Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change To Modify Rules 971.1NY and 971.2NY, 55562-55566 [2020-19714]
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Federal Register / Vol. 85, No. 174 / Tuesday, September 8, 2020 / Notices
Exchange Commission, c/o Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: September 1, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19722 Filed 9–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–516; OMB Control No.
3235–0574]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
jbell on DSKJLSW7X2PROD with NOTICES
Extension: Rule 3a–8
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collections of information
summarized below. The Commission
plans to submit the existing collection
of information to the Office of
Management and Budget for extension
and approval.
17 CFR 270.3a–8 (rule 3a–8 of the
Investment Company Act of 1940 (15
U.S.C. 80a) (the ‘‘Act’’)), serves as a
nonexclusive safe harbor from
investment company status for certain
research and development companies
(‘‘R&D companies’’).
The rule requires that the board of
directors of an R&D company seeking to
rely on the safe harbor adopt an
appropriate resolution evidencing that
the company is primarily engaged in a
non-investment business and record
that resolution contemporaneously in its
minute books or comparable
documents.1 An R&D company seeking
to rely on the safe harbor must retain
these records only as long as such
records must be maintained in
accordance with state law.
Rule 3a–8 contains an additional
requirement that is also a collection of
information within the meaning of the
PRA. The board of directors of a
company that relies on the safe harbor
under rule 3a–8 must adopt a written
policy with respect to the company’s
capital preservation investments. We
expect that the board of directors will
base its decision to adopt the resolution
1 Rule
3a–8(a)(6) (17 CFR 270.3a–8(6)).
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discussed above, in part, on investment
guidelines that the company will follow
to ensure its investment portfolio is in
compliance with the rule’s
requirements.
The collection of information
imposed by rule 3a–8 is voluntary
because the rule is an exemptive safe
harbor, and therefore, R&D companies
may choose whether or not to rely on it.
The purposes of the information
collection requirements in rule 3a–8 are
to ensure that: (i) The board of directors
of an R&D company is involved in
determining whether the company
should be considered an investment
company and subject to regulation
under the Act, and (ii) adequate records
are available for Commission review, if
necessary. Rule 3a–8 would not require
the reporting of any information or the
filing of any documents with the
Commission.
Commission staff estimates that there
is no annual recordkeeping burden
associated with the rule’s requirements.
Nevertheless, the Commission requests
authorization to maintain an inventory
of one burden hour for administrative
purposes.
Commission staff estimates that
approximately 29,999 R&D companies
may take advantage of rule 3a–8.2 Given
that the board resolutions and
investment guidelines will generally
need to be adopted only once (unless
relevant circumstances change),3 the
Commission believes that all the R&D
companies that existed prior to the
adoption of rule 3a–8 adopted their
board resolutions and established
written investment guidelines in 2003
when the rule was adopted. We expect
that R&D companies formed subsequent
to the adoption of rule 3a–8 would
adopt the board resolution and
investment guidelines simultaneously
with their formation documents in the
ordinary course of business.4 Therefore,
we estimate that rule 3a–8 does not
impose additional burdens.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
2 See National Science Foundation, National
Center for Science and Engineering Statistics,
Business R&D and Innovation Survey: 2016 (results
published May 13, 2019).
3 In the event of changed circumstances, the
Commission believes that the board resolution and
investment guidelines will be amended and
recorded in the ordinary course of business and
would not create additional time burdens.
4 In order for these companies to raise sufficient
capital to fund their product development stage,
Commission staff believes that they will need to
present potential investors with investment
guidelines. Investors generally want to be assured
that the company’s funds are invested consistent
with the goals of capital preservation and liquidity.
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agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: September 1, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19723 Filed 9–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89723; File No. SR–
NYSEAMER–2020–64]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing of
Proposed Rule Change To Modify
Rules 971.1NY and 971.2NY
September 1, 2020.
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 August
19, 2020, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘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 selfregulatory 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 971.1NY and 971.2NY regarding
its Customer Best Execution (‘‘CUBE’’)
auction to provide optional all-or-none
functionality for larger-sized orders. The
proposed rule change is available on the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 85, No. 174 / Tuesday, September 8, 2020 / Notices
improvement.7 In the case of the SingleLeg CUBE, to assure that a CUBE Order
does not execute ahead of Customer
interest resting on the Book at the
initiation of an Auction, the Exchange
II. Self-Regulatory Organization’s
has established that the CUBE Order
Statement of the Purpose of, and
may only execute within a defined
Statutory Basis for, the Proposed Rule
range of permissible executions, which
Change
range is based on a snapshot of the
market at the initiation of the Auction.8
In its filing with the Commission, the
Specifically, for a CUBE Order to buy
self-regulatory organization included
(sell) 50 or more contracts, the Auction
statements concerning the purpose of,
begins with an ‘‘initiating price,’’ which
and basis for, the proposed rule change
and discussed any comments it received is the lower (higher) of the CUBE
Order’s limit price or the NBO (NBB);
on the proposed rule change. The text
of those statements may be examined at however, if there is Customer interest on
the Book at the BB (BO), the lower
the places specified in Item IV below.
The Exchange has prepared summaries, (upper) bound of permissible executions
is the higher (lower) of the BB plus one
set forth in sections A, B, and C below,
cent (BO minus one cent) or the NBB
of the most significant parts of such
(NBO).9 This latter structure (when
statements.
there is resting Customer interest)
A. Self-Regulatory Organization’s
ensures that any Customer interest at
Statement of the Purpose of, and the
the BB (BO) retains priority at that price,
Statutory Basis for, the Proposed Rule
and is not circumvented by the interest
Change
in the CUBE Auction, including the
CUBE Order. As discussed below, the
1. Purpose
proposed AON CUBE Order, which is
500 or more contracts, would be subject
The Exchange proposes to expand its
to the same requirements regarding how
electronic crossing mechanism—the
the range of permissible executions and
CUBE Auction, to provide optional allor-none (‘‘AON’’) 4 functionality for ATP initiating price of the CUBE Order
would be determined, which are
Holders to execute larger-sized orders
designed to honor the priority of
(i.e., 500 or more contracts) in both the
Single-Leg and Complex CUBE Auctions Customer interest on the Book.
