Self-Regulatory Organizations; NYSE American, LLC.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New Rules 997NY, 997.1NY, 997.2NY and 997.3NY and Delete Paragraph (d) to Rule 957NY, 54720-54727 [2022-19226]
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Federal Register / Vol. 87, No. 172 / Wednesday, September 7, 2022 / Notices
subcontractors, licensee employees,
employees of other government
agencies, and other individuals who are
not NRC employees who require an NRC
access authorization.
III. Specific Requests for Comments
The NRC is seeking comments that
address the following questions:
1. Is the proposed collection of
information necessary for the NRC to
properly perform its functions? Does the
information have practical utility?
2. Is the estimate of the burden of the
information collection accurate?
3. Is there a way to enhance the
quality, utility, and clarity of the
information to be collected?
4. How can the burden of the
information collection on respondents
be minimized, including the use of
automated collection techniques or
other forms of information technology?
Dated: September 1, 2022.
For the Nuclear Regulatory Commission.
David C. Cullison,
NRC Clearance Officer, Office of the Chief
Information Officer.
[FR Doc. 2022–19258 Filed 9–6–22; 8:45 am]
BILLING CODE 7590–01–P
Self-Regulatory Organizations; NYSE
American, LLC.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adopt New Rules
997NY, 997.1NY, 997.2NY and 997.3NY
and Delete Paragraph (d) to Rule
957NY
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August 31, 2022.
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
23, 2022, NYSE American, LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II, 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.
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1. Purpose
[Release No. 34–95646; File No. SR–
NYSEAMER–2022–36]
2 15
The Exchange proposes to adopt new
Rules 997NY, 997.1NY, 997.2NY and
997.3NY regarding certain position
transfers, including off-floor transfers.
The Exchange also proposes to delete
paragraph (d) to Rule 957NY (Reporting
Duties). The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1 15
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of this rule change is to
adopt new Rules 997NY, 997.1NY,
997.2NY, and 997.3NY regarding certain
position transfers, including off-floor
transfers as described herein. The
proposed rules are substantively
identical to rules on other options
exchanges and would align the
Exchange’s rules with that of its
competitors.4 This proposal would
benefit investors by reducing the
administrative burden of determining
whether their transfers comply with
multiple sets of options exchange rules.
In addition, the Exchange proposes to
delete paragraph (d) to Rule 957NY
(Reporting Duties) for reason set forth
below.
Proposed Rule 997NY: Transactions Off
the Exchange
Rules 19c–1 and 19c–3 under the
Securities Exchange Act of 1934 (the
‘‘Act’’) describe rule provisions that
4 See,
e.g., Cboe Options Exchange, Inc. (‘‘Cboe’’)
Rule 5.12 (Transactions Off the Exchange); Cboe
Rule 6.7 (Off-Floor Transfer of Positions); Cboe Rule
6.8 (Off-Floor RWA Transfers); and NYSE Arca Rule
6.78A–O (In-Kind Exchange of Options Positions
and ETF Shares and UIT Units) and Cboe Rule 6.9
(same).
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each national securities change must
include in its Rules regarding the ability
of members to engage in transactions off
an exchange. While the Exchange’s
rules, stated policies, and practices are
consistent with these provisions of the
Act, the Exchange Rules do not
currently include these provisions.
Therefore, the proposed rule change
adopts these provisions in new Rule
997NY, ‘‘Transactions Off the
Exchange,’’ in accordance with Rules
19c–1 and 19c–3 under the Act.
Proposed Rule 997NY is also
substantively identical to the off-floor
transactions rule of another options
exchange and thus would align
Exchange rules with those of its
competitors.5
Proposed Rule 997NY(a) provides that
except as otherwise provided by this
proposed Rule, no ATP Holder 6 acting
as principal or agent may effect
transactions in any class of option
contracts listed on the Exchange for a
premium in excess of $1.00 other than
(1) on the Exchange, (2) on another
exchange on which such option
contracts are listed and traded, or (3) in
the over-the-counter market if the stock
underlying the option class, or in the
case of an index option, if all the
component stocks of an index
underlying the option class, was a
National Market System security under
SEC Rule 600 at the time the Exchange
commenced trading in that option class,
unless that ATP Holder has first
attempted to execute the transaction on
the floor of the Exchange and has
reasonably ascertained that it may be
executed at a better price off the floor.
Proposed Rule 997NY(b) provides
that, notwithstanding the provisions of
paragraph (a) of this proposed Rule, an
ATP Holder acting as agent may execute
a customer’s order off the Exchange
floor with any other person (except
when such ATP Holder also is acting as
agent for such other person in such
transaction) for the purchase or sale of
an option contract listed on the
Exchange.
Proposed Rule 997NY(c) provides that
for each transaction in which an ATP
Holder acting as principal or agent
executes any purchase or sale of an
option contract listed on the Exchange
other than on the Exchange or on
another exchange on which such option
contracts are listed and traded, a record
5 See Cboe Rule 5.12 (Transactions Off the
Exchange).
6 An ‘‘ATP Holder’’ is a natural person, sole
proprietorship, partnership, corporation, limited
liability company or other organization, in good
standing, that has been issued an ATP [American
Trading Permit] by the Exchange. See Rule
900.2NY(5).
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of such transaction shall be maintained
by such ATP Holder and shall be
available for inspection by the Exchange
for a period of one year. Such record
shall include the circumstances under
which the transaction was executed in
conformity with this Rule.
Proposed Rule 997NY(d) provides
that no rule, stated policy, or practice of
the Exchange may prohibit or condition,
or be construed to prohibit or condition,
or otherwise limit, directly or indirectly,
the ability of any ATP Holder acting as
agent to effect any transaction otherwise
than on the Exchange with another
person (except when such ATP Holder
also is acting as agent for such other
person in such transaction) in any
equity security listed on the Exchange
or to which unlisted trading privileges
on the Exchange have been extended.
Proposed Rule 997NY(e) provides that
no rule, stated policy, or practice of the
Exchange may prohibit or condition, or
be construed to prohibit, condition, or
otherwise limit, directly or indirectly,
the ability of any ATP Holder to effect
any transaction otherwise than on the
Exchange in any reported security listed
and registered on the Exchange or as to
which unlisted trading privileges on the
Exchange have been extended (other
than a put option or call option issued
by Options Clearing Corporates or OCC)
which is not a covered security.7
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Proposed Rule 997.1NY: Off-Floor
Transfer of Positions
The Exchange proposes to adopt new
Rule 997.1NY titled ‘‘Off-Floor Transfer
of Positions,’’ to provide a process by
which ATP Holders may transfer option
positions between accounts,
individuals, or entities in limited
circumstances without first exposing the
order on the Exchange. This rule would
also permit off-floor transfers upon the
occurrence of significant, non-recurring
events. Proposed Rule 997.1NY is
substantively identical to the rules of
other option exchanges regarding
permissible off-floor transfers of options
positions and would align Exchange
rules with those of its competitors.8
7 The ‘‘Options Clearing Corporation’’ or ‘‘OCC’’
refers to The Options Clearing Corporation, a
subsidiary of the Participating Exchanges. See Rule
900.2NY(55). The term ‘‘Participating Exchanges’’
refers to any national securities exchange that has
qualified for participation in the OCC pursuant to
the provisions of the Rules of the Options Clearing
Corporation. See Rule 900.2NY(61).
8 See Cboe Rule 6.7 (Off-Floor Transfer of
Positions). See also Nasdaq ISE LLC (‘‘ISE’’)
Options 6, Section 5 (Transfer of Positions); Miami
Options Exchange (‘‘MIAX’’) Rule 1326 (Transfer of
Positions). As noted below, regarding the
‘‘presidential’’ exemption, Cboe Rule 6.7(f) does not
explicitly include the Chief Executive Officer,
which reference is included in ISE Options 6,
Section 5(f); MIAX Rule 1326(f).
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Proposed Rule 997.1NY(a) provides
that, notwithstanding proposed Rule
997NY (described above), existing
positions in options listed on the
Exchange of an ATP Holder, or non-ATP
Holder, that are to be transferred on,
from, or to the books of a Clearing
Member 9 may be transferred off the
Exchange (an ‘‘off-floor transfer’’) if the
off-floor transfer involves one or more of
the following events:
• an adjustment or transfer in
connection with the correction of a bona
fide error in the recording of a
transaction or the transferring of a
position to another account, provided
that the original trade documentation
confirms the error;
• the transfer of positions from one
account to another account where no
change in ownership is involved (i.e.,
accounts of the same Person (as defined
in Rule 15)),10 provided the accounts are
not in separate aggregation units or
otherwise subject to information barrier
or account segregation requirements;
• the consolidation of accounts where
no change in ownership is involved;
• a merger, acquisition,
consolidation, or similar non-recurring
transaction for a Person;
• the dissolution of a joint account in
which the remaining ATP Holder
assumes the positions of the joint
account;
• the dissolution of a corporation or
partnership in which a former nominee
of the corporation or partnership
assumes the positions;
• positions transferred as part of an
ATP Holder’s capital contribution to a
new joint account, partnership, or
corporation;
• the donation of positions to a notfor-profit corporation;
• the transfer of positions to a minor
under the Uniform Gifts to Minors Act;
or
• the transfer of positions through
operation of law from death,
bankruptcy, or otherwise.
