Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend NYSE Arca Rule 6.86-O To Eliminate the Use of Dark Series on the Exchange, 25913-25915 [2021-09888]
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Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) 8 of the Act and Rule
19b–4(f)(6) thereunder.9 Because the
foregoing proposed rule change does
not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act and
subparagraph (f)(6) of Rule 19b–4
thereunder.10
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2021–019 on the subject line.
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–BX–2021–019. 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–BX–2021–019, and should
be submitted on or before June 1, 2021.
[Release No. 34–91780; File No. SR–
NYSEArca-2021–09]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–09882 Filed 5–10–21; 8:45 am]
BILLING CODE 8011–01–P
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
8 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
10 In addition, Rule 19b–4(f)(6)(iii) requires the
Exchange to give the Commission written notice of
its intent to file the proposed rule change at least
five business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
9 17
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Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
a Proposed Rule Change, as Modified
by Amendment No. 1, To Amend NYSE
Arca Rule 6.86–O To Eliminate the Use
of Dark Series on the Exchange
May 5, 2021.
I. Introduction
On January 26, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) 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 NYSE Arca Rule 6.86–
O to eliminate the use of ‘‘dark’’ series
on the Exchange. The proposed rule
change was published for comment in
the Federal Register on February 5,
2021.3 On March 18, 2021, 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 approve or
disapprove the proposed rule change.5
On April 27, 2021, the Exchange filed
Amendment No. 1 to the proposed rule
change.6 The Commission received no
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91038
(February 1, 2021), 86 FR 8416 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 91354,
86 FR 15764 (March 24, 2021). The Commission
designated May 6, 2021, as the date by which it
should approve, disapprove, or institute
proceedings to determine whether to approve or
disapprove the proposed rule change.
6 In Amendment No. 1, the Exchange provided
data that showed that during the eighteen (18)
trading days between March 1, 2021 and March 24,
2021, quotes in dark series accounted for 2.43% of
NYSE Arca quotes and 1.99% of NYSE American,
LLC (‘‘NYSE American’’) quotes, and quotes in dark
series averaged 0.174% on NYSE Arca and 0.190%
on NYSE American when compared to the total
OPRA disseminated quotes during the same period.
The Exchange also stated that on March 4, 2021 and
March 5, 2021, OPRA processed the most messages
in its history and provided data that shows that on
March 4th, quotes in dark series from NYSE Arca
and NYSE American combined for 0.5095%
compared to OPRA message traffic. On March 5th,
quotes in dark series from NYSE Arca and NYSE
American combined for 0.2562% when compared
to OPRA quote volume. The Exchange concluded
that eliminating the suppression of quotes in dark
series would result in a de minimis increase in
quotes sent by NYSE Arca and NYSE American to
OPRA and have essentially no impact on messaging
at an industry level. Because Amendment No. 1 to
the proposed rule change does not materially alter
2 17
CFR 200.30–3(a)(12).
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25913
Continued
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25914
Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
comment letters on the proposal. This
order approves the proposed rule
change, as modified by Amendment No.
1.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
Currently, NYSE Arca Rule 6.86–O
(‘‘Firm Quotes’’) requires the Exchange
to collect, process, and make available
to quotation vendors the best bid and
best offer for each option series that is
a reported security unless the series is
subject to an approved quote mitigation
plan.7 Pursuant to the quote mitigation
plan set forth in Commentary .03 to
NYSE Arca Rule 6.86–O, the Exchange
only disseminates quotes in ‘‘active’’
series.8 A series is considered active if
the series: (i) Has traded on any options
exchange in the previous 14 calendar
days; (ii) is solely listed on the
Exchange; (iii) has been trading ten days
or less; or (iv) is a series in which the
Exchange has an order.9 In addition, a
series may be considered active on an
intraday basis if: (i) The series trades at
any options exchange; (ii) the Exchange
receives an order in the series; or (iii)
the Exchange receives a request for
quote from a customer in that series.10
Any options series that does not meet
the definition of an active series is
deemed be an inactive or ‘‘dark’’ series.