Once an Auction for a CUBE Order is
(collectively, referred to herein as the
commenced, such order is deemed
‘‘CUBE Auction’’ functionality).5 As
proposed, a CUBE Order would execute executed (as it is guaranteed).10
in full at the single stop price against the However, to respect the priority of the
Consolidated Book, the Auction for a
Contra Order, unless RFR Responses
CUBE Order ends early upon the arrival
that provide price improvement to the
CUBE Order or customer interest that is of certain price-improving interest—
priced equal to the CUBE Order, or both,
7 See Rule 900.2NY(14) (defining Consolidated
can in the aggregate, satisfy the full
Book (or ‘‘Book’’) and providing that all quotes and
quantity of the CUBE Order, in which
orders ‘‘that are entered into the Book will be
case, the Contra Order would not
ranked and maintained in accordance with the rules
of priority as provided in Rule 964NY’’). Rule
receive an allocation.6
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
Priority of Resting Customer Interest at
Start of CUBE Auctions
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The CUBE Auction operates
seamlessly with the Consolidated
Book—while still affording Single-Leg
and Complex CUBE Orders an
opportunity to receive price
4 An All-or-None Order or AON Order is a
‘‘Market or Limit Order that is to be executed on
the Exchange in its entirety or not at all.’’ See Rule
900.3NY(d)(4).
5 See proposed Rules 971.1NY, Commentary .05
and 971.2NY, Commentary .04.
6 Capitalized terms have the same meaning as the
defined terms in Rules 971.1NY and 971.2NY. See
Securities and Exchange Act Release Nos. 71655
(March 5, 2014) 79 FR 13711 (March 11, 2014) (SR–
NYSEMKT–2014–17) (the ‘‘Single-Leg CUBE
Notice’’); 82802 (March 2, 2018), 83 FR 9769 (March
7, 2018) (SR–NYSEAMER–2018–05) (the ‘‘Complex
CUBE Notice’’).
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964NY (Display, Priority and Order Allocation—
Trading Systems) dictates the priority of quotes and
orders. The Exchange has integrated the Complex
CUBE Auction into the Complex Matching Engine
(or CME), which ensures that the Complex CUBE
Auction respects the priority of interest in the
Consolidated Book. See Rule 971.2NY(a).
8 See generally Rule 971.1NY (for detailed
description of operation of Single-Leg CUBE
Auction). This proposal focuses solely on
requirements of Single-Leg CUBE Order of 50 or
more contracts because the proposed AON CUBE
Order is for more than 50 contracts (i.e., at least
500). See, e.g., Rule 971.1NY(b)(1)(A) (regarding 50
or more contracts), (B) (regarding pricing for CUBE
Order of 50 or fewer contracts).
9 See Rule 971.1NY(b)(1)(A). See supra note 6,
Single-Leg CUBE Notice, 79 FR 13711, at 13713
(examples #1 and 2 setting forth the initiating price
and range of permissible executions based on
resting Customer interest at the BBO at the start of
the Auction).
10 See Rule 971.1NY(b) (providing that ‘‘[t]he time
at which the Auction is initiated shall also be
considered the time of execution for the CUBE
Order . . .).
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including Customer interest that
improves the stop price.11
In the case of Complex CUBE, the
Exchange utilizes the concept of a CUBE
BBO, which requires price improvement
over resting interest to initiate a
Complex CUBE Auction.12 Upon entry
of a Complex CUBE Order in the
System, the CUBE BBO is determined to
be the more aggressive of (i) the
Complex BBO improved by $0.01, or (ii)
the Derived BBO improved by: $0.01
multiplied by the smallest leg of the
complex order strategy.13 As with
Single-Leg, a Complex CUBE Auction
begins with an ‘‘initiating price,’’ which
for a Complex CUBE Order is the less
aggressive of the net debit/credit price
of such order or the price that locks the
contra-side CUBE BBO and the range of
permissible executions of a Complex
CUBE Order is all prices equal to or
between the initiating price and the
same-side CUBE BBO.14 Thus, to initiate
a Complex CUBE Auction, the Complex
CUBE Order must be priced better than
the interest resting on the Consolidated
Book, i.e., the CUBE BBO, which
ensures that price-time priority—
including for Customer interest—is
respected.15 As discussed below, the
proposed AON Complex CUBE Order
must likewise rely on the CUBE BBO to
determine the initiating price and
therefore honor Customer (and all other
resting) interest.
Like a Single-Leg CUBE Order, once
an Auction for a Complex CUBE Order
is commenced, such order is deemed
executed (as it is guaranteed).16 As such,
to respect the priority of the
Consolidated Book, the Auction for a
Complex CUBE Order ends early upon
the arrival of certain price-improving
11 See 971.1NY(c)(4) (setting forth the type of
interest that causes the early end to a Single-Leg
CUBE Auction).
12 See generally Rule 971.2NY and Commentary
.02 (definitions). See also Rule 900.2NY(7)(b),(c)
(defining Complex BBO and Derived BBO). The
‘‘same-side CUBE BBO’’ and ‘‘contra-side CUBE
BBO’’ refer to the CUBE BBO on the same or
opposite side of the market as the Complex CUBE
Order, respectively. See Rule 971.2NY(a)(2).
13 See Rule 971.2NY(a)(2). A complex order
strategy is entered with the ratio expressed in the
fewest number of contracts for each leg of the ratio.
For a complex order strategy with a ratio of 2, 3,
and 6 contracts per leg, the $0.01 figure would be
multiplied by 2 contracts, which represents the
smallest leg. To calculate the CUBE BBO for this
strategy, the Derived BBO would need to be priced
improved by $0.02.
14 See Rule 971.2NY(a)(2)–(4).
15 See supra note 6, Complex CUBE Notice, 83 FR
9769, at 83 FR 9772 (example illustrating the
initiating price and range of permissible executions
for a Complex CUBE Order per Rule 971.2NY(a)(2)–
(4)).
16 See Rule 971.2NY(c) (providing that ‘‘[t]he time
at which the Auction is initiated will also be
considered the time of execution for the Complex
CUBE Order’’).
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Federal Register / Vol. 85, No. 174 / Tuesday, September 8, 2020 / Notices
interest—including Customer interest
that improves the stop price.17
The proposal to expand the current
CUBE Auction functionality by
providing an additional (optional)
method for market participants to effect
larger-sized orders in the CUBE Auction
would likewise operate seamlessly with
the Consolidated Book. The Exchange
also believes this proposal would
encourage ATP Holders to compete
vigorously to provide the opportunity
for price improvement for larger-sized
orders in a competitive auction process,
which may lead to enhanced liquidity
and tighter markets.