The proposed rule change makes clear
that the transferred positions must be
on, from, or to the books of a Clearing
Member. The proposed rule change
states that existing positions of an ATP
Holder or a non-ATP Holder may be
subject to an off-floor transfer, except
under specified circumstances in which
9 A ‘‘Clearing Member’’ refers to an ATP Holder
that has been admitted to membership in the OCC
pursuant to the provisions of the Rules of the OCC.
See Rule 900.2NY(11).
10 A ‘‘Person’’ refers to a natural person,
corporation, partnership, association, joint stock
company, trust, fund, or any organized group of
persons whether incorporated or not. See Rule 15.
The proposed transfers may only occur between the
same individual or legal entity.
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54721
a transfer may only be effected for
positions of an ATP Holder.11 The
Exchange notes off-floor transfers of
positions in Exchange listed options
may also be subject to applicable laws,
rules, and regulations, including rules of
other self-regulatory organizations.12
Except as explicitly provided in
proposed Rule 997.1NY, the proposed
rule change is not intended to exempt
off-floor position transfers from any
other applicable rules or regulations,
and proposed paragraph (h) to Rule
997.1NY makes this clear.
Proposed Rule 997.1NY(b) provides
that no position may net against another
position (‘‘netting’’), and no position
transfer may result in preferential
margin or haircut treatment, unless
otherwise permitted by proposed
paragraph (f) (described below). Netting
occurs when long positions and short
positions in the same series ‘‘offset’’
against each other, leaving no position,
or a reduced position. For example, if an
ATP Holder wanted to transfer 100 long
calls to another account that contained
short calls of the same options series as
well as other positions, even if the offfloor transfer is permitted pursuant to
one of the permissible events listed in
proposed Rule 997.1NY(a)(1)–(10), the
ATP Holder could not transfer the
offsetting series, as they would net
against each other and close the
positions.
Proposed Rule 997.1NY(c) provides
that the transfer price, to the extent it is
consistent with applicable laws, rules,
and regulations, including rules of other
self-regulatory organizations, and tax
and accounting rules and regulations, at
which an off-floor transfer may be
effected is either: (1) the original trade
prices of the positions that appear on
the books of the trading Clearing
Member, in which case the records of
the off-floor transfer must indicate the
original trade dates for the positions;
provided, transfers to correct bona fide
errors pursuant to proposed
subparagraph (a)(1) must be transferred
at the correct original trade prices; (2)
mark-to-market prices of the positions at
the close of trading on the transfer date;
(3) mark-to-market prices of the
positions at the close of trading on the
trade date prior to the transfer date; 13 or
(4) the then-current market price of the
positions at the time the transfer is
effected. Proposed Rule 997.1NY(c)
provides market participants that effect
off-floor transfers with flexibility to
11 See
proposed Rule 997.1NY(a)(5) and (7).
proposed Rule 997.1NY(h).
13 For example, for a transfer that occurs on a
Tuesday, the transfer price may be based on the
closing market price on Monday.
12 See
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Federal Register / Vol. 87, No. 172 / Wednesday, September 7, 2022 / Notices
select a transfer price based on the
circumstances of the transfer and their
business. However, for corrections of
bona fide errors, because those transfers
are necessary to correct processing
errors that occurred at the time of the
transaction, those off-floor transfers
would occur at the original transaction
price, as the purpose of the transfer is
to create the originally intended result
of the transaction.
Proposed Rule 997.1NY(d) requires an
ATP Holder and its Clearing Member(s)
(to the extent the ATP Holder is not selfclearing) to submit to the Exchange, in
a manner determined by the Exchange,
written notice prior to effecting an offfloor transfer from or to the account(s)
of an ATP Holder(s).14 Per proposed
Rule 997.1NY(d)(1), the proposed notice
must indicate: the Exchange-listed
options positions to be transferred; the
nature of the transaction; the
enumerated provision(s) under
proposed Rule 997.1NY(a) pursuant to
which the positions are being
transferred; the name of the
counterparty(ies); the anticipated
transfer date; the method for
determining the transfer price; and any
other information requested by the
Exchange. The proposed notice is
designed to ensure that the Exchange is
made aware of all transfers so that the
Exchange can monitor and review such
transfers (including the records that
must be retained pursuant to proposed
Rule 997.1NY(e) (described below) to
determine whether they are effected in
accordance with the Exchange rules.
Additionally, the Exchange believes that
requiring notice from the ATP Holder(s)
and its Clearing Member(s) would
ensure that both parties are in
agreement with respect to the terms of
the transfer. In light of the notice
requirement contained in proposed Rule
997.1NY(d), the Exchange proposes to
make a conforming change by deleting
paragraph (d) to Rule 957NY, which
similarly requires ATP Holders to report
to the Exchange any off-floor
transactions, and to hold paragraph (d)
as Reserved.15
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14 This
notice provision applies only to transfers
involving an ATP Holder’s positions and not to
positions of non-ATP Holders, as the latter parties
are not subject to Exchange rules. In addition, no
notice would be required to effect transfers to
correct bona fide errors pursuant to proposed
subparagraph (a)(1) or transfers of positions from
one account to another where no change in
ownership is involved pursuant to proposed
paragraph (a)(2) of Rule 997.1NY.
15 See Rule 957.NY(d) (providing that ‘‘[f]or each
transaction in which an ATP Holder participates
off-board (off a participating Exchange) in any
option pertaining to an underlying security which
is currently approved for Exchange options
transactions, such ATP Holder shall report the
transaction to the Exchange in a form and manner
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Per proposed Rule 997.1NY(d)(2),
however, receipt of prior notice of an
off-floor transfer would not constitute a
determination by the Exchange that
such transfer was effected or reported in
conformity with the requirements of
proposed Rule 997.1NY. As such,
notwithstanding submission of written
notice to the Exchange, ATP Holder and
Clearing Members that effect off-floor
transfers that do not conform to the
requirements of the proposed Rule
would be subject to appropriate
disciplinary action in accordance with
the Exchange rules.
Similarly, proposed Rule 997.1NY(e)
requires that each party to an off-floor
transfer generate and retain records of
the information provided in the written
notice to the Exchange (pursuant to
proposed subparagraph (d)(1)), as well
as information regarding the actual
Exchange-listed options that are
ultimately transferred, the actual
transfer date, and the actual transfer
price (and the original trade dates, if
applicable), and any other information
the Exchange may request the ATP
Holder or Clearing Member to provide.
Proposed 997.1NY(f) provides
exemptions to the prohibition against
off-floor transfers, as approved by the
Exchange’s President or Chief Executive
Officer (or his or her designee(s)).16
Specifically, this provision is in
addition to the exemptions (to Rule
997NY) set forth in proposed Rule
997.1NY(a)(1)–(10). The Exchange
proposes that the Exchange President or
Chief Executive Officer (or his or her
designee(s)) may grant an exemption
from the requirement of this proposed
Rule, on his or her own motion or upon
application of the ATP Holder (with
respect to the ATP Holder’s positions)
or a Clearing Member (with respect to
positions carried and cleared by the
Clearing Members). The President, the
Chief Executive Officer, or his or her
designee(s), may permit an off-floor
transfer if necessary or appropriate for
the maintenance of a fair and orderly
market and the protection of investors
prescribed by the Exchange. (With the identity of
participants removed, such transaction may be
made public by the Exchange.)’’).
16 See ISE Options 6, Section 5(f); MIAX Rule
1326(f). The Exchange notes that, unlike the rules
of ISE and MIAX, which refer to ‘‘senior level
designees,’’ the Exchange proposes to instead
reference ‘‘designees,’’ which omits the potentially
ambiguous ‘‘senior’’ qualifier. The Exchange
believes this distinction does not alter the or
impede the authority granted in the proposed
provision and is consistent with other Exchange
rules that provide for delegated authority. See, e.g.,
Rule 975NY(k)(3)(A) (proving that the appeals panel
to review Obvious Errors or Catastrophic Errors be
comprised, in part of, the Exchange Chief
Regulatory Officer (‘‘CRO’’), or a designee of the
CRO).
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and is in the public interest, including
due to unusual or extraordinary
circumstances. For example, an
exemption may be granted if the market
value of the Person’s positions would be
compromised by having to comply with
the requirement to trade on the
Exchange pursuant to the normal
auction process or when, in the
judgment of the President, the Chief
Executive Officer, or his or her
designee(s), market conditions make
trading on the Exchange impractical.
The Exchange proposes to state that
the off-floor transfer procedure set forth
in Rule 997.1NY is intended to facilitate
non-routine, nonrecurring movements
of positions, except for transfers
between accounts of the same Person
pursuant to proposed subparagraph
(a)(2), and is not to be used repeatedly
or routinely in circumvention of the
normal auction market process.17
Lastly, proposed paragraph (h)
provides that the off-floor transfer
procedure set forth in proposed Rule
997.1NY is only applicable to positions
in options listed on the Exchange; that
off-floor transfers of positions in
Exchange-listed options may also be
subject to applicable laws, rules, and
regulations, including rules of other
self-regulatory organizations; and that
off-floor transfers of non-Exchange
listed options and other financial
instruments are not governed by this
proposed Rule 997.1NY.
Proposed Rule 997.2NY: Off-Floor RWA
Transfers
The Exchange proposes to adopt Rule
997.2NY titled ‘‘Off-Floor RWA
Transfers,’’ to facilitate the reduction of
risk-weighted assets (‘‘RWA’’)
attributable to open options positions.