Consequently, under the Exchange’s
current rules, although the Exchange
accepts quotes from OTP Holders in all
series, the only quote messages the
Exchange disseminates to the Options
Price Reporting Authority (‘‘OPRA’’) are
quotes for active series.11 The Exchange
proposes to delete Commentary .03 to
Rule 6.86–O. Therefore, the proposed
rule change would eliminate the
distinction between active and dark
the substance of the proposed rule change,
Amendment No. 1 is not subject to notice and
comment. Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-nysearca-2021-09/
srnysearca202109.htm.
7 See NYSE Arca Rule 6.86–O(b)(1).
8 The quote mitigation plan set forth in
Commentary .03 to NYSE Arca Rule 6.86 was
adopted in 2006 in connection with the Penny Pilot
Program, a program which was subsequently
approved on a permanent basis in 2020. See Notice,
supra note 3, at 8416.
9 See Commentary, .03 to NYSE Arca Rule
6.86–O.
10 See Commentary .03 to NYSE Arca Rule
6.86–O.
11 See Notice, supra note 3, at 8416. See also
Amendment No. 1, supra note 6 (providing data to
support the Exchange’s conclusion that eliminating
the suppression of quotes in dark series would
result in a de minimis increase in quotes sent by
NYSE Arca and NYSE American to OPRA and
would have essentially no impact on messaging at
an industry level).
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17:13 May 10, 2021
Jkt 253001
series, and thus require quotes in all
series to be disseminated to OPRA.12
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change, as modified by
Amendment No.1, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.13 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Section 6(b)(5) of the Act,14 which
requires that the rules of an exchange be
designed, among other things, 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 regulating and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
In support of its proposal, the
Exchange states the proposed rule
change would increase transparency,
enhance price discovery, and alleviate
potential confusion among market
participants regarding what quotes are
being published in the disseminated
quote feed and what quotes are being
suppressed.15 According to the
Exchange, discontinuing the use of the
quote mitigation plan set forth in
Commentary .03 to NYSE Arca Rule
6.86–O would result in all Market
Maker quotes (including those currently
being suppressed because they are
considered inactive) being displayed
and reflected in the market, benefitting
market participants by providing notice
of such liquidity and removing the
element of potential confusion.16
Further, the Exchange states the
proposed rule change would not change
the amount of capacity needed at OPRA
to accommodate the inclusion of quotes
in dark series because the Exchange
already includes such quotes in the
Exchange’s current capacity planning
requests to OPRA.17 According to the
12 See
Notice, supra note 3, at 8416.
approving this proposed rule change, as
modified by Amendment No.1, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(5).
15 See Notice, supra note 3, at 8417 (stating that
‘‘over the years, certain market participants have
expressed confusion regarding what quotes are
being published and which are being suppressed’’).
16 See Notice, supra note 3, at 8417.
17 See Notice, supra note 3, at 8416–17. The
Exchange represents that it has always factored the
13 In
PO 00000
Frm 00078
Fmt 4703
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Exchange, the proposal would not
impact market participants or
downstream users that consume
Exchange or OPRA data because the
quote capacity information OPRA
currently publishes already reflects
quotes in dark series because they are
part of the Exchange’s current capacity
request.18 Thus, according to the
Exchange, market participants
(including data vendors and
subscribers) currently have the
opportunity to prepare for and make
necessary accommodations for
anticipated quote traffic (including
quotes in dark series).19 Further, the
Exchange anticipates that the proposed
increase in quote message traffic due to
the dissemination of quotes in inactive
series is likely to be minimal and
therefore unlikely to impact the flow of
message traffic and/or harm
downstream consumers of OPRA data.20
In support of this assertion, the
Exchange states that on the two trading
days that OPRA processed the most
messages in its history (March 4, 2021
and March 5, 2021), quotes in dark
series from NYSE Arca and NYSE
American combined were only 0.5095%
and 0.2562%, respectively, compared to
OPRA message traffic.21 Finally, the
Exchange states its additional existing
quote mitigation strategies are sufficient
to continue to mitigate quote traffic.22
The Commission believes that
eliminating the exclusion of inactive or
dark series from the requirements of
NYSE Arca Rule 6.86–O should increase
transparency and may enhance
opportunities for price discovery.