Proposed AON CUBE Functionality
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AON CUBE Order for Single-Leg CUBE
The Exchange proposes to add new
Commentary .05 to Rule 971.1NY to
provide that a CUBE Order of at least
500 contracts would execute in full at
the single stop price against the Contra
Order, except under specified
circumstances (the ‘‘AON CUBE
Order’’).18 As further proposed, a Contra
Order would not be permitted to
guarantee an AON CUBE Order for automatch or an auto-match limit, which
features are otherwise available in a
Single-Leg CUBE Auction.19
The initiating price and permissible
range of executions for a proposed AON
CUBE Order would be determined in
the same manner as for a standard CUBE
Order, which means it must improve the
price of any resting Customer interest to
maintain the priority of such resting
interest at the start of the Auction.20 An
AON CUBE Order Auction would also
be subject to the same early end events
as a Singe-Leg CUBE Order, including
the arrival of Customer interest that
improves the stop price.21
As proposed, an AON CUBE Order to
buy (sell) would not execute with the
17 See 971.1NY(c)(3) (setting forth the type of
interest that causes the early end to a Complex
CUBE Auction).
18 See proposed Commentary .05, Rule 971.1NY.
See Rule 971.1NY(c)(1)(A) (setting forth parameters
for single stop price). An AON CUBE Order would
be rejected for the same reasons as a CUBE Order
(see Rule 971.1NY(b)(2)–(10)), except that the
minimum size is 500 contracts, as opposed to one
contract, as set forth in Rule 971.1NY(b)(8).
19 See proposed Commentary .05, Rule 971.1NY.
See also Rule 971.1NY(c)(1)(B)–(C) (regarding
parameters for auto-match and auto-match limit
price).
20 An AON CUBE Order and its paired Contra
Order would be rejected if it failed to meet the
pricing parameters. See Rule 971.1NY(b) (regarding
auction eligibility requirements). See supra note 9
(regarding examples in Single-Leg CUBE Notice
setting forth the initiating price and range of
permissible executions based on resting Customer
interest at the BBO at the start of the Auction).
21 See 971.1NY(c)(4) (setting forth the type of
interest that causes the early end to an Single-Leg
CUBE Auction).
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Contra Order if the entire AON CUBE
Order can be satisfied in full by contraside Customer interest at the stop price
or contra-side interest that price
improves the stop price, or both. To
effect this, the Exchange proposes that
paragraph (a) to Commentary .05 to Rule
971.1NY would provide that the Contra
Order would not receive an allocation if:
(a) RFR Responses to sell (buy) at prices
lower (higher) than the stop price or
Customer interest to sell (buy) at a price
equal to the stop price, or both, that in the
aggregate can satisfy the full quantity of the
AON CUBE Order, in which case, the RFR
Responses will be allocated as provided for
in paragraphs (c)(5)(A) and (c)(5)(B)(i) of this
Rule, as applicable.22
Thus, any Customer RFR Responses
that equal the price of the AON CUBE
Order may on its own or in combination
with any non-Customer RFR Responses
that improve the price of the AON
CUBE Order, execute against the AON
CUBE Order, provided that the size
contingency of the order is met. The
Exchange believes that providing RFR
Responses an opportunity for an
allocation in these specified
circumstances is consistent with the
Exchange’s priority rules that give
priority first to customer orders, and
second to orders that provide price
improvement.23
As further proposed, if RFR
Responses and Customer interest to sell
(buy) do not meet the requirements of
proposed Commentary .05(a) to Rule
971.1NY, RFR Responses would not
receive an allocation in the Auction for
the AON CUBE Order. The Exchange
believes that this proposal is consistent
with the terms of how AONs function
generally without violating the
Exchange’s general priority rules.24
With respect to allocation, the
Exchange notes that the proposed
functionality differs from the allocation
of a standard Single-Leg CUBE Order in
that the Contra Order is not guaranteed
a minimum allocation at the stop price.
Instead, given the AON nature of the
functionality, the Contra Order either
22 See proposed Commentary .05, Rule
971.1NY(a).
23 See Rule 971.1NY (c)(5)(A) (providing
Customer interest first priority to trade with the
CUBE Order, pursuant to the size pro rata algorithm
set forth in Rule 964NY(b)(3) at each price point)
and (c)(5)(B)(i) (providing that, second to Customer
interest, RFR Responses priced below (above) the
stop price, beginning with the lowest (highest) price
within the range of permissible executions will
execute with the CUBE Order, pursuant to the size
pro rata algorithm set forth in Rule 964NY(b)(3) at
each price point).
24 See Rule 964NY (regarding order ranking and
priority).
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trades with the entire AON CUBE Order
or not at all.25
With the exception of differences to
the minimum size and allocation
described in proposed Commentary .05
to Rule 971.1NY, an AON CUBE Order
would otherwise be subject to Rule
971.1NY with respect to all other
aspects of the CUBE Auction
functionality.
AON Complex CUBE Order for Complex
CUBE 26
The Exchange also proposes to adopt
substantially similar rule text to
likewise offer ATP Holders the option of
executing larger-sized orders in the
Complex CUBE Auction. Specifically, as
proposed, Commentary .04 to Rule
971.2NY would provide that a Complex
CUBE Order Auction of at least 500
contracts would execute in full at the
single stop price against the Complex
Contra Order under specified
circumstances (the ‘‘AON Complex
CUBE Order’’).27 As further proposed, a
Complex Contra Order would not be
permitted to guarantee an AON
Complex CUBE Order for auto-match
limit, which feature is otherwise
available in a Complex CUBE Auction.28
The CUBE BBO for a proposed AON
Complex CUBE Order would be
determined in the same manner as for
a Complex CUBE Order, which means
an AON Complex CUBE Order would
ensure the priority of such resting
interest at the start of the Auction.29 An
AON Complex CUBE Order Auction
would also be subject to the same early
end events as a Complex CUBE Order,
including the arrival of Customer
interest that improves the stop price.30
25 See Rule 971.1NY(c)(5)(B)(i)(b) (providing that,
‘‘if there is sufficient size of the CUBE Order still
available after executing at better prices or against
Customer interest, the Contra Order shall receive
additional contracts required to achieve an
allocation of the greater of 40% of the original
CUBE Order size or one contract (or the greater of
50% of the original CUBE Order size or one contract
if there is only one RFR Response)’’).
26 See generally Rule 971.2NY (for detailed
description of operation of Complex CUBE
Auction).
27 See also proposed Commentary .04, Rule
971.2NY. See Rule 971.2NY(b)(1)(A) (setting forth
parameters for single stop price). An AON Complex
CUBE Order would be rejected for the same reasons
as a Complex CUBE Order (see Rule 971.2NY(b)(2)–
(5)).
28 See Rule 971.2NY(b)(1)(B) (regarding
parameters for auto-match limit price).
29 A Complex AON CUBE Order and its paired
Complex Contra Order would be rejected if it failed
to meet the pricing parameters. See Rule
971.2NY(b) (regarding auction eligibility
requirements). See supra note 15 (regarding
example in Complex CUBE Notice setting forth the
initiating price and range of permissible executions
based CUBE BBO).
30 See 971.1NY(c)(3) (setting forth the type of
interest that causes the early end to a Complex
CUBE Auction).