This proposal is substantively identical
to rules on other options exchanges and
would align the Exchanges rules with
that of its competitors.18
SEC Rule 15c3–1 (Net Capital
Requirements for Brokers or Dealers)
(‘‘Net Capital Rules’’) requires registered
broker-dealers, unless otherwise
excepted, to maintain certain specified
minimum levels of capital.19 The Net
Capital Rules are designed to protect
securities customers, counterparties,
and creditors by requiring that brokerdealers have sufficient liquid resources
on hand, at all times, to meet their
financial obligations. Notably, hedged
positions, including offsetting futures
and options contract positions, result in
17 See
proposed Rule 997.1NY(g).
e.g., Cboe Rule 6.8 (Off-Floor RWA
Transfers); ISE Options 6, Section 6 (Off-Exchange
RWA Transfers).
19 17 CFR 240.15c3–1.
18 See,
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certain net capital requirement
reductions under the Net Capital
Rules.20
Subject to certain exceptions, Clearing
Members are subject to the Net Capital
Rules.21 However, a subset of Clearing
Members are subsidiaries of U.S. bank
holding companies, which, due to their
affiliations with their parent U.S.-bank
holding companies, must comply with
additional bank regulatory capital
requirements pursuant to rulemaking
required under the Dodd-Frank Wall
Street Reform and Consumer Protection
Act.22 Pursuant to this mandate, the
Board of Governors of the Federal
Reserve System, the Office of the
Comptroller of the Currency, and the
Federal Deposit Insurance Corporation
have approved a regulatory capital
framework for subsidiaries of U.S. bank
holding company clearing firms.23
Generally, these rules, among other
things, impose higher minimum capital
and higher asset risk weights than were
previously mandated for Clearing
Members that are subsidiaries of U.S.
bank holding companies under the Net
Capital Rules. Furthermore, the new
rules do not fully permit deductions for
hedged securities or offsetting options
positions.24 Rather, capital charges
under these standards are, in large part,
based on the aggregate notional value of
short positions regardless of offsets. As
a result, in general, Clearing Members
that are subsidiaries of U.S. bank
holding companies must hold
substantially more bank regulatory
capital than would otherwise be
required under the Net Capital Rules.
The Exchange is concerned with the
ability of Market Makers to provide
liquidity in their appointed classes. The
Exchange believes that permitting
market participants to efficiently
20 In addition, the Net Capital Rules permit
various offsets under which a percentage of an
option position’s gain at any one valuation point is
allowed to offset another position’s loss at the same
valuation point (e.g., vertical spreads).
21 In the event federal regulators modify bank
capital requirements in the future, the Exchange
will reevaluate the proposed rule change at that
time to determine whether any corresponding
changes to the proposed rule are appropriate.
22 H.R. 4173 (amending section 3(a) of the Act)
(15 U.S.C. 78c(a))).
23 12 CFR 50; 79 FR 61440 (Liquidity Coverage
Ratio: Liquidity Risk Measurement Standards).
24 Many options strategies, including relatively
simple strategies often used by retail customers and
more sophisticated strategies used by brokerdealers, are risk limited strategies or options spread
strategies that employ offsets or hedges to achieve
certain investment outcomes. Such strategies
typically involve the purchase and sale of multiple
options (and may be coupled with purchases or
sales of the underlying securities), executed
simultaneously as part of the same strategy. In
many cases, the potential market exposure of these
strategies is limited and defined.
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transfer existing options positions
through an off-floor transfer process
would likely have a beneficial effect on
continued liquidity in the options
market without adversely affecting
market quality. Liquidity in the listed
options market is critically important.
The Exchange believes that the
proposed rule change provides market
participants with an efficient
mechanism to transfer their open
options positions from one clearing
account to another clearing account and
thereby increase liquidity in the listed
options market. The Exchange currently
has no mechanism that firms may use to
transfer positions between clearing
accounts without having to effect a
transaction with another party and close
a position.
Proposed Rule 997.2NY provides that,
notwithstanding Rule 997NY (described
above), existing positions in options
listed on the Exchange of an ATP
Holder or non-ATP Holder (including
an affiliate of an ATP Holder) may be
transferred on, from, or to the books of
a Clearing Member off the Exchange if
the transfer establishes a net reduction
of RWA attributable to those options
positions (an ‘‘RWA Transfer’’).
Proposed paragraph (a) to Rule 997.2NY
provides examples of two transfers that
would be deemed to establish a net
reduction of RWA, and thus qualify as
a permissible RWA Transfer:
• A transfer of options positions from
Clearing Member A to Clearing Member
B that net (offset) with positions held at
Clearing Member B, and thus closes all
or part of those positions (as
demonstrated in the example below); 25
and
• A transfer of options positions from
a bank-affiliated Clearing Member to a
non-bank-affiliated Clearing Member.26
These transfers would not result in a
change in ownership, as they must
occur between accounts of the same
‘‘Person,’’ as defined in Rule 15, per
proposed Rule 997.2NY(e).27 In other
words, RWA Transfers may only occur
between the same individual or legal
entity. These are merely transfers from
one clearing account to another, both of
which are attributable to the same
individual or legal entity. A market
participant effecting an RWA Transfer is
analogous to an individual transferring
25 This transfer would establish a net reduction of
RWA attributable to the transferring Person,
because there would be fewer open positions and
thus fewer assets subject to Net Capital Rules.
26 This transfer would establish a net reduction of
RWA attributable to the transferring Person,
because the non-bank-affiliated Clearing Member
would not be subject to Net Capital Rules, as
described above.
27 See supra note 10 (defining Person).
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54723
funds from a checking account to a
savings account, or from an account at
one bank to an account at another
bank—the money still belongs to the
same person, who is just holding it in
a different account for personal
financial reasons.
For example, Market Maker A clears
transactions on the Exchange into an
account it has with Clearing Member X,
which is affiliated with a U.S-bank
holding company. Market Maker A
opens a clearing account with Clearing
Member Y, which is not affiliated with
a U.S.-bank holding company. Clearing
Member X has informed Market Maker
A that its open positions may not
exceed a certain amount at the end of
a calendar month, or it will be subject
to restrictions on new positions it may
open the following month. On August
28, Market Maker A reviews the open
positions in its Clearing Member X
clearing account and determines it must
reduce its open positions to satisfy
Clearing Member X’s requirements by
the end of August. It determines that
transferring out 1,000 short calls in class
ABC will sufficiently reduce the RWA
capital requirements in the account with
Clearing Member X to avoid additional
position limits in September. Market
Maker A wants to retain the positions in
accordance with its risk profile.
Pursuant to the proposed rule change,
on August 31, Market Maker A transfers
1,000 short calls in class ABC to its
clearing account with Clearing Member
Y. As a result, Market Maker A can
continue to provide the same level of
liquidity in class ABC during September
as it did in previous months.
An ATP Holder must ‘‘give up’’ a
Clearing Member for each transaction it
effects on the Exchange, which
identifies the Clearing Member through
which the transaction will clear.28 An
ATP Holder that has the ability to
change the give up for a transaction
within a specified period of time.29
Additionally, an ATP Holder may
change the Clearing Member for a
specific transaction.30 The transfer of
28 See Rule 961 (Authorizing Give Up of a
Clearing Member) (providing process for an ATP
Holder (other than a Market Maker) to indicate each
of its transactions any OCC number of a Clearing
Member through which a transaction will be
cleared (i.e., the give up), subject to the criteria set
forth in the rule).
29 See Rule 961(g)(1) (providing that, ‘‘[i]f the ATP
Holder has the ability through an Exchange system
to do so, the ATP Holder may change the give up
on the trade to another Clearing Member for whom
they are an Authorized ATP Holder or to its
Guarantor.’’; which ability ‘‘will end at the Trade
Date Cutoff Time.’’).
30 The Clearing Member Trade Assignment
(‘‘CMTA’’) process at OCC facilitates the transfer of
option trades/positions from one OCC clearing
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positions from an account with one
clearing firm to the account of another
clearing firm pursuant to the proposed
rule change has a similar result as
changing a give up or CMTA, as it
results in a position that resulted from
a transaction moving from the account
of one clearing firm to another, just at
a different time and in a different
manner.31
In the above example, if Market Maker
A had initially given up Clearing
Member Y rather than Clearing Member
X on the transactions that resulted in
the 1,000 long calls in class ABC, or had
changed the give-up or CMTA to
Clearing Member Y pursuant to Rule
961 the ultimate result would have been
the same. There are a variety of reasons
why firms give up or CMTA
transactions to certain clearing firms
(and not to non-bank affiliate clearing
firms) at the time of a transaction, and
the proposed rule change provides firms
with a mechanism to achieve the same
result at a later time.
Proposed paragraph (b) to Rule
997.2NY provides that RWA Transfers
may occur on a routine, recurring basis.
As noted in the example above, clearing
firms may impose restrictions on the
amount of open positions. Permitting
transfers on a routine, recurring basis
will provide market participants with
the flexibility to comply with these
restrictions when necessary to avoid
position limits on future options
activity. Additionally, proposed
paragraph (f) to Rule 997.2NY provides
that no prior written notice to the
Exchange is required for RWA
Transfers. Because of the potential
routine basis on which RWA Transfers
may occur, and because of the need for
flexibility to comply with the
restrictions described above, the
Exchange believes such requirement
may interfere with the ability of ATP
Holders to comply with any Clearing
Member restrictions describe above, and
may be burdensome to provide notice
for these routine transfers.