Publishing all quotes (not just those in
active series) in the disseminated quote
feed may benefit market participants
because it will provide notice of
additional liquidity. Further, because
the Exchange currently includes Market
Maker quotes in inactive series in its
capacity planning request to OPRA 23
and because publication of dark quotes
from both the Exchange and NYSE
American combined would result in a
percentage increase in OPRA
disseminated quotes that is de minimis
total quote traffic it receives from Market Makers,
including quotes in dark series, when making its
capacity requests to OPRA. Specifically, the
Exchange ‘‘presumes that all series will be active
and therefore requests capacity to accommodate
sending quotes in all series to OPRA.’’ Id. at 8416.
18 See Notice, supra note 3, at 8417.
19 See id.
20 See id. at 8418. See also Amendment No.1,
supra note 6.
21 See Amendment No.1, supra note 6.
22 See Notice, supra note 3, at 8417–18
(discussing three quote mitigation strategies the
exchange currently employs to reduce the potential
for excessive quoting and to reduce quote traffic).
23 See id. at 8418.
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Federal Register / Vol. 86, No. 89 / Tuesday, May 11, 2021 / Notices
according to the Exchange’s data,24 the
Commission believes that dissemination
of these quotes as part of the Exchange’s
quote feed to OPRA is not likely to
negatively impact systems capacity. In
addition, the Exchange has existing
additional quote mitigation strategies
that also serve to reduce the potential
for excessive quoting.25
Accordingly, for the reasons set forth
above, the Commission finds that the
proposed rule change, as modified by
Amendment No.1, is consistent with
Section 6(b)(5) of the Act 26 and the
rules and regulations thereunder
applicable to a national securities
exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,27 that the
proposed rule change (SR–NYSEArca2021–09), as modified by Amendment
No. 1, hereby is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to extend
the operation of its Flexible Exchange
Options (‘‘FLEX Options’’) pilot
program regarding permissible exercise
settlement values for FLEX Index
Options. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe Exchange, Inc.
[FR Doc. 2021–09888 Filed 5–10–21; 8:45 am]
*
BILLING CODE 8011–01–P
Rule 4.21. Series of FLEX Options
(a) No change.
(b) Terms. When submitting a FLEX Order
for a FLEX Option series to the System, the
submitting FLEX Trader must include one of
each of the following terms in the FLEX
Order (all other terms of a FLEX Option
series are the same as those that apply to
non-FLEX Options), which terms constitute
the FLEX Option series:
(1)–(4) No change.
(5) settlement type:
(A) No change.
(B) FLEX Index Options. FLEX Index
Options are settled in U.S. dollars, and may
be:
(i) No change.
(ii) p.m.-settled (with exercise settlement
value determined by reference to the reported
level of the index derived from the reported
closing prices of the component securities),
except for a FLEX Index Option that expires
on any business day that falls on or within
two business days of a third Friday-of-themonth expiration day for a non-FLEX Option
(other than a QIX option) may only be a.m.settled; however, for a pilot period ending
the earlier of [May 3]November 1, 2021 or the
date on which the pilot program is approved
on a permanent basis, a FLEX Index Option
with an expiration date on the third-Friday
of the month may be p.m.-settled;
(iii)–(iv) No change.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91782; File No. SR–CBOE–
2021–031]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Extend the
Operation of Its Flexible Exchange
Options (‘‘FLEX Options’’) Pilot
Program Regarding Permissible
Exercise Settlement Values for FLEX
Index Options
May 5, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 22,
2021, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
24 See Amendment No.1, supra note 6. In
addition, the Exchange states that there is sufficient
capacity at OPRA to accommodate any additional
quote traffic that will result from the elimination of
dark series. See Notice, supra note 3, at 8416–17.
The Exchange further notes that it does not believe
its proposal will impact any other exchange’s
capacity at OPRA. See id. at 8416 n.9.
25 See Notice, supra note 3, at 8416–17.
26 15 U.S.C. 78f(b)(5).
27 15 U.S.C. 78s(b)(2).