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Federal Register / Vol. 85, No. 174 / Tuesday, September 8, 2020 / Notices
As proposed, an AON Complex CUBE
Order to buy (sell) would not execute in
full with the Complex Contra Order if
the entire AON Complex CUBE Order
can be satisfied in full by contra-side
Customer interest at the stop price or
RFR Responses that price improve the
stop price, or both. To effect this, the
Exchange proposes that paragraph (a) to
Commentary .04 to Rule 971.2NY would
provide that the Complex Contra Order
would not receive an allocation if:
(a) RFR Responses to sell (buy) at prices
more aggressive than the stop price or
Customer interest to sell (buy) at a price
equal to the stop price, or both, that in the
aggregate can satisfy the full quantity of the
AON Complex CUBE Order, in which case,
the RFR Responses will be allocated as
provided for in paragraphs (c)(4)(A) and
(c)(4)(B)(i) of this Rule, as applicable.31
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Thus, any Customer RFR Responses
that equal the price of the AON
Complex CUBE Order may on its own
or in combination with any nonCustomer RFR Responses that improve
the price of the AON CUBE Order,
execute against the AON Complex
CUBE Order provided that the size
contingency of the order is met. The
Exchange believes that providing RFR
Responses an opportunity for an
allocation in these specified
circumstances is consistent with the
Exchange’s priority rules that give
priority first to customer orders, and
second to orders that provide price
improvement.32
As further proposed, if RFR
Responses and Customer interest to sell
(buy) do not meet the requirements of
proposed Commentary .04(a) to Rule
971.2NY, RFR Responses would not
receive an allocation in the Auction for
the AON Complex CUBE Order. The
Exchange believes that this proposal is
consistent with the terms of how AONs
function generally without violating the
Exchange’s general priority rules.33
With respect to allocation, the
Exchange notes that the proposed
functionality differs from the allocation
of a standard Complex CUBE Order in
31 See proposed Commentary .04, Rule
971.2NY(a).
32 See also Rule 971.2NY (c)(4)(A) (providing
Customer interest first priority to trade with the
Complex CUBE Order, at each price level, pursuant
to the size pro rata algorithm set forth in Rule
964NY(b)(3) at each price point) and (c)(4)(B)(i)
(providing that, second to Customer interest, RFR
Responses priced below (above) the stop price,
beginning with the lowest (highest) price within the
range of permissible executions will execute with
the Complex CUBE Order, pursuant to the size pro
rata algorithm set forth in Rule 964NY(b)(3) at each
price point).
33 See Rule 980NY(b) (‘‘Priority of Electronic
Complex Orders in the Consolidated Book’’). See
also Rule 971.2NY (regarding processing of
Complex CUBE Orders per Rule 980NY).
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that the Complex Contra Order is not
guaranteed a minimum allocation at the
stop price. Instead, given the AON
nature of the functionality, the Complex
Contra Order either trades with the
entire AON Complex CUBE Order or not
at all.34
With the exception of differences to
the minimum size and allocation
described in proposed Commentary .04
to Rule 971.2NY, an AON Complex
CUBE Order would otherwise be subject
to Rule 971.2NY with respect to all
other aspects of the Complex CUBE
Auction functionality.
Implementation
The Exchange will announce the
implementation date of the proposed
rule change in a Trader Update
following the approval of this proposed
rule change.
2. Statutory Basis
For the reasons set forth above, the
Exchange believes the proposed rule
change is consistent with Section 6(b) of
the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act,
in that it is designed to promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The proposed functionality is
intended to benefit investors, because it
is designed to provide investors seeking
to execute large option orders in the
CUBE Auction with greater certainty
regarding the price at which the order
would be executed. This proposal
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system because it would provide ATP
Holders that locate liquidity for their
customers’ larger-sized orders a facility
in which to execute those orders at the
agreed-upon price, while also providing
an opportunity for such orders to be
price improved if the full quantity can
be price improved. The Exchange
believes the proposed functionality
would promote and foster competition
and provide more options contracts
with the opportunity for price
improvement.
34 See Rule 971.2NY(c)(4)(B)(i)(b) (providing that,
‘‘[a]t the stop price, if there is sufficient size of the
Complex CUBE Order still available after executing
at prices better than the stop price or against
Customer interest, the Complex Contra Order will
receive an allocation of the greater of 40% of the
original Complex CUBE Order size or one contract
(or the greater of 50% of the original Complex
CUBE Order size or one contract if there is only one
RFR Response)’’).
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
55565
The Exchange believes that the
proposed functionality would provide
more efficient transactions, reduce
execution risk to ATP Holders, and
afford greater execution opportunities
for larger-sized orders. The proposed
functionality would operate within the
Single-Leg CUBE and Complex CUBE
(including by integrating Complex
CUBE into the Complex Matching
Engine, per Rule 971.2NY(a)) such
that—because of the existing priceimprovement requirements to initiate
the respective CUBE Auctions that
would be applicable to an AON CUBE
Order or AON Complex CUBE Order—
the Exchange is able to assure that the
proposed functionality would continue
to respect the priority of interest, in
particular Customer interest, resting on
the Consolidated Book when an Auction
commences.
Further, the proposed functionality is
reasonable and promotes a fair and
orderly market and national market
system, because it is substantially
similar to the price improvement
mechanisms for larger-sized orders
available on other options exchanges.
The Exchange believes this proposal
may lead to an increase in Exchange
volume and should allow the Exchange
to better compete against other markets
that already offer an all-or-none
electronic solicitation mechanism for
larger-sized orders. The Exchange
believes that its proposal would allow
the Exchange to better compete for
solicited transactions, while providing
an opportunity for price improvement
on the larger-sized orders. In addition,
the proposed functionality should
promote and foster competition and
provide more options contracts with the
opportunity for price improvement,
which should benefit market
participants.
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
Exchange is proposing the functionality
as an optional market enhancement that,
if utilized, should increase competition
for ATP Holders seeking to execute
larger-sized orders in an electronic
auction mechanism. The Exchange
notes that other options exchanges offer
electronic auction mechanisms for
larger-sized orders on an AON basis.
While the Exchange has not conducted
a comparison of the proposed
functionality to the mechanisms that are
available on other exchanges, the
Exchange nonetheless believes the
E:\FR\FM\08SEN1.SGM
08SEN1
55566
Federal Register / Vol. 85, No. 174 / Tuesday, September 8, 2020 / Notices
proposed functionality would provide
ATP Holders with a greater choice of
exchanges from which to execute such
orders. The proposal is structured to
offer the same enhancement to all
market participants and would not
impose an intra-market competitive
burden on any participant. The price
improvement functionality for the AON
functionality for both Single-Leg and
CUBE Auctions are designed to promote
competition for ATP Holders to compete
amongst each other by responding with
not only their best price, but also the
full size for a particular auction.