Proposed Rule 997.2NY(c) provides
that RWA Transfers may result in the
netting of positions. Netting occurs
when long positions and short positions
in the same series ‘‘offset’’ against each
other, leaving no or a reduced position.
For example, if there were 100 long calls
in one account, and 100 short calls of
the same option series were added to
member to another in an automated fashion.
Changing a CMTA for a specific transaction would
allocate the trade to a different OCC clearing
member than the one initially identified on the
trade.
31 The transferred positions will continue to be
subject to OCC rules, as they will continue to be
held in an account of an OCC member.
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that account, the positions would offset,
leaving no open positions. Firms may
maintain different clearing accounts for
a variety of reasons, such as the
structure of their businesses, the manner
in which they trade, their risk
management procedures, and for capital
purposes. While there are times when a
firm may not want to close out open
positions to reduce RWA, there are
other times when a firm may determine
it is appropriate to close out positions
to accomplish a reduction in RWA.
In the example above, suppose after
making the RWA Transfer described
above, Market Maker A effects a
transaction on September 25 that results
in 1,000 long calls in class ABC, which
clears into its account with Clearing
Member X. If Market Maker A had not
effected its RWA Transfer in August, the
1,000 long calls would have offset
against the 1,000 short calls, eliminating
both positions and thus any RWA
capital requirements associated with
them. At the end of August, Market
Maker A did not want to close out the
1,000 short calls when it made its RWA
Transfer. However, given changed
circumstances in September, Market
Maker A has determined it no longer
wants to hold those positions. The
proposed rule change would permit
Market Maker A to effect an RWA
Transfer of the 1,000 short calls from its
account with Clearing Member Y to its
account with Clearing Member X (or
vice versa), which results in elimination
of those positions (and a reduction in
RWA associated with them). As noted
above, such netting would have
occurred if Market Maker A cleared the
September transaction directly into its
account with Clearing Member Y, or had
not effected an RWA Transfer in August.
Netting provides market participants
with appropriate flexibility to conduct
their businesses as they see fit while
having the ability to reduce RWA
capital requirements when necessary.
Proposed Rule 997.2NY(d) provides
that RWA Transfers may not result in
preferential margin or haircut treatment.
Finally, per proposed Rule 997.2NY(g),
RWA Transfers may only be effected for
options listed on the Exchange, as
transfers of non-Exchange listed options
and other financial instruments are not
governed by proposed Rule 997.2NY,
and will be subject to applicable laws,
rules, and regulations, including rules of
other self-regulatory organizations
(including OCC).32
32 All RWA Transfers will be subject to all
recordkeeping requirements applicable to ATP
Holders and Clearing Members under the Act, such
as Rule 17a–3 and 17a–4.
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Proposed Rule 997.3NY: In-Kind
Exchange of Options Positions and ETF
Shares and UIT Units
The Exchange proposes to adopt Rule
997.3NY regarding in-kind exchanges of
options positions and exchange-traded
fund (‘‘Fund’’) shares and unit
investment trust (‘‘UIT’’) interests. As
discussed further below, the ability to
effect ‘‘in kind’’ transfers is a key
component of the operational structure
of a Fund and a UIT. Currently, in
general, Funds and UITs can effect inkind transfers with respect to equity
securities and fixed-income securities.
The in-kind process is the means by
which assets may be added to or
removed from Funds and UITs. The
proposed rule change is substantively
identical to rules on other options
exchanges and would align the
Exchanges rules with that of its
competitors.33
Proposed Rule 997.3NY would add a
circumstance under which off-floor
transfers of options positions would be
permitted to occur, in addition to the
circumstances in proposed Rules
997.1NY and 997.2NY. Specifically,
Rule 997.3NY would allow positions in
options listed on the Exchange to be
transferred off the Exchange by an ATP
Holder in connection with transactions
(a) to purchase or redeem ‘‘creation
units’’ of Fund Shares between an
‘‘authorized participant’’ 34 and the
issuer 35 of such Fund Shares 36 or (b) to
create or redeem units of a UIT between
33 See NYSE Arca Rule 6.78A–O and Cboe
Options Rule 6.9 (except that the Cboe rule does not
include a notice provision related to the transfers
that is contained in Rule 6.78A–O(b) and proposed
Rule 997.2NY(b)). See also Securities and Exchange
Act Release No. 90552 (December 2, 2020), 85 FR
79049 (December 8, 2020) (SR–NYSEArca–2020–
102) (immediately effective filing to adopt Rule
6.78A–O to allow in-kind exchange of options
positions and ETF Shares and UIT Units).
34 The Exchange is proposing that, for purposes
of proposed Rule 997.3NY, the term ‘‘authorized
participant’’ would be defined as an entity that has
a written agreement with the issuer of Fund Shares
or one of its service providers, which allows the
authorized participant to place orders for the
purchase and redemption of creation units (i.e.,
specified numbers of Fund Shares). See proposed
Rule 997.3NY(a)(1). While an authorized
participant may be an ATP Holder and directly
effect transactions in options on the Exchange, an
authorized participant that is not an ATP Holder
may effect transactions in options on the Exchange
through an ATP Holder on its behalf.
35 The Exchange proposes that, for purposes of
proposed Rule 997.3NY, any issuer of Fund Shares
would be registered with the Commission as an
open-end management investment company under
the Investment Company Act of 1940 (the ‘‘1940
Act’’). See proposed Rule 997.3NY(a)(2).
36 A Fund Share is a share or other security traded
on a national securities exchange and defined as an
NMS stock, as set forth in in Rule 600(b)(47) of
Regulation NMS, which includes open-end
management investment companies registered with
the Commission. See Rule 915, Commentary .06.
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a broker-dealer and the issuer 37 of such
UIT units, which transfers would occur
at the price used to calculate the net
asset value (‘‘NAV’’) of such Fund
Shares or UIT units, respectively.
Allowing the Exchange to permit offfloor transfers of options positions in
connection with the creation and
redemption process would enable the
Exchange to compete with other options
exchanges that allow such transfers.
However, the Exchange believes it is
appropriate to include in proposed Rule
997.3NY(b) the requirement that ATP
Holders that engage in such transfers
‘‘must, upon request of the Exchange,
provide to the Exchange information
relating to the transfers in a form and
manner prescribed by the Exchange.’’
The Exchange notes that this proposed
provision is identical to the notice
provision in NYSE Arca Rule 6.78A–
O(b), and, like that provision, would
help ensure that ATP Holders keep
accurate books and records relating to
such transfers for review by the
Exchange, which is to the benefit of all
market participants.
The Exchange’s proposal mirrors
other exchange rules in that applies
solely in the context of transfers of
options positions effected in connection
with transactions to purchase or redeem
creation units of Fund Shares between
Funds and authorized participants,38
and units of UITs between UITs and
sponsors. Other than the transfers
covered by the proposed rule,
transactions involving options, whether
held by a Fund or an authorized
participant, or a UIT or a sponsor would
be fully subject to all applicable
Exchange trading rules.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,39 in general, and furthers the
objectives of Section 6(b)(5) of the Act,40
in particular, because it is designed to
prevent fraudulent and manipulative
37 The Exchange proposes that, for purposes of
proposed Rule 997.3NY, any issuer of UIT units
would be a trust registered with the Commission as
a unit investment trust under the 1940 Act. See
proposed Rule 997.3NY(a)(3).
38 See supra note 34. The term ‘‘authorized
participant’’ is specific and narrowly defined. As
noted in the Investment Company Act Release No.
33140 (June 28, 2018), 83 FR 37332 (July 31, 2018)
(the ‘‘Proposed ETF Rule Release’’), the requirement
that only authorized participants of a Fund may
purchase creation units from (or sell creation units
to) a Fund ‘‘is designed to preserve an orderly
creation unit issuance and redemption process
between [Funds] and authorized participants.’’
Furthermore, an ‘‘orderly creation unit issuance and
redemption process is of central importance to the
arbitrage mechanism.’’ See Proposed ETF Rule
Release at 83 FR 37348.
39 15 U.S.C. 78f(b).
40 15 U.S.C. 78f(b)(5).
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acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, 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 and
because it is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
As a general matter, the proposed rules
are substantively identical to rules on
other options exchanges and would
align the Exchanges rules with that of its
competitors. As such, this proposal
would benefit investors by reducing the
administrative burden of determining
whether their off-floor transfers comply
with multiple sets of options exchange
rules.
Proposed Rule 997NY: Transactions Off
the Exchange
In particular, the Exchange believes
proposed Rule 997NY is consistent with
the Act, because it adopts provisions in
the Rules specifically required by Rules
19c–1 and 19c–3 under the Act, setting
forth the Exchange’s general prohibition
against off-floor transfers. The proposed
rule change will add transparency to the
Exchange rules, which would benefit
investors. In addition, as noted herein,
proposed Rule 997NY is substantively
identical to the rules of at least one
other options exchange and would
therefore allow the Exchange to compete
on equal footing.
Proposed Rule 997.1NY: Off-Floor
Transfer of Positions
The Exchange believes that permitting
off-floor transfers in very limited
circumstances would allow ATP
Holders to accomplish certain goals
efficiently. Proposed Rule 997.1NY is
also substantively identical to the rules
of other options exchanges and,
consistent with those rules, the
proposed rule permits non-recurring offfloor transfers in situations involving
dissolutions of entities or accounts, for
purposes of donations, mergers or by
operation of law. As noted above for
example, an ATP Holder that is
undergoing a structural change and a
one-time movement of positions may
require a transfer of positions or an ATP
Holder that is leaving a firm that will no
longer be in business may require a
transfer of positions to another firm.