28 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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17:13 May 10, 2021
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*
*
*
*
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
3 15
4 17
PO 00000
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
Frm 00079
Fmt 4703
Sfmt 4703
25915
Home.aspx), at the Exchange’s Office of
the Secretary, 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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On January 28, 2010, the Securities
and Exchange Commission (the
‘‘Commission’’) approved a Cboe
Options rule change that, among other
things, established a pilot program
regarding permissible exercise
settlement values for FLEX Index
Options.5 The Exchange has extended
the pilot period numerous times, which
is currently set to expire on the earlier
of May 3, 2021 or the date on which the
pilot program is approved on a
permanent basis.6 The purpose of this
5 Securities Exchange Act Release No. 61439
(January 28, 2010), 75 FR 5831 (February 4, 2010)
(SR–CBOE–2009–087) (‘‘Approval Order’’). The
initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010.
See Securities Exchange Act Release No. 61676
(March 9, 2010), 75 FR 13191 (March 18, 2010) (SR–
CBOE–2010–026).
6 See Securities Exchange Act Release Nos. 64110
(March 23, 2011), 76 FR 17463 (March 29, 2011)
(SR–CBOE–2011–024); 66701 (March 30, 2012), 77
FR 20673 (April 5, 2012) (SR–CBOE–2012–027);
68145 (November 2, 2012), 77 FR 67044 (November
8, 2012) (SR–CBOE–2012–102); 70752 (October 24,
2013), 78 FR 65023 (October 30, 2013) (SR–CBOE–
2013–099); 73460 (October 29, 2014), 79 FR 65464
(November 4, 2014) (SR–CBOE–2014–080); 77742
(April 29, 2016), 81 FR 26857 (May 4, 2016) (SR–
CBOE–2016–032); 80443 (April 12, 2017), 82 FR
18331 (April 18, 2017) (SR–CBOE–2017–032);
83175 (May 4, 2018), 83 FR 21808 (May 10, 2018)
(SR–CBOE–2018–037); 84537 (November 5, 2018),
83 FR 56113 (November 9, 2018) (SR–CBOE–2018–
071); 85707 (April 23, 2019), 84 FR 18100 (April 29,
2019) (SR–CBOE–2019–021); 87515 (November 13,
2020), 84 FR 63945 (November 19, 2019) (SR–
CBOE–2019–108); 88782 (April 30, 2020), 85 FR
27004 (May 6, 2020) (SR–CBOE–2020–039); and
90279 (October 28, 2020) 85 FR 69667 (November
3, 2020) (SR–CBOE–2020–103) (extending the pilot
program through the earlier of May 3, 2021 or the
date on which the pilot program is approved on a
permanent basis). At the same time the permissible
exercise settlement values pilot was established for
Continued
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]]>Agencies
[Federal Register Volume 86, Number 89 (Tuesday, May 11, 2021)]
[Notices]
[Pages 25913-25915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09888]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91780; File No. SR-NYSEArca-2021-09]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend NYSE Arca Rule 6.86-O To Eliminate the Use of Dark Series on the
Exchange
May 5, 2021.
I. Introduction
On January 26, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') 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 NYSE Arca Rule 6.86-O to eliminate the
use of ``dark'' series on the Exchange. The proposed rule change was
published for comment in the Federal Register on February 5, 2021.\3\
On March 18, 2021, 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 approve or disapprove the proposed
rule change.\5\ On April 27, 2021, the Exchange filed Amendment No. 1
to the proposed rule change.\6\ The Commission received no
[[Page 25914]]
comment letters on the proposal. This order approves the proposed rule
change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 91038 (February 1,
2021), 86 FR 8416 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 91354, 86 FR 15764
(March 24, 2021). The Commission designated May 6, 2021, as the date
by which it should approve, disapprove, or institute proceedings to
determine whether to approve or disapprove the proposed rule change.