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 that the proposed
rule change will relieve any burden on,
or otherwise promote, competition. The
Exchange believes this proposed rule
change is necessary to permit fair
competition among the options
exchanges and to establish more
uniform price improvement auction
rules on the various options exchanges.
The proposed functionality may lead to
an increase in Exchange volume and
should allow the Exchange to better
compete against other markets that
already offer similar price improvement
mechanisms for larger-sized orders. The
Exchange anticipates that this proposal
will create new opportunities for the
Exchange to attract new business and
compete on equal footing with those
options exchanges that offer auction
AON functionality for larger-sized
orders and for this reason the proposal
does not create an undue burden on
intermarket competition. By contrast,
not having the proposed functionality
places the Exchange at a competitive
disadvantage vis-a`-vis other exchanges
that offer similar price improvement
mechanisms for larger-sized orders.
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 DSKJLSW7X2PROD 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
VerDate Sep<11>2014
16:32 Sep 04, 2020
Jkt 250001
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:
Number SR–NYSEAMER–2020–64, and
should be submitted on or before
September 29, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19714 Filed 9–4–20; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2020–64 on the subject
line.
[Disaster Declaration # 16633 and # 16634;
LOUISIANA Disaster Number LA–00103]
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–2020–64. 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
ACTION:
PO 00000
Frm 00159
Fmt 4703
Sfmt 4703
Presidential Declaration Amendment of
a Major Disaster for the State of
Louisiana
U.S. Small Business
Administration.
AGENCY:
Amendment 1.
This is an amendment of the
Presidential declaration of a major
disaster for the State of Louisiana
(FEMA—4559—DR), dated 08/28/2020.
Incident: Hurricane Laura.
Incident Period: 08/22/2020 through
08/27/2020.
SUMMARY:
Issued on 08/30/2020.
Physical Loan Application Deadline
Date: 10/27/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/28/2021.
DATES:
Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
FOR FURTHER INFORMATION CONTACT:
The notice
of the President’s major disaster
declaration for the State of Louisiana,
dated 08/28/2020, is hereby amended to
include the following areas as adversely
affected by the disaster:
SUPPLEMENTARY INFORMATION:
Primary Parishes (Physical Damage and
Economic Injury Loans): Vernon
Contiguous Parishes (Economic Injury
Loans Only):
Louisiana: Natchitoches, Sabine.
All other information in the original
declaration remains unchanged.
35 17
E:\FR\FM\08SEN1.SGM
CFR 200.30–3(a)(12).
08SEN1
]]>Agencies
[Federal Register Volume 85, Number 174 (Tuesday, September 8, 2020)]
[Notices]
[Pages 55562-55566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19714]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89723; File No. SR-NYSEAMER-2020-64]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of Proposed Rule Change To Modify Rules 971.1NY and 971.2NY
September 1, 2020.
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 August 19, 2020, NYSE American LLC (``NYSE American'' or the
``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 modify Rules 971.1NY and 971.2NY regarding
its Customer Best Execution (``CUBE'') auction to provide optional all-
or-none functionality for larger-sized orders. The proposed rule change
is available on the
[[Page 55563]]
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 expand its electronic crossing mechanism--
the CUBE Auction, to provide optional all-or-none (``AON'') \4\
functionality for ATP Holders to execute larger-sized orders (i.e., 500
or more contracts) in both the Single-Leg and Complex CUBE Auctions
(collectively, referred to herein as the ``CUBE Auction''
functionality).\5\ As proposed, a CUBE Order would execute in full at
the single stop price against the Contra Order, unless RFR Responses
that provide price improvement to the CUBE Order or customer interest
that is priced equal to the CUBE Order, or both, can in the aggregate,
satisfy the full quantity of the CUBE Order, in which case, the Contra
Order would not receive an allocation.\6\
---------------------------------------------------------------------------
\4\ An All-or-None Order or AON Order is a ``Market or Limit
Order that is to be executed on the Exchange in its entirety or not
at all.'' See Rule 900.3NY(d)(4).
\5\ See proposed Rules 971.1NY, Commentary .05 and 971.2NY,
Commentary .04.
\6\ Capitalized terms have the same meaning as the defined terms
in Rules 971.1NY and 971.2NY. See Securities and Exchange Act
Release Nos. 71655 (March 5, 2014) 79 FR 13711 (March 11, 2014) (SR-
NYSEMKT-2014-17) (the ``Single-Leg CUBE Notice''); 82802 (March 2,
2018), 83 FR 9769 (March 7, 2018) (SR-NYSEAMER-2018-05) (the
``Complex CUBE Notice'').
---------------------------------------------------------------------------
Priority of Resting Customer Interest at Start of CUBE Auctions
The CUBE Auction operates seamlessly with the Consolidated Book--
while still affording Single-Leg and Complex CUBE Orders an opportunity
to receive price improvement.\7\ In the case of the Single-Leg CUBE, to
assure that a CUBE Order does not execute ahead of Customer interest
resting on the Book at the initiation of an Auction, the Exchange has
established that the CUBE Order may only execute within a defined range
of permissible executions, which range is based on a snapshot of the
market at the initiation of the Auction.\8\ Specifically, for a CUBE
Order to buy (sell) 50 or more contracts, the Auction begins with an
``initiating price,'' which is the lower (higher) of the CUBE Order's
limit price or the NBO (NBB); however, if there is Customer interest on
the Book at the BB (BO), the lower (upper) bound of permissible
executions is the higher (lower) of the BB plus one cent (BO minus one
cent) or the NBB (NBO).\9\ This latter structure (when there is resting
Customer interest) ensures that any Customer interest at the BB (BO)
retains priority at that price, and is not circumvented by the interest
in the CUBE Auction, including the CUBE Order. As discussed below, the
proposed AON CUBE Order, which is 500 or more contracts, would be
subject to the same requirements regarding how the range of permissible
executions and initiating price of the CUBE Order would be determined,
which are designed to honor the priority of Customer interest on the
Book.
---------------------------------------------------------------------------
\7\ See Rule 900.2NY(14) (defining Consolidated Book (or
``Book'') and providing that all quotes and orders ``that are
entered into the Book will be ranked and maintained in accordance
with the rules of priority as provided in Rule 964NY''). Rule 964NY
(Display, Priority and Order Allocation--Trading Systems) dictates
the priority of quotes and orders. The Exchange has integrated the
Complex CUBE Auction into the Complex Matching Engine (or CME),
which ensures that the Complex CUBE Auction respects the priority of
interest in the Consolidated Book. See Rule 971.2NY(a).