Also, an ATP Holder may require a
transfer of positions to make a capital
contribution. The above-referenced
circumstances are non-recurring
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
54725
situations where the transferor
continues to maintain some ownership
interest or manage the positions
transferred. By contrast, repeated or
routine transfers between entities or
accounts—even if there is no change in
beneficial ownership as a result of the
transfer—is inconsistent with the
purposes for which the proposed rule
will be adopted. Accordingly, such
activity would not be permitted under
the proposed rule. The proposed rule
change would provide market
participants that experience these
limited, non-recurring events with an
efficient and effective means to transfer
positions in these situations. The
Exchange believes the proposed rule
change regarding permissible transfer
prices would provide market
participants with flexibility to
determine the price appropriate for their
business, which maintain cost bases in
accordance with normal accounting
practices and removes impediments to a
free and open market.
The proposed rule change which
requires notice and maintenance of
records would ensure the Exchange is
able to review off-floor transfers for
compliance with the Exchange rules,
which prevents fraudulent and
manipulative acts and practices. The
requirement to retain records is
consistent with the requirements of Rule
17a–3 and 17a–4 under the Act.
Similar to the rules of other options
exchanges, the Exchange would permit
a presidential exemption.41 The
Exchange believes that this exemption is
consistent with the Act because the
Exchange’s Chief Executive Officer or
President (or his or her designee(s))
would consider an exemption in very
limited circumstances (i.e., to facilitate
non-routine, nonrecurring movements
of positions not designed to circumvent
the normal auction market process).
Proposed Rule 997.1NY(f) specifically
provides that the Exchange’s Chief
Executive Officer or President (or his or
her designee(s)) may in his or her
judgment allow an off-floor transfer if it
is necessary or appropriate for the
maintenance of a fair and orderly
market and the protection of investors
and is in the public interest, including
due to unusual or extraordinary
circumstances such as the market value
of the Person’s positions will be
comprised by having to comply with the
requirement to trade on the Exchange
pursuant to the normal auction process
or, when in the judgment of the
President, Chief Executive Officer, or
his or her designee(s), market conditions
41 See ISE Options 6, Section 5(f); MIAX Rule
1326(f). See also Cboe Rule 6.8(f).
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make trading on the Exchange
impractical. These standards within
paragraph (f) of the proposed rule are
intended to provide guidance
concerning the use of this exemption to
the benefit of investors and the
investing public for the maintenance of
a fair and orderly market and the
protection of investors and is in the
public interest.
Finally, the Exchange believes the
conforming change to delete paragraph
(d) to Rule 957NY in light of the
comparable notice requirement in
proposed Rule 997.1NY(d) would
reduce redundancy, add clarity,
transparency and internal consistent to
Exchange rules.
Proposed Rule 997.2NY: Off-Floor RWA
Transfers
The Exchange believes proposed Rule
997.2NY to permit RWA Transfers,
which is substantially the same as the
rules of other options markets, would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by
providing liquidity in the listed options
market. The Exchange believes
providing market participants with an
efficient process to reduce RWA capital
requirements attributable to open
positions in clearing accounts with U.S.
bank-affiliated clearing firms may
contribute to additional liquidity in the
listed options market, which, in general,
protects investors and the public
interest.
The proposal to permit RWA
Transfers to occur on a routine,
recurring basis and result in netting,
also provides market participants with
sufficient flexibility to reduce RWA
capital requirements at times necessary
to comply with requirements imposed
on them by clearing firms. This would
permit market participants to respond to
then-current market conditions,
including volatility and increased
volume, by reducing the RWA capital
requirements associated with any new
positions they may open while those
conditions exist. Given the additional
capital that may become available to
market participants as a result of the
RWA Transfers, market participants
would be able to continue to provide
liquidity to the market, even during
periods of increased volume and
volatility, which liquidity ultimately
benefits investors. It is not possible for
market participants to predict what
market conditions will exist at a specific
time, and when volatility will occur.
The proposed rule change to permit
routine, recurring RWA Transfers
(without any required prior written
notice) would provide market
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participants with the ability to respond
to these conditions whenever they
occur. Permitting such transfers on a
routine, recurring basis will provide
market participants with the flexibility
to comply with applicable restrictions
when necessary to avoid position limits
on future options activity. In addition,
with respect to netting, as discussed
above, firms may maintain different
clearing accounts for a variety of
reasons, such as the structure of their
businesses, the manner in which they
trade, their risk management
procedures, and for capital purposes.
Netting may otherwise occur with
respect to a firm’s positions if it
structured its clearing accounts
differently, such as by using a universal
account. Therefore, the proposed rule
change will permit netting while
allowing firms to continue to maintain
different clearing accounts in a manner
consistent with their businesses.
The Exchange recognizes the
numerous benefits of executing options
transactions on exchanges, including
price transparency, potential price
improvement, and a clearing guarantee.
However, the Exchange believes it is
appropriate to permit RWA Transfers to
occur off the Exchange, as these benefits
are inapplicable to RWA Transfers,
which are narrow in scope and intended
to achieve a limited beneficial purpose.
RWA Transfers are not intended to be a
competitive trading tool. There is no
need for price discovery or
improvement, as the purpose of the
transfer is to reduce RWA asset capital
requirements attributable to a market
participants’ positions. Unlike trades on
an exchange, the price at which an RWA
Transfers occurs is immaterial—the
resulting reduction in RWA is the
critical part of the transfer. RWA
Transfers will result in no change in
ownership, and thus they do not
constitute trades with a counterparty
(and thus eliminating the need for a
counterparty guarantee). The
transactions that resulted in the open
positions to be transferred as an RWA
Transfer were already guaranteed by a
Clearing Member, and the positions will
continue to be subject to OCC rules, as
they will continue to be held in an
account with a Clearing Member. The
narrow scope of the proposed rule
change and the limited, beneficial
purpose of RWA Transfers make
allowing RWA Transfers to occur off the
floor appropriate and important to
support the provision of liquidity in the
listed options market.
The proposed rule change does not
unfairly discriminate against market
participants, as all ATP Holders and
non-ATP Holders with open positions
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Frm 00057
Fmt 4703
Sfmt 4703
in options listed on the Exchange may
use the proposed off-floor transfer
process to reduce the RWA capital
requirements of Clearing Members.
Finally, this proposed rule change
would align Exchange rules with those
of other options exchanges, thereby
allowing the Exchange to compete on
equal footing.
Proposed Rule 997.3NY: In-Kind
Exchange of Options Positions and ETF
Shares and UIT Units
The Exchange believes proposed Rule
997.3NY to permit off-floor transfers in
connection with the in-kind Fund and
UIT creation and redemption process
would promote just and equitable
principles of trade as it would permit
Funds and UITs that invest in options
traded on the Exchange to utilize the inkind creation and redemption process
that is available for Funds and UITs that
invest in equities and fixed-income
securities.
The Exchange believes it is
appropriate to require ATP Holders that
engage in off-floor transfers as provided
in proposed Rule 997.3NY(b) to keep
records of such transactions such that
this information could be shared with
the Exchange upon request. The
Exchange believes this provision, which
is identical to NYSE Arca Rule 6.78A–
O(b), would prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade because the provision would help
ensure that ATP Holders keep accurate
books and records relating to such
transfers for review by the Exchange,
which is to the benefit of all market
participants. Finally, this proposed rule
change would align Exchange rules with
those of other options exchanges,
thereby allowing the Exchange to
compete on equal footing.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposal would not impose any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of Section 6(b)(8) of the Act.42
The proposed rules are not intended to
be competitive trading tools, but rather
to set forth the general prohibition
against off-floor transactions and to
facilitate certain off-floor transactions in
limited circumstances that meet the
enumerated criteria.
The Exchange does not believe the
proposed rule change regarding off-floor
position transfers set forth in the
proposed rules would impose an undue
burden on intra-market competition as
42 15
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the transfer procedure(s) may be utilized
by any ATP Holder and the rule would
apply uniformly to all ATP Holders. Use
of each off-floor transfer procedure is
voluntary and all ATP Holders may use
each such procedure to transfer
positions as long as the criteria in the
proposed rule are satisfied.
The Exchange does not believe the
proposed rule change will impose an
undue burden on inter-market
competition. As indicated above, it is
intended to provide an additional
clearly delineated and limited
circumstance in which options
positions can be transferred off an
exchange (as well as to set forth the
general prohibition against such
transfers). Additionally, as discussed
above, the proposed rule change is
substantively identical to the rules of
other options exchanges and would
allow the Exchange to compete on equal
footing. Moreover, the Exchange
believes having similar rules related to
off-floor position transfers to those of
other options exchanges will reduce the
administrative burden on market
participants of determining whether
their transfers comply with multiple
sets of rules.
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.
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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) of the Act 43 and Rule
19b–4(f)(6) thereunder.44 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.45
43 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
45 15 U.S.C. 78s(b)(3)(A)(iii). Rule 19b–4(f)(6)(iii)
requires a self-regulatory organization 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
44 17
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54727
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) of the Act 46 to
determine whether the proposed rule
change should be approved or
disapproved.
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–2022–36 and
should be submitted on or before
September 28, 2022.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
J. Matthew DeLesDernier,
Deputy Secretary.
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–2022–36 on the subject
line.