\6\ In Amendment No. 1, the Exchange provided data that showed
that during the eighteen (18) trading days between March 1, 2021 and
March 24, 2021, quotes in dark series accounted for 2.43% of NYSE
Arca quotes and 1.99% of NYSE American, LLC (``NYSE American'')
quotes, and quotes in dark series averaged 0.174% on NYSE Arca and
0.190% on NYSE American when compared to the total OPRA disseminated
quotes during the same period. The Exchange also stated that on
March 4, 2021 and March 5, 2021, OPRA processed the most messages in
its history and provided data that shows that on March 4th, quotes
in dark series from NYSE Arca and NYSE American combined for 0.5095%
compared to OPRA message traffic. On March 5th, quotes in dark
series from NYSE Arca and NYSE American combined for 0.2562% when
compared to OPRA quote volume. The Exchange concluded that
eliminating the suppression of quotes in dark series would result in
a de minimis increase in quotes sent by NYSE Arca and NYSE American
to OPRA and have essentially no impact on messaging at an industry
level. Because Amendment No. 1 to the proposed rule change does not
materially alter the substance of the proposed rule change,
Amendment No. 1 is not subject to notice and comment. Amendment No.
1 is available at: https://www.sec.gov/comments/sr-nysearca-2021-09/srnysearca202109.htm.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
Currently, NYSE Arca Rule 6.86-O (``Firm Quotes'') requires the
Exchange to collect, process, and make available to quotation vendors
the best bid and best offer for each option series that is a reported
security unless the series is subject to an approved quote mitigation
plan.\7\ Pursuant to the quote mitigation plan set forth in Commentary
.03 to NYSE Arca Rule 6.86-O, the Exchange only disseminates quotes in
``active'' series.\8\ A series is considered active if the series: (i)
Has traded on any options exchange in the previous 14 calendar days;
(ii) is solely listed on the Exchange; (iii) has been trading ten days
or less; or (iv) is a series in which the Exchange has an order.\9\ In
addition, a series may be considered active on an intraday basis if:
(i) The series trades at any options exchange; (ii) the Exchange
receives an order in the series; or (iii) the Exchange receives a
request for quote from a customer in that series.\10\ Any options
series that does not meet the definition of an active series is deemed
be an inactive or ``dark'' series. Consequently, under the Exchange's
current rules, although the Exchange accepts quotes from OTP Holders in
all series, the only quote messages the Exchange disseminates to the
Options Price Reporting Authority (``OPRA'') are quotes for active
series.\11\ The Exchange proposes to delete Commentary .03 to Rule
6.86-O. Therefore, the proposed rule change would eliminate the
distinction between active and dark series, and thus require quotes in
all series to be disseminated to OPRA.\12\
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\7\ See NYSE Arca Rule 6.86-O(b)(1).
\8\ The quote mitigation plan set forth in Commentary .03 to
NYSE Arca Rule 6.86 was adopted in 2006 in connection with the Penny
Pilot Program, a program which was subsequently approved on a
permanent basis in 2020. See Notice, supra note 3, at 8416.
\9\ See Commentary, .03 to NYSE Arca Rule 6.86-O.
\10\ See Commentary .03 to NYSE Arca Rule 6.86-O.
\11\ See Notice, supra note 3, at 8416. See also Amendment No.
1, supra note 6 (providing data to support the Exchange's conclusion
that eliminating the suppression of quotes in dark series would
result in a de minimis increase in quotes sent by NYSE Arca and NYSE
American to OPRA and would have essentially no impact on messaging
at an industry level).
\12\ See Notice, supra note 3, at 8416.
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III. Discussion and Commission Findings
The Commission finds that the proposed rule change, as modified by
Amendment No.1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\13\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
6(b)(5) of the Act,\14\ which requires that the rules of an exchange be
designed, among other things, 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
regulating and facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\13\ In approving this proposed rule change, as modified by
Amendment No.1, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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In support of its proposal, the Exchange states the proposed rule
change would increase transparency, enhance price discovery, and
alleviate potential confusion among market participants regarding what
quotes are being published in the disseminated quote feed and what
quotes are being suppressed.\15\ According to the Exchange,
discontinuing the use of the quote mitigation plan set forth in
Commentary .03 to NYSE Arca Rule 6.86-O would result in all Market
Maker quotes (including those currently being suppressed because they
are considered inactive) being displayed and reflected in the market,
benefitting market participants by providing notice of such liquidity
and removing the element of potential confusion.\16\
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\15\ See Notice, supra note 3, at 8417 (stating that ``over the
years, certain market participants have expressed confusion
regarding what quotes are being published and which are being
suppressed'').
