
15 See proposed Rule 6.62–O(d)(1), (2).
16 See Rule 6.62–O(d)(4).
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have no standing in any Order Process
in the Consolidated Book.17 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.18 Finally, the Exchange
proposes to specify that the System
monitors the Consolidated Book for
AON Order execution opportunities.19
The Exchange believes the proposed
changes would add transparency to the
operation of this order type, without
altering the current functionality.
Rule 6.76A–O: Order Execution
The Exchange proposes to make a
clarifying change to Rule 6.76A–O,
which details how bids and orders are
executed. In particular, current Rule
6.76A–O(b)(1)(A) provides that ‘‘[a]n
incoming marketable bid or offer shall
be matched against orders in [sic] the
Working Order Process in the order of
their ranking, at the price of the
displayed portion (or in the case of an
All-or-None Order, or at the limit price
for AON Orders [sic]), for the total
amount of option contracts available at
that price or for the size of the incoming
bid or offer, whichever is smaller.’’ 20
The Exchange proposes to add ‘‘of
Reserve Orders’’ to make clear that
reference to ‘‘the price of the displayed
portion’’ refers to such orders. 21 In
addition, the Exchange proposes to
amend and reorganize the language
regarding AON Orders to add clarity
and coherence to the paragraph.
Proposed Rule 6.76A–O(b)(1)(A) would
provide that incoming interest is
‘‘matched against orders within the
Working Order Process in the order of
their ranking, at the price of the
displayed portion of Reserve Orders, or
at the limit price of AON Orders, for the
total amount of option contracts
available at that price or for the size of
the incoming bid or offer, whichever is
smaller.’’ 22 As noted herein, Stop
Orders have no standing unless or until
triggered, hence the reason the Working
Order Process does not address the
execution of such orders.
17 See proposed Rule 6.62–O(d)(4). See also Rule
6.76–O(a)(2)(C) (providing that AON Orders within
the Working Order File [sic] are ‘‘ranked based on
the specified limit price and the time of order
entry’’).
18 See proposed Rule 6.62–O(d)(4).
19 See id.
20 See Rule 6.76A–O(b)(1)(A).
21 See proposed Rule 6.76A–O(b)(1)(A).
22 See id.
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60129
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 23 of the
Act, in general, and furthers the
objectives of Section 6(b)(5),24 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 Contingency Orders, Working Orders,
Stop Orders and AON Orders types
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
Contingency Orders, Working Orders,
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, including to
Rule 6.76A–O, 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
23 15
24 15
E:\FR\FM\07NON1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
07NON1
60130
Federal Register / Vol. 84, No. 216 / Thursday, November 7, 2019 / Notices
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.
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–2019–71 and
should be submitted on or before
November 29, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Jill M. Peterson,
Assistant Secretary.
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:
[FR Doc. 2019–24255 Filed 11–6–19; 8:45 am]
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–
NYSEArca–2019–71 on the subject line.
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend Rules
4120 and 4753
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–2019–71. 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
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87445; File No. SR–
NASDAQ–2019–060]
November 1, 2019.
I. Introduction
On July 18, 2019, The Nasdaq Stock
Market LLC (‘‘Exchange’’ or ‘‘Nasdaq’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Rules 4120 and 4753
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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to permit the Exchange to declare a
regulatory halt in a security that traded
in the over-the-counter (‘‘OTC’’) market
prior to the initial pricing on the
Exchange and to allow for the initial
pricing of such a security through the
IPO Cross. The proposed rule change
was published for comment in the
Federal Register on August 6, 2019.3 On
September 19, 2019, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 On September 19, 2019,
the Exchange also filed Amendment No.
1 to the proposed rule change, which
amended and superseded the proposed
rule change as originally filed.6 The
Commission received no comment
letters on the proposed rule change. The
Commission is publishing this notice
and order to solicit comments on the
proposed rule change, as modified by
Amendment No. 1, from interested
persons and to institute proceedings
pursuant to Section 19(b)(2)(B) of the
Act 7 to determine whether to approve
or disapprove the proposed rule change,
as modified by Amendment No. 1.
II. Description of the Proposal
Currently, a security that traded in the
OTC market immediately prior to listing
on the Exchange is released for initial
trading on the Exchange by utilizing the
Opening Cross pursuant to Rule
3 See Securities Exchange Act Release No. 86537
(July 31, 2019), 84 FR 38321.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 87012,
84 FR 50490 (September 25, 2019). The
Commission designated November 4, 2019 as the
date by which the Commission shall approve or
disapprove, or institute proceedings to determine
whether to disapprove, the proposed rule change.