SECURITIES AND EXCHANGE
COMMISSION
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–2022–36. 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
[FR Doc. 2022–19226 Filed 9–6–22; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–95644; File No. SR–
NYSEARCA–2022–55]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify Rule 6.78–O
and Adopt New Rules Related Thereto
and Delete Paragraph (d) to Rule
6.69–O
August 31, 2022.
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
23, 2022, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II,
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify
Rule 6.78–O and to adopt new rules
related thereto regarding certain
position transfers, including off-floor
transfers. The Exchange also proposes to
delete paragraph (d) to Rule 6.69–O
(Reporting Duties). The proposed rule
change is available on the Exchange’s
47 17
Commission. The Commission notes that the
Exchange satisfied this requirement.
46 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00058
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\07SEN1.SGM
07SEN1
]]>Agencies
[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Notices]
[Pages 54720-54727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19226]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95646; File No. SR-NYSEAMER-2022-36]
Self-Regulatory Organizations; NYSE American, LLC.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt New
Rules 997NY, 997.1NY, 997.2NY and 997.3NY and Delete Paragraph (d) to
Rule 957NY
August 31, 2022.
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 23, 2022, NYSE American, LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and
II, 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 adopt new Rules 997NY, 997.1NY, 997.2NY
and 997.3NY regarding certain position transfers, including off-floor
transfers. The Exchange also proposes to delete paragraph (d) to Rule
957NY (Reporting Duties). The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule change is to adopt new Rules 997NY,
997.1NY, 997.2NY, and 997.3NY regarding certain position transfers,
including off-floor transfers as described herein. The proposed rules
are substantively identical to rules on other options exchanges and
would align the Exchange's rules with that of its competitors.\4\ This
proposal would benefit investors by reducing the administrative burden
of determining whether their transfers comply with multiple sets of
options exchange rules. In addition, the Exchange proposes to delete
paragraph (d) to Rule 957NY (Reporting Duties) for reason set forth
below.
---------------------------------------------------------------------------
\4\ See, e.g., Cboe Options Exchange, Inc. (``Cboe'') Rule 5.12
(Transactions Off the Exchange); Cboe Rule 6.7 (Off-Floor Transfer
of Positions); Cboe Rule 6.8 (Off-Floor RWA Transfers); and NYSE
Arca Rule 6.78A-O (In-Kind Exchange of Options Positions and ETF
Shares and UIT Units) and Cboe Rule 6.9 (same).
---------------------------------------------------------------------------
Proposed Rule 997NY: Transactions Off the Exchange
Rules 19c-1 and 19c-3 under the Securities Exchange Act of 1934
(the ``Act'') describe rule provisions that each national securities
change must include in its Rules regarding the ability of members to
engage in transactions off an exchange. While the Exchange's rules,
stated policies, and practices are consistent with these provisions of
the Act, the Exchange Rules do not currently include these provisions.
Therefore, the proposed rule change adopts these provisions in new Rule
997NY, ``Transactions Off the Exchange,'' in accordance with Rules 19c-
1 and 19c-3 under the Act. Proposed Rule 997NY is also substantively
identical to the off-floor transactions rule of another options
exchange and thus would align Exchange rules with those of its
competitors.\5\
---------------------------------------------------------------------------
\5\ See Cboe Rule 5.12 (Transactions Off the Exchange).
---------------------------------------------------------------------------
Proposed Rule 997NY(a) provides that except as otherwise provided
by this proposed Rule, no ATP Holder \6\ acting as principal or agent
may effect transactions in any class of option contracts listed on the
Exchange for a premium in excess of $1.00 other than (1) on the
Exchange, (2) on another exchange on which such option contracts are
listed and traded, or (3) in the over-the-counter market if the stock
underlying the option class, or in the case of an index option, if all
the component stocks of an index underlying the option class, was a
National Market System security under SEC Rule 600 at the time the
Exchange commenced trading in that option class, unless that ATP Holder
has first attempted to execute the transaction on the floor of the
Exchange and has reasonably ascertained that it may be executed at a
better price off the floor.
---------------------------------------------------------------------------
\6\ An ``ATP Holder'' is a natural person, sole proprietorship,
partnership, corporation, limited liability company or other
organization, in good standing, that has been issued an ATP
[American Trading Permit] by the Exchange. See Rule 900.2NY(5).
---------------------------------------------------------------------------
Proposed Rule 997NY(b) provides that, notwithstanding the
provisions of paragraph (a) of this proposed Rule, an ATP Holder acting
as agent may execute a customer's order off the Exchange floor with any
other person (except when such ATP Holder also is acting as agent for
such other person in such transaction) for the purchase or sale of an
option contract listed on the Exchange.
Proposed Rule 997NY(c) provides that for each transaction in which
an ATP Holder acting as principal or agent executes any purchase or
sale of an option contract listed on the Exchange other than on the
Exchange or on another exchange on which such option contracts are
listed and traded, a record
[[Page 54721]]
of such transaction shall be maintained by such ATP Holder and shall be
available for inspection by the Exchange for a period of one year. Such
record shall include the circumstances under which the transaction was
executed in conformity with this Rule.
Proposed Rule 997NY(d) provides that no rule, stated policy, or
practice of the Exchange may prohibit or condition, or be construed to
prohibit or condition, or otherwise limit, directly or indirectly, the
ability of any ATP Holder acting as agent to effect any transaction
otherwise than on the Exchange with another person (except when such
ATP Holder also is acting as agent for such other person in such
transaction) in any equity security listed on the Exchange or to which
unlisted trading privileges on the Exchange have been extended.
Proposed Rule 997NY(e) provides that no rule, stated policy, or
practice of the Exchange may prohibit or condition, or be construed to
prohibit, condition, or otherwise limit, directly or indirectly, the
ability of any ATP Holder to effect any transaction otherwise than on
the Exchange in any reported security listed and registered on the
Exchange or as to which unlisted trading privileges on the Exchange
have been extended (other than a put option or call option issued by
Options Clearing Corporates or OCC) which is not a covered security.\7\
---------------------------------------------------------------------------
\7\ The ``Options Clearing Corporation'' or ``OCC'' refers to
The Options Clearing Corporation, a subsidiary of the Participating
Exchanges. See Rule 900.2NY(55). The term ``Participating
Exchanges'' refers to any national securities exchange that has
qualified for participation in the OCC pursuant to the provisions of
the Rules of the Options Clearing Corporation. See Rule 900.2NY(61).
---------------------------------------------------------------------------
Proposed Rule 997.1NY: Off-Floor Transfer of Positions
The Exchange proposes to adopt new Rule 997.1NY titled ``Off-Floor
Transfer of Positions,'' to provide a process by which ATP Holders may
transfer option positions between accounts, individuals, or entities in
limited circumstances without first exposing the order on the Exchange.
This rule would also permit off-floor transfers upon the occurrence of
significant, non-recurring events. Proposed Rule 997.1NY is
substantively identical to the rules of other option exchanges
regarding permissible off-floor transfers of options positions and
would align Exchange rules with those of its competitors.\8\
---------------------------------------------------------------------------
\8\ See Cboe Rule 6.7 (Off-Floor Transfer of Positions). See
also Nasdaq ISE LLC (``ISE'') Options 6, Section 5 (Transfer of
Positions); Miami Options Exchange (``MIAX'') Rule 1326 (Transfer of
Positions). As noted below, regarding the ``presidential''
exemption, Cboe Rule 6.7(f) does not explicitly include the Chief
Executive Officer, which reference is included in ISE Options 6,
Section 5(f); MIAX Rule 1326(f).
---------------------------------------------------------------------------
Proposed Rule 997.1NY(a) provides that, notwithstanding proposed
Rule 997NY (described above), existing positions in options listed on
the Exchange of an ATP Holder, or non-ATP Holder, that are to be
transferred on, from, or to the books of a Clearing Member \9\ may be
transferred off the Exchange (an ``off-floor transfer'') if the off-
floor transfer involves one or more of the following events:
---------------------------------------------------------------------------
\9\ A ``Clearing Member'' refers to an ATP Holder that has been
admitted to membership in the OCC pursuant to the provisions of the
Rules of the OCC. See Rule 900.2NY(11).
---------------------------------------------------------------------------
an adjustment or transfer in connection with the
correction of a bona fide error in the recording of a transaction or
the transferring of a position to another account, provided that the
original trade documentation confirms the error;
the transfer of positions from one account to another
account where no change in ownership is involved (i.e., accounts of the
same Person (as defined in Rule 15)),\10\ provided the accounts are not
in separate aggregation units or otherwise subject to information
barrier or account segregation requirements;
---------------------------------------------------------------------------
\10\ A ``Person'' refers to a natural person, corporation,
partnership, association, joint stock company, trust, fund, or any
organized group of persons whether incorporated or not. See Rule 15.
The proposed transfers may only occur between the same individual or
legal entity.
---------------------------------------------------------------------------
the consolidation of accounts where no change in ownership
is involved;
a merger, acquisition, consolidation, or similar non-
recurring transaction for a Person;
the dissolution of a joint account in which the remaining
ATP Holder assumes the positions of the joint account;
the dissolution of a corporation or partnership in which a
former nominee of the corporation or partnership assumes the positions;
positions transferred as part of an ATP Holder's capital
contribution to a new joint account, partnership, or corporation;
the donation of positions to a not-for-profit corporation;
the transfer of positions to a minor under the Uniform
Gifts to Minors Act; or
the transfer of positions through operation of law from
death, bankruptcy, or otherwise.