\16\ See Notice, supra note 3, at 8417.
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Further, the Exchange states the proposed rule change would not
change the amount of capacity needed at OPRA to accommodate the
inclusion of quotes in dark series because the Exchange already
includes such quotes in the Exchange's current capacity planning
requests to OPRA.\17\ According to the Exchange, the proposal would not
impact market participants or downstream users that consume Exchange or
OPRA data because the quote capacity information OPRA currently
publishes already reflects quotes in dark series because they are part
of the Exchange's current capacity request.\18\ Thus, according to the
Exchange, market participants (including data vendors and subscribers)
currently have the opportunity to prepare for and make necessary
accommodations for anticipated quote traffic (including quotes in dark
series).\19\ Further, the Exchange anticipates that the proposed
increase in quote message traffic due to the dissemination of quotes in
inactive series is likely to be minimal and therefore unlikely to
impact the flow of message traffic and/or harm downstream consumers of
OPRA data.\20\ In support of this assertion, the Exchange states that
on the two trading days that OPRA processed the most messages in its
history (March 4, 2021 and March 5, 2021), quotes in dark series from
NYSE Arca and NYSE American combined were only 0.5095% and 0.2562%,
respectively, compared to OPRA message traffic.\21\ Finally, the
Exchange states its additional existing quote mitigation strategies are
sufficient to continue to mitigate quote traffic.\22\
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\17\ See Notice, supra note 3, at 8416-17. The Exchange
represents that it has always factored the total quote traffic it
receives from Market Makers, including quotes in dark series, when
making its capacity requests to OPRA. Specifically, the Exchange
``presumes that all series will be active and therefore requests
capacity to accommodate sending quotes in all series to OPRA.'' Id.
at 8416.
\18\ See Notice, supra note 3, at 8417.
\19\ See id.
\20\ See id. at 8418. See also Amendment No.1, supra note 6.
\21\ See Amendment No.1, supra note 6.
\22\ See Notice, supra note 3, at 8417-18 (discussing three
quote mitigation strategies the exchange currently employs to reduce
the potential for excessive quoting and to reduce quote traffic).
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The Commission believes that eliminating the exclusion of inactive
or dark series from the requirements of NYSE Arca Rule 6.86-O should
increase transparency and may enhance opportunities for price
discovery. Publishing all quotes (not just those in active series) in
the disseminated quote feed may benefit market participants because it
will provide notice of additional liquidity. Further, because the
Exchange currently includes Market Maker quotes in inactive series in
its capacity planning request to OPRA \23\ and because publication of
dark quotes from both the Exchange and NYSE American combined would
result in a percentage increase in OPRA disseminated quotes that is de
minimis
[[Page 25915]]
according to the Exchange's data,\24\ the Commission believes that
dissemination of these quotes as part of the Exchange's quote feed to
OPRA is not likely to negatively impact systems capacity. In addition,
the Exchange has existing additional quote mitigation strategies that
also serve to reduce the potential for excessive quoting.\25\
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\23\ See id. at 8418.
\24\ See Amendment No.1, supra note 6. In addition, the Exchange
states that there is sufficient capacity at OPRA to accommodate any
additional quote traffic that will result from the elimination of
dark series. See Notice, supra note 3, at 8416-17. The Exchange
further notes that it does not believe its proposal will impact any
other exchange's capacity at OPRA. See id. at 8416 n.9.
\25\ See Notice, supra note 3, at 8416-17.
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Accordingly, for the reasons set forth above, the Commission finds
that the proposed rule change, as modified by Amendment No.1, is
consistent with Section 6(b)(5) of the Act \26\ and the rules and
regulations thereunder applicable to a national securities exchange.
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\26\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the proposed rule change (SR-NYSEArca-2021-09), as
modified by Amendment No. 1, hereby is approved.
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\27\ 15 U.S.C. 78s(b)(2).
\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09888 Filed 5-10-21; 8:45 am]
BILLING CODE 8011-01-P