\8\ See generally Rule 971.1NY (for detailed description of
operation of Single-Leg CUBE Auction). This proposal focuses solely
on requirements of Single-Leg CUBE Order of 50 or more contracts
because the proposed AON CUBE Order is for more than 50 contracts
(i.e., at least 500). See, e.g., Rule 971.1NY(b)(1)(A) (regarding 50
or more contracts), (B) (regarding pricing for CUBE Order of 50 or
fewer contracts).
\9\ See Rule 971.1NY(b)(1)(A). See supra note 6, Single-Leg CUBE
Notice, 79 FR 13711, at 13713 (examples #1 and 2 setting forth the
initiating price and range of permissible executions based on
resting Customer interest at the BBO at the start of the Auction).
---------------------------------------------------------------------------
Once an Auction for a CUBE Order is commenced, such order is deemed
executed (as it is guaranteed).\10\ However, to respect the priority of
the Consolidated Book, the Auction for a CUBE Order ends early upon the
arrival of certain price-improving interest--including Customer
interest that improves the stop price.\11\
---------------------------------------------------------------------------
\10\ See Rule 971.1NY(b) (providing that ``[t]he time at which
the Auction is initiated shall also be considered the time of
execution for the CUBE Order . . .).
\11\ See 971.1NY(c)(4) (setting forth the type of interest that
causes the early end to a Single-Leg CUBE Auction).
---------------------------------------------------------------------------
In the case of Complex CUBE, the Exchange utilizes the concept of a
CUBE BBO, which requires price improvement over resting interest to
initiate a Complex CUBE Auction.\12\ Upon entry of a Complex CUBE Order
in the System, the CUBE BBO is determined to be the more aggressive of
(i) the Complex BBO improved by $0.01, or (ii) the Derived BBO improved
by: $0.01 multiplied by the smallest leg of the complex order
strategy.\13\ As with Single-Leg, a Complex CUBE Auction begins with an
``initiating price,'' which for a Complex CUBE Order is the less
aggressive of the net debit/credit price of such order or the price
that locks the contra-side CUBE BBO and the range of permissible
executions of a Complex CUBE Order is all prices equal to or between
the initiating price and the same-side CUBE BBO.\14\ Thus, to initiate
a Complex CUBE Auction, the Complex CUBE Order must be priced better
than the interest resting on the Consolidated Book, i.e., the CUBE BBO,
which ensures that price-time priority--including for Customer
interest--is respected.\15\ As discussed below, the proposed AON
Complex CUBE Order must likewise rely on the CUBE BBO to determine the
initiating price and therefore honor Customer (and all other resting)
interest.
---------------------------------------------------------------------------
\12\ See generally Rule 971.2NY and Commentary .02
(definitions). See also Rule 900.2NY(7)(b),(c) (defining Complex BBO
and Derived BBO). The ``same-side CUBE BBO'' and ``contra-side CUBE
BBO'' refer to the CUBE BBO on the same or opposite side of the
market as the Complex CUBE Order, respectively. See Rule
971.2NY(a)(2).
\13\ See Rule 971.2NY(a)(2). A complex order strategy is entered
with the ratio expressed in the fewest number of contracts for each
leg of the ratio. For a complex order strategy with a ratio of 2, 3,
and 6 contracts per leg, the $0.01 figure would be multiplied by 2
contracts, which represents the smallest leg. To calculate the CUBE
BBO for this strategy, the Derived BBO would need to be priced
improved by $0.02.
\14\ See Rule 971.2NY(a)(2)-(4).
\15\ See supra note 6, Complex CUBE Notice, 83 FR 9769, at 83 FR
9772 (example illustrating the initiating price and range of
permissible executions for a Complex CUBE Order per Rule
971.2NY(a)(2)-(4)).
---------------------------------------------------------------------------
Like a Single-Leg CUBE Order, once an Auction for a Complex CUBE
Order is commenced, such order is deemed executed (as it is
guaranteed).\16\ As such, to respect the priority of the Consolidated
Book, the Auction for a Complex CUBE Order ends early upon the arrival
of certain price-improving
[[Page 55564]]
interest--including Customer interest that improves the stop price.\17\
---------------------------------------------------------------------------
\16\ See Rule 971.2NY(c) (providing that ``[t]he time at which
the Auction is initiated will also be considered the time of
execution for the Complex CUBE Order'').
\17\ See 971.1NY(c)(3) (setting forth the type of interest that
causes the early end to a Complex CUBE Auction).
---------------------------------------------------------------------------
The proposal to expand the current CUBE Auction functionality by
providing an additional (optional) method for market participants to
effect larger-sized orders in the CUBE Auction would likewise operate
seamlessly with the Consolidated Book. The Exchange also believes this
proposal would encourage ATP Holders to compete vigorously to provide
the opportunity for price improvement for larger-sized orders in a
competitive auction process, which may lead to enhanced liquidity and
tighter markets.
Proposed AON CUBE Functionality
AON CUBE Order for Single-Leg CUBE
The Exchange proposes to add new Commentary .05 to Rule 971.1NY to
provide that a CUBE Order of at least 500 contracts would execute in
full at the single stop price against the Contra Order, except under
specified circumstances (the ``AON CUBE Order'').\18\ As further
proposed, a Contra Order would not be permitted to guarantee an AON
CUBE Order for auto-match or an auto-match limit, which features are
otherwise available in a Single-Leg CUBE Auction.\19\
---------------------------------------------------------------------------
\18\ See proposed Commentary .05, Rule 971.1NY. See Rule
971.1NY(c)(1)(A) (setting forth parameters for single stop price).
An AON CUBE Order would be rejected for the same reasons as a CUBE
Order (see Rule 971.1NY(b)(2)-(10)), except that the minimum size is
500 contracts, as opposed to one contract, as set forth in Rule
971.1NY(b)(8).
\19\ See proposed Commentary .05, Rule 971.1NY. See also Rule
971.1NY(c)(1)(B)-(C) (regarding parameters for auto-match and auto-
match limit price).
---------------------------------------------------------------------------
The initiating price and permissible range of executions for a
proposed AON CUBE Order would be determined in the same manner as for a
standard CUBE Order, which means it must improve the price of any
resting Customer interest to maintain the priority of such resting
interest at the start of the Auction.\20\ An AON CUBE Order Auction
would also be subject to the same early end events as a Singe-Leg CUBE
Order, including the arrival of Customer interest that improves the
stop price.\21\
---------------------------------------------------------------------------
\20\ An AON CUBE Order and its paired Contra Order would be
rejected if it failed to meet the pricing parameters. See Rule
971.1NY(b) (regarding auction eligibility requirements). See supra
note 9 (regarding examples in Single-Leg CUBE Notice setting forth
the initiating price and range of permissible executions based on
resting Customer interest at the BBO at the start of the Auction).