The proposed rule change makes clear that the transferred positions
must be on, from, or to the books of a Clearing Member. The proposed
rule change states that existing positions of an ATP Holder or a non-
ATP Holder may be subject to an off-floor transfer, except under
specified circumstances in which a transfer may only be effected for
positions of an ATP Holder.\11\ The Exchange notes off-floor transfers
of positions in Exchange listed options may also be subject to
applicable laws, rules, and regulations, including rules of other self-
regulatory organizations.\12\ Except as explicitly provided in proposed
Rule 997.1NY, the proposed rule change is not intended to exempt off-
floor position transfers from any other applicable rules or
regulations, and proposed paragraph (h) to Rule 997.1NY makes this
clear.
---------------------------------------------------------------------------
\11\ See proposed Rule 997.1NY(a)(5) and (7).
\12\ See proposed Rule 997.1NY(h).
---------------------------------------------------------------------------
Proposed Rule 997.1NY(b) provides that no position may net against
another position (``netting''), and no position transfer may result in
preferential margin or haircut treatment, unless otherwise permitted by
proposed paragraph (f) (described below). Netting occurs when long
positions and short positions in the same series ``offset'' against
each other, leaving no position, or a reduced position. For example, if
an ATP Holder wanted to transfer 100 long calls to another account that
contained short calls of the same options series as well as other
positions, even if the off-floor transfer is permitted pursuant to one
of the permissible events listed in proposed Rule 997.1NY(a)(1)-(10),
the ATP Holder could not transfer the offsetting series, as they would
net against each other and close the positions.
Proposed Rule 997.1NY(c) provides that the transfer price, to the
extent it is consistent with applicable laws, rules, and regulations,
including rules of other self-regulatory organizations, and tax and
accounting rules and regulations, at which an off-floor transfer may be
effected is either: (1) the original trade prices of the positions that
appear on the books of the trading Clearing Member, in which case the
records of the off-floor transfer must indicate the original trade
dates for the positions; provided, transfers to correct bona fide
errors pursuant to proposed subparagraph (a)(1) must be transferred at
the correct original trade prices; (2) mark-to-market prices of the
positions at the close of trading on the transfer date; (3) mark-to-
market prices of the positions at the close of trading on the trade
date prior to the transfer date; \13\ or (4) the then-current market
price of the positions at the time the transfer is effected. Proposed
Rule 997.1NY(c) provides market participants that effect off-floor
transfers with flexibility to
[[Page 54722]]
select a transfer price based on the circumstances of the transfer and
their business. However, for corrections of bona fide errors, because
those transfers are necessary to correct processing errors that
occurred at the time of the transaction, those off-floor transfers
would occur at the original transaction price, as the purpose of the
transfer is to create the originally intended result of the
transaction.
---------------------------------------------------------------------------
\13\ For example, for a transfer that occurs on a Tuesday, the
transfer price may be based on the closing market price on Monday.
---------------------------------------------------------------------------
Proposed Rule 997.1NY(d) requires an ATP Holder and its Clearing
Member(s) (to the extent the ATP Holder is not self-clearing) to submit
to the Exchange, in a manner determined by the Exchange, written notice
prior to effecting an off-floor transfer from or to the account(s) of
an ATP Holder(s).\14\ Per proposed Rule 997.1NY(d)(1), the proposed
notice must indicate: the Exchange-listed options positions to be
transferred; the nature of the transaction; the enumerated provision(s)
under proposed Rule 997.1NY(a) pursuant to which the positions are
being transferred; the name of the counterparty(ies); the anticipated
transfer date; the method for determining the transfer price; and any
other information requested by the Exchange. The proposed notice is
designed to ensure that the Exchange is made aware of all transfers so
that the Exchange can monitor and review such transfers (including the
records that must be retained pursuant to proposed Rule 997.1NY(e)
(described below) to determine whether they are effected in accordance
with the Exchange rules. Additionally, the Exchange believes that
requiring notice from the ATP Holder(s) and its Clearing Member(s)
would ensure that both parties are in agreement with respect to the
terms of the transfer. In light of the notice requirement contained in
proposed Rule 997.1NY(d), the Exchange proposes to make a conforming
change by deleting paragraph (d) to Rule 957NY, which similarly
requires ATP Holders to report to the Exchange any off-floor
transactions, and to hold paragraph (d) as Reserved.\15\
---------------------------------------------------------------------------
\14\ This notice provision applies only to transfers involving
an ATP Holder's positions and not to positions of non-ATP Holders,
as the latter parties are not subject to Exchange rules. In
addition, no notice would be required to effect transfers to correct
bona fide errors pursuant to proposed subparagraph (a)(1) or
transfers of positions from one account to another where no change
in ownership is involved pursuant to proposed paragraph (a)(2) of
Rule 997.1NY.
\15\ See Rule 957.NY(d) (providing that ``[f]or each transaction
in which an ATP Holder participates off-board (off a participating
Exchange) in any option pertaining to an underlying security which
is currently approved for Exchange options transactions, such ATP
Holder shall report the transaction to the Exchange in a form and
manner prescribed by the Exchange. (With the identity of
participants removed, such transaction may be made public by the
Exchange.)'').
---------------------------------------------------------------------------
Per proposed Rule 997.1NY(d)(2), however, receipt of prior notice
of an off-floor transfer would not constitute a determination by the
Exchange that such transfer was effected or reported in conformity with
the requirements of proposed Rule 997.1NY. As such, notwithstanding
submission of written notice to the Exchange, ATP Holder and Clearing
Members that effect off-floor transfers that do not conform to the
requirements of the proposed Rule would be subject to appropriate
disciplinary action in accordance with the Exchange rules.
Similarly, proposed Rule 997.1NY(e) requires that each party to an
off-floor transfer generate and retain records of the information
provided in the written notice to the Exchange (pursuant to proposed
subparagraph (d)(1)), as well as information regarding the actual
Exchange-listed options that are ultimately transferred, the actual
transfer date, and the actual transfer price (and the original trade
dates, if applicable), and any other information the Exchange may
request the ATP Holder or Clearing Member to provide.
Proposed 997.1NY(f) provides exemptions to the prohibition against
off-floor transfers, as approved by the Exchange's President or Chief
Executive Officer (or his or her designee(s)).\16\ Specifically, this
provision is in addition to the exemptions (to Rule 997NY) set forth in
proposed Rule 997.1NY(a)(1)-(10). The Exchange proposes that the
Exchange President or Chief Executive Officer (or his or her
designee(s)) may grant an exemption from the requirement of this
proposed Rule, on his or her own motion or upon application of the ATP
Holder (with respect to the ATP Holder's positions) or a Clearing
Member (with respect to positions carried and cleared by the Clearing
Members). The President, the Chief Executive Officer, or his or her
designee(s), may permit an off-floor transfer if necessary or
appropriate for the maintenance of a fair and orderly market and the
protection of investors and is in the public interest, including due to
unusual or extraordinary circumstances. For example, an exemption may
be granted if the market value of the Person's positions would be
compromised by having to comply with the requirement to trade on the
Exchange pursuant to the normal auction process or when, in the
judgment of the President, the Chief Executive Officer, or his or her
designee(s), market conditions make trading on the Exchange
impractical.
---------------------------------------------------------------------------
\16\ See ISE Options 6, Section 5(f); MIAX Rule 1326(f). The
Exchange notes that, unlike the rules of ISE and MIAX, which refer
to ``senior level designees,'' the Exchange proposes to instead
reference ``designees,'' which omits the potentially ambiguous
``senior'' qualifier. The Exchange believes this distinction does
not alter the or impede the authority granted in the proposed
provision and is consistent with other Exchange rules that provide
for delegated authority. See, e.g., Rule 975NY(k)(3)(A) (proving
that the appeals panel to review Obvious Errors or Catastrophic
Errors be comprised, in part of, the Exchange Chief Regulatory
Officer (``CRO''), or a designee of the CRO).
---------------------------------------------------------------------------
The Exchange proposes to state that the off-floor transfer
procedure set forth in Rule 997.1NY is intended to facilitate non-
routine, nonrecurring movements of positions, except for transfers
between accounts of the same Person pursuant to proposed subparagraph
(a)(2), and is not to be used repeatedly or routinely in circumvention
of the normal auction market process.\17\
---------------------------------------------------------------------------
\17\ See proposed Rule 997.1NY(g).
---------------------------------------------------------------------------
Lastly, proposed paragraph (h) provides that the off-floor transfer
procedure set forth in proposed Rule 997.1NY is only applicable to
positions in options listed on the Exchange; that off-floor transfers
of positions in Exchange-listed options may also be subject to
applicable laws, rules, and regulations, including rules of other self-
regulatory organizations; and that off-floor transfers of non-Exchange
listed options and other financial instruments are not governed by this
proposed Rule 997.1NY.
Proposed Rule 997.2NY: Off-Floor RWA Transfers
The Exchange proposes to adopt Rule 997.2NY titled ``Off-Floor RWA
Transfers,'' to facilitate the reduction of risk-weighted assets
(``RWA'') attributable to open options positions. This proposal is
substantively identical to rules on other options exchanges and would
align the Exchanges rules with that of its competitors.\18\
---------------------------------------------------------------------------
\18\ See, e.g., Cboe Rule 6.8 (Off-Floor RWA Transfers); ISE
Options 6, Section 6 (Off-Exchange RWA Transfers).