6 In Amendment No. 1, the Exchange revised the
proposal to: (1) Clarify that when a security
previously traded in the OTC market is initially
priced using the IPO Cross, the fourth tie-breaker
for each of the Current Reference Price
disseminated in the Nasdaq Order Imbalance
Indicator and the price at which the cross will
occur will be the price that is closest to the most
recent transaction price in the OTC market; (2)
specify that, for purposes of this proposed rule
change, the use of the term ‘‘regulatory halt’’ refers
to Nasdaq’s authority to halt trading in a security
under Rule 4120(a)(7); (3) clarify that, currently, a
security that traded in the OTC market immediately
prior to listing on Nasdaq is released for initial
trading on Nasdaq through the Opening Cross under
Rule 4752(d) and, pursuant to the proposal, if such
an issuer does not retain a financial advisor, the
initial pricing will continue to be effected through
the Opening Cross; (4) include additional
justification in support of the proposed rule change;
and (5) make technical and conforming changes.
Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nasdaq-2019-060/
srnasdaq2019060-6163792-192369.pdf.
7 15 U.S.C. 78s(b)(2)(B).
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]]>Agencies
[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Notices]
[Pages 60128-60130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24255]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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 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 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.
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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 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\
---------------------------------------------------------------------------
\5\ See Rule 6.62-O(d)(1).
\6\ See Rule 6.62-O(d)(2).
\7\ See Rule 6.62-O(d)(1),(2).
\8\ See 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'').
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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 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\
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\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 sell Stop Orders and Stop
Limit Orders in one sentence, the Exchange proposes to delete as
unnecessary the sentences in the current definitions that describe
the functionality for sell Stop Orders and sell Stop Limit Orders.
See id. For internal consistently, the Exchange also proposes to
replace reference to NYSE Arca with the ``Exchange.'' See id.
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[[Page 60129]]
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 6.62-O.\12\ 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).'' \13\ The Exchange also proposes to add new rule text
to clarify that ``[a]fter the triggering event,'' a Stop Order (per
Rule 6.62-O(d)(1)) becomes a new Market Order, and a Stop Limit Order
(per Rule 6.62-O(d)(2)) becomes a new Limit Order, and each converted
order is processed accordingly.\14\
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\12\ See Rule 6.62-O(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'').
\13\ See proposed Rule 6.62-O(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.
\14\ See proposed Rule 6.62-O(d)(1), (2). See also Rule 6.62-
O(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.\15\
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\15\ See proposed Rule 6.62-O(d)(1), (2).
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Rule 6.62-O(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.\16\ 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.\17\ 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.\18\ Finally, the Exchange
proposes to specify that the System monitors the Consolidated Book for
AON Order execution opportunities.\19\ 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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\16\ See Rule 6.62-O(d)(4).
\17\ See proposed Rule 6.62-O(d)(4). See also Rule 6.76-
O(a)(2)(C) (providing that AON Orders within the Working Order File
[sic] are ``ranked based on the specified limit price and the time
of order entry'').
\18\ See proposed Rule 6.62-O(d)(4).
\19\ See id.
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Rule 6.76A-O: Order Execution
The Exchange proposes to make a clarifying change to Rule 6.76A-O,
which details how bids and orders are executed. In particular, current
Rule 6.76A-O(b)(1)(A) provides that ``[a]n incoming marketable bid or
offer shall be matched against orders in [sic] the Working Order
Process in the order of their ranking, at the price of the displayed
portion (or in the case of an All-or-None Order, or at the limit price
for AON Orders [sic]), for the total amount of option contracts
available at that price or for the size of the incoming bid or offer,
whichever is smaller.'' \20\ The Exchange proposes to add ``of Reserve
Orders'' to make clear that reference to ``the price of the displayed
portion'' refers to such orders. \21\ In addition, the Exchange
proposes to amend and reorganize the language regarding AON Orders to
add clarity and coherence to the paragraph. Proposed Rule 6.76A-
O(b)(1)(A) would provide that incoming interest is ``matched against
orders within the Working Order Process in the order of their ranking,
at the price of the displayed portion of Reserve Orders, or at the
limit price of AON Orders, for the total amount of option contracts
available at that price or for the size of the incoming bid or offer,
whichever is smaller.'' \22\ As noted herein, Stop Orders have no
standing unless or until triggered, hence the reason the Working Order
Process does not address the execution of such orders.
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\20\ See Rule 6.76A-O(b)(1)(A).
\21\ See proposed Rule 6.76A-O(b)(1)(A).
\22\ See id.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \23\ of
the Act, in general, and furthers the objectives of Section
6(b)(5),\24\ 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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\23\ 15 U.S.C. 78f(b).
\24\ 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 Contingency Orders, Working Orders, Stop Orders
and AON Orders types 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 Contingency Orders, Working Orders, 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, including to Rule 6.76A-O, 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
[[Page 60130]]
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-NYSEArca-2019-71 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-2019-71. 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-2019-71 and should be submitted
on or before November 29, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24255 Filed 11-6-19; 8:45 am]
BILLING CODE 8011-01-P