\21\ See 971.1NY(c)(4) (setting forth the type of interest that
causes the early end to an Single-Leg CUBE Auction).
---------------------------------------------------------------------------
As proposed, an AON CUBE Order to buy (sell) would not execute with
the Contra Order if the entire AON CUBE Order can be satisfied in full
by contra-side Customer interest at the stop price or contra-side
interest that price improves the stop price, or both. To effect this,
the Exchange proposes that paragraph (a) to Commentary .05 to Rule
971.1NY would provide that the Contra Order would not receive an
allocation if:
(a) RFR Responses to sell (buy) at prices lower (higher) than
the stop price or Customer interest to sell (buy) at a price equal
to the stop price, or both, that in the aggregate can satisfy the
full quantity of the AON CUBE Order, in which case, the RFR
Responses will be allocated as provided for in paragraphs (c)(5)(A)
and (c)(5)(B)(i) of this Rule, as applicable.\22\
---------------------------------------------------------------------------
\22\ See proposed Commentary .05, Rule 971.1NY(a).
Thus, any Customer RFR Responses that equal the price of the AON
CUBE Order may on its own or in combination with any non-Customer RFR
Responses that improve the price of the AON CUBE Order, execute against
the AON CUBE Order, provided that the size contingency of the order is
met. The Exchange believes that providing RFR Responses an opportunity
for an allocation in these specified circumstances is consistent with
the Exchange's priority rules that give priority first to customer
orders, and second to orders that provide price improvement.\23\
---------------------------------------------------------------------------
\23\ See Rule 971.1NY (c)(5)(A) (providing Customer interest
first priority to trade with the CUBE Order, pursuant to the size
pro rata algorithm set forth in Rule 964NY(b)(3) at each price
point) and (c)(5)(B)(i) (providing that, second to Customer
interest, RFR Responses priced below (above) the stop price,
beginning with the lowest (highest) price within the range of
permissible executions will execute with the CUBE Order, pursuant to
the size pro rata algorithm set forth in Rule 964NY(b)(3) at each
price point).
---------------------------------------------------------------------------
As further proposed, if RFR Responses and Customer interest to sell
(buy) do not meet the requirements of proposed Commentary .05(a) to
Rule 971.1NY, RFR Responses would not receive an allocation in the
Auction for the AON CUBE Order. The Exchange believes that this
proposal is consistent with the terms of how AONs function generally
without violating the Exchange's general priority rules.\24\
---------------------------------------------------------------------------
\24\ See Rule 964NY (regarding order ranking and priority).
---------------------------------------------------------------------------
With respect to allocation, the Exchange notes that the proposed
functionality differs from the allocation of a standard Single-Leg CUBE
Order in that the Contra Order is not guaranteed a minimum allocation
at the stop price. Instead, given the AON nature of the functionality,
the Contra Order either trades with the entire AON CUBE Order or not at
all.\25\
---------------------------------------------------------------------------
\25\ See Rule 971.1NY(c)(5)(B)(i)(b) (providing that, ``if there
is sufficient size of the CUBE Order still available after executing
at better prices or against Customer interest, the Contra Order
shall receive additional contracts required to achieve an allocation
of the greater of 40% of the original CUBE Order size or one
contract (or the greater of 50% of the original CUBE Order size or
one contract if there is only one RFR Response)'').
---------------------------------------------------------------------------
With the exception of differences to the minimum size and
allocation described in proposed Commentary .05 to Rule 971.1NY, an AON
CUBE Order would otherwise be subject to Rule 971.1NY with respect to
all other aspects of the CUBE Auction functionality.
AON Complex CUBE Order for Complex CUBE \26\
---------------------------------------------------------------------------
\26\ See generally Rule 971.2NY (for detailed description of
operation of Complex CUBE Auction).
---------------------------------------------------------------------------
The Exchange also proposes to adopt substantially similar rule text
to likewise offer ATP Holders the option of executing larger-sized
orders in the Complex CUBE Auction. Specifically, as proposed,
Commentary .04 to Rule 971.2NY would provide that a Complex CUBE Order
Auction of at least 500 contracts would execute in full at the single
stop price against the Complex Contra Order under specified
circumstances (the ``AON Complex CUBE Order'').\27\ As further
proposed, a Complex Contra Order would not be permitted to guarantee an
AON Complex CUBE Order for auto-match limit, which feature is otherwise
available in a Complex CUBE Auction.\28\
---------------------------------------------------------------------------
\27\ See also proposed Commentary .04, Rule 971.2NY. See Rule
971.2NY(b)(1)(A) (setting forth parameters for single stop price).
An AON Complex CUBE Order would be rejected for the same reasons as
a Complex CUBE Order (see Rule 971.2NY(b)(2)-(5)).
\28\ See Rule 971.2NY(b)(1)(B) (regarding parameters for auto-
match limit price).
---------------------------------------------------------------------------
The CUBE BBO for a proposed AON Complex CUBE Order would be
determined in the same manner as for a Complex CUBE Order, which means
an AON Complex CUBE Order would ensure the priority of such resting
interest at the start of the Auction.\29\ An AON Complex CUBE Order
Auction would also be subject to the same early end events as a Complex
CUBE Order, including the arrival of Customer interest that improves
the stop price.\30\
---------------------------------------------------------------------------
\29\ A Complex AON CUBE Order and its paired Complex Contra
Order would be rejected if it failed to meet the pricing parameters.
See Rule 971.2NY(b) (regarding auction eligibility requirements).
See supra note 15 (regarding example in Complex CUBE Notice setting
forth the initiating price and range of permissible executions based
CUBE BBO).
\30\ See 971.1NY(c)(3) (setting forth the type of interest that
causes the early end to a Complex CUBE Auction).
---------------------------------------------------------------------------
[[Page 55565]]
As proposed, an AON Complex CUBE Order to buy (sell) would not
execute in full with the Complex Contra Order if the entire AON Complex
CUBE Order can be satisfied in full by contra-side Customer interest at
the stop price or RFR Responses that price improve the stop price, or
both. To effect this, the Exchange proposes that paragraph (a) to
Commentary .04 to Rule 971.2NY would provide that the Complex Contra
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Order would not receive an allocation if:
(a) RFR Responses to sell (buy) at prices more aggressive than
the stop price or Customer interest to sell (buy) at a price equal
to the stop price, or both, that in the aggregate can satisfy the
full quantity of the AON Complex CUBE Order, in which case, the RFR
Responses will be allocated as provided for in paragraphs (c)(4)(A)
and (c)(4)(B)(i) of this Rule, as applicable.\31\
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\31\ See proposed Commentary .04, Rule 971.2NY(a).
Thus, any Customer RFR Responses that equal the price of the AON
Complex CUBE Order may on its own or in combination with any non-
Customer RFR Responses that improve the price of the AON CUBE Order,
execute against the AON Complex CUBE Order provided that the size
contingency of the order is met. The Exchange believes that providing
RFR Responses an opportunity for an allocation in these specified
circumstances is consistent with the Exchange's priority rules that
give priority first to customer orders, and second to orders that
provide price improvement.\32\
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\32\ See also Rule 971.2NY (c)(4)(A) (providing Customer
interest first priority to trade with the Complex CUBE Order, at
each price level, pursuant to the size pro rata algorithm set forth
in Rule 964NY(b)(3) at each price point) and (c)(4)(B)(i) (providing
that, second to Customer interest, RFR Responses priced below
(above) the stop price, beginning with the lowest (highest) price
within the range of permissible executions will execute with the
Complex CUBE Order, pursuant to the size pro rata algorithm set
forth in Rule 964NY(b)(3) at each price point).
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As further proposed, if RFR Responses and Customer interest to sell
(buy) do not meet the requirements of proposed Commentary .04(a) to
Rule 971.2NY, RFR Responses would not receive an allocation in the
Auction for the AON Complex CUBE Order. The Exchange believes that this
proposal is consistent with the terms of how AONs function generally
without violating the Exchange's general priority rules.\33\
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\33\ See Rule 980NY(b) (``Priority of Electronic Complex Orders
in the Consolidated Book''). See also Rule 971.2NY (regarding
processing of Complex CUBE Orders per Rule 980NY).
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With respect to allocation, the Exchange notes that the proposed
functionality differs from the allocation of a standard Complex CUBE
Order in that the Complex Contra Order is not guaranteed a minimum
allocation at the stop price. Instead, given the AON nature of the
functionality, the Complex Contra Order either trades with the entire
AON Complex CUBE Order or not at all.\34\
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\34\ See Rule 971.2NY(c)(4)(B)(i)(b) (providing that, ``[a]t the
stop price, if there is sufficient size of the Complex CUBE Order
still available after executing at prices better than the stop price
or against Customer interest, the Complex Contra Order will receive
an allocation of the greater of 40% of the original Complex CUBE
Order size or one contract (or the greater of 50% of the original
Complex CUBE Order size or one contract if there is only one RFR
Response)'').
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With the exception of differences to the minimum size and
allocation described in proposed Commentary .04 to Rule 971.2NY, an AON
Complex CUBE Order would otherwise be subject to Rule 971.2NY with
respect to all other aspects of the Complex CUBE Auction functionality.
Implementation
The Exchange will announce the implementation date of the proposed
rule change in a Trader Update following the approval of this proposed
rule change.
2. Statutory Basis
For the reasons set forth above, the Exchange believes the proposed
rule change is consistent with Section 6(b) of the Act in general, and
furthers the objectives of Section 6(b)(5) of the Act, in that it is
designed to promote just and equitable principles of trade, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
The proposed functionality is intended to benefit investors,
because it is designed to provide investors seeking to execute large
option orders in the CUBE Auction with greater certainty regarding the
price at which the order would be executed. This proposal would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would provide ATP Holders that
locate liquidity for their customers' larger-sized orders a facility in
which to execute those orders at the agreed-upon price, while also
providing an opportunity for such orders to be price improved if the
full quantity can be price improved. The Exchange believes the proposed
functionality would promote and foster competition and provide more
options contracts with the opportunity for price improvement.
The Exchange believes that the proposed functionality would provide
more efficient transactions, reduce execution risk to ATP Holders, and
afford greater execution opportunities for larger-sized orders. The
proposed functionality would operate within the Single-Leg CUBE and
Complex CUBE (including by integrating Complex CUBE into the Complex
Matching Engine, per Rule 971.2NY(a)) such that--because of the
existing price-improvement requirements to initiate the respective CUBE
Auctions that would be applicable to an AON CUBE Order or AON Complex
CUBE Order--the Exchange is able to assure that the proposed
functionality would continue to respect the priority of interest, in
particular Customer interest, resting on the Consolidated Book when an
Auction commences.
Further, the proposed functionality is reasonable and promotes a
fair and orderly market and national market system, because it is
substantially similar to the price improvement mechanisms for larger-
sized orders available on other options exchanges. The Exchange
believes this proposal may lead to an increase in Exchange volume and
should allow the Exchange to better compete against other markets that
already offer an all-or-none electronic solicitation mechanism for
larger-sized orders. The Exchange believes that its proposal would
allow the Exchange to better compete for solicited transactions, while
providing an opportunity for price improvement on the larger-sized
orders. In addition, the proposed functionality should promote and
foster competition and provide more options contracts with the
opportunity for price improvement, which should benefit market
participants.
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 Exchange is proposing
the functionality as an optional market enhancement that, if utilized,
should increase competition for ATP Holders seeking to execute larger-
sized orders in an electronic auction mechanism. The Exchange notes
that other options exchanges offer electronic auction mechanisms for
larger-sized orders on an AON basis. While the Exchange has not
conducted a comparison of the proposed functionality to the mechanisms
that are available on other exchanges, the Exchange nonetheless
believes the
[[Page 55566]]
proposed functionality would provide ATP Holders with a greater choice
of exchanges from which to execute such orders. The proposal is
structured to offer the same enhancement to all market participants and
would not impose an intra-market competitive burden on any participant.
The price improvement functionality for the AON functionality for both
Single-Leg and CUBE Auctions are designed to promote competition for
ATP Holders to compete amongst each other by responding with not only
their best price, but also the full size for a particular auction.
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 that the
proposed rule change will relieve any burden on, or otherwise promote,
competition. The Exchange believes this proposed rule change is
necessary to permit fair competition among the options exchanges and to
establish more uniform price improvement auction rules on the various
options exchanges. The proposed functionality may lead to an increase
in Exchange volume and should allow the Exchange to better compete
against other markets that already offer similar price improvement
mechanisms for larger-sized orders. The Exchange anticipates that this
proposal will create new opportunities for the Exchange to attract new
business and compete on equal footing with those options exchanges that
offer auction AON functionality for larger-sized orders and for this
reason the proposal does not create an undue burden on intermarket
competition. By contrast, not having the proposed functionality places
the Exchange at a competitive disadvantage vis-[agrave]-vis other
exchanges that offer similar price improvement mechanisms for larger-
sized orders.
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-2020-64 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-2020-64. 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-2020-64, and should be
submitted on or before September 29, 2020.
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\35\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19714 Filed 9-4-20; 8:45 am]
BILLING CODE 8011-01-P