---------------------------------------------------------------------------
SEC Rule 15c3-1 (Net Capital Requirements for Brokers or Dealers)
(``Net Capital Rules'') requires registered broker-dealers, unless
otherwise excepted, to maintain certain specified minimum levels of
capital.\19\ The Net Capital Rules are designed to protect securities
customers, counterparties, and creditors by requiring that broker-
dealers have sufficient liquid resources on hand, at all times, to meet
their financial obligations. Notably, hedged positions, including
offsetting futures and options contract positions, result in
[[Page 54723]]
certain net capital requirement reductions under the Net Capital
Rules.\20\
---------------------------------------------------------------------------
\19\ 17 CFR 240.15c3-1.
\20\ In addition, the Net Capital Rules permit various offsets
under which a percentage of an option position's gain at any one
valuation point is allowed to offset another position's loss at the
same valuation point (e.g., vertical spreads).
---------------------------------------------------------------------------
Subject to certain exceptions, Clearing Members are subject to the
Net Capital Rules.\21\ However, a subset of Clearing Members are
subsidiaries of U.S. bank holding companies, which, due to their
affiliations with their parent U.S.-bank holding companies, must comply
with additional bank regulatory capital requirements pursuant to
rulemaking required under the Dodd-Frank Wall Street Reform and
Consumer Protection Act.\22\ Pursuant to this mandate, the Board of
Governors of the Federal Reserve System, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation have
approved a regulatory capital framework for subsidiaries of U.S. bank
holding company clearing firms.\23\ Generally, these rules, among other
things, impose higher minimum capital and higher asset risk weights
than were previously mandated for Clearing Members that are
subsidiaries of U.S. bank holding companies under the Net Capital
Rules. Furthermore, the new rules do not fully permit deductions for
hedged securities or offsetting options positions.\24\ Rather, capital
charges under these standards are, in large part, based on the
aggregate notional value of short positions regardless of offsets. As a
result, in general, Clearing Members that are subsidiaries of U.S. bank
holding companies must hold substantially more bank regulatory capital
than would otherwise be required under the Net Capital Rules.
---------------------------------------------------------------------------
\21\ In the event federal regulators modify bank capital
requirements in the future, the Exchange will reevaluate the
proposed rule change at that time to determine whether any
corresponding changes to the proposed rule are appropriate.
\22\ H.R. 4173 (amending section 3(a) of the Act) (15 U.S.C.
78c(a))).
\23\ 12 CFR 50; 79 FR 61440 (Liquidity Coverage Ratio: Liquidity
Risk Measurement Standards).
\24\ Many options strategies, including relatively simple
strategies often used by retail customers and more sophisticated
strategies used by broker-dealers, are risk limited strategies or
options spread strategies that employ offsets or hedges to achieve
certain investment outcomes. Such strategies typically involve the
purchase and sale of multiple options (and may be coupled with
purchases or sales of the underlying securities), executed
simultaneously as part of the same strategy. In many cases, the
potential market exposure of these strategies is limited and
defined.
---------------------------------------------------------------------------
The Exchange is concerned with the ability of Market Makers to
provide liquidity in their appointed classes. The Exchange believes
that permitting market participants to efficiently transfer existing
options positions through an off-floor transfer process would likely
have a beneficial effect on continued liquidity in the options market
without adversely affecting market quality. Liquidity in the listed
options market is critically important. The Exchange believes that the
proposed rule change provides market participants with an efficient
mechanism to transfer their open options positions from one clearing
account to another clearing account and thereby increase liquidity in
the listed options market. The Exchange currently has no mechanism that
firms may use to transfer positions between clearing accounts without
having to effect a transaction with another party and close a position.
Proposed Rule 997.2NY provides that, notwithstanding Rule 997NY
(described above), existing positions in options listed on the Exchange
of an ATP Holder or non-ATP Holder (including an affiliate of an ATP
Holder) may be transferred on, from, or to the books of a Clearing
Member off the Exchange if the transfer establishes a net reduction of
RWA attributable to those options positions (an ``RWA Transfer'').
Proposed paragraph (a) to Rule 997.2NY provides examples of two
transfers that would be deemed to establish a net reduction of RWA, and
thus qualify as a permissible RWA Transfer:
A transfer of options positions from Clearing Member A to
Clearing Member B that net (offset) with positions held at Clearing
Member B, and thus closes all or part of those positions (as
demonstrated in the example below); \25\ and
---------------------------------------------------------------------------
\25\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because there would be
fewer open positions and thus fewer assets subject to Net Capital
Rules.
---------------------------------------------------------------------------
A transfer of options positions from a bank-affiliated
Clearing Member to a non-bank-affiliated Clearing Member.\26\
---------------------------------------------------------------------------
\26\ This transfer would establish a net reduction of RWA
attributable to the transferring Person, because the non-bank-
affiliated Clearing Member would not be subject to Net Capital
Rules, as described above.
---------------------------------------------------------------------------
These transfers would not result in a change in ownership, as they
must occur between accounts of the same ``Person,'' as defined in Rule
15, per proposed Rule 997.2NY(e).\27\ In other words, RWA Transfers may
only occur between the same individual or legal entity. These are
merely transfers from one clearing account to another, both of which
are attributable to the same individual or legal entity. A market
participant effecting an RWA Transfer is analogous to an individual
transferring funds from a checking account to a savings account, or
from an account at one bank to an account at another bank--the money
still belongs to the same person, who is just holding it in a different
account for personal financial reasons.
---------------------------------------------------------------------------
\27\ See supra note 10 (defining Person).
---------------------------------------------------------------------------
For example, Market Maker A clears transactions on the Exchange
into an account it has with Clearing Member X, which is affiliated with
a U.S-bank holding company. Market Maker A opens a clearing account
with Clearing Member Y, which is not affiliated with a U.S.-bank
holding company. Clearing Member X has informed Market Maker A that its
open positions may not exceed a certain amount at the end of a calendar
month, or it will be subject to restrictions on new positions it may
open the following month. On August 28, Market Maker A reviews the open
positions in its Clearing Member X clearing account and determines it
must reduce its open positions to satisfy Clearing Member X's
requirements by the end of August. It determines that transferring out
1,000 short calls in class ABC will sufficiently reduce the RWA capital
requirements in the account with Clearing Member X to avoid additional
position limits in September. Market Maker A wants to retain the
positions in accordance with its risk profile. Pursuant to the proposed
rule change, on August 31, Market Maker A transfers 1,000 short calls
in class ABC to its clearing account with Clearing Member Y. As a
result, Market Maker A can continue to provide the same level of
liquidity in class ABC during September as it did in previous months.
An ATP Holder must ``give up'' a Clearing Member for each
transaction it effects on the Exchange, which identifies the Clearing
Member through which the transaction will clear.\28\ An ATP Holder that
has the ability to change the give up for a transaction within a
specified period of time.\29\ Additionally, an ATP Holder may change
the Clearing Member for a specific transaction.\30\ The transfer of
[[Page 54724]]
positions from an account with one clearing firm to the account of
another clearing firm pursuant to the proposed rule change has a
similar result as changing a give up or CMTA, as it results in a
position that resulted from a transaction moving from the account of
one clearing firm to another, just at a different time and in a
different manner.\31\
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\28\ See Rule 961 (Authorizing Give Up of a Clearing Member)
(providing process for an ATP Holder (other than a Market Maker) to
indicate each of its transactions any OCC number of a Clearing
Member through which a transaction will be cleared (i.e., the give
up), subject to the criteria set forth in the rule).
\29\ See Rule 961(g)(1) (providing that, ``[i]f the ATP Holder
has the ability through an Exchange system to do so, the ATP Holder
may change the give up on the trade to another Clearing Member for
whom they are an Authorized ATP Holder or to its Guarantor.''; which
ability ``will end at the Trade Date Cutoff Time.'').
\30\ The Clearing Member Trade Assignment (``CMTA'') process at
OCC facilitates the transfer of option trades/positions from one OCC
clearing member to another in an automated fashion. Changing a CMTA
for a specific transaction would allocate the trade to a different
OCC clearing member than the one initially identified on the trade.
\31\ The transferred positions will continue to be subject to
OCC rules, as they will continue to be held in an account of an OCC
member.
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In the above example, if Market Maker A had initially given up
Clearing Member Y rather than Clearing Member X on the transactions
that resulted in the 1,000 long calls in class ABC, or had changed the
give-up or CMTA to Clearing Member Y pursuant to Rule 961 the ultimate
result would have been the same. There are a variety of reasons why
firms give up or CMTA transactions to certain clearing firms (and not
to non-bank affiliate clearing firms) at the time of a transaction, and
the proposed rule change provides firms with a mechanism to achieve the
same result at a later time.
Proposed paragraph (b) to Rule 997.2NY provides that RWA Transfers
may occur on a routine, recurring basis. As noted in the example above,
clearing firms may impose restrictions on the amount of open positions.
Permitting transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with these restrictions
when necessary to avoid position limits on future options activity.
Additionally, proposed paragraph (f) to Rule 997.2NY provides that no
prior written notice to the Exchange is required for RWA Transfers.
Because of the potential routine basis on which RWA Transfers may
occur, and because of the need for flexibility to comply with the
restrictions described above, the Exchange believes such requirement
may interfere with the ability of ATP Holders to comply with any
Clearing Member restrictions describe above, and may be burdensome to
provide notice for these routine transfers.
Proposed Rule 997.2NY(c) provides that RWA Transfers may result in
the netting of positions. Netting occurs when long positions and short
positions in the same series ``offset'' against each other, leaving no
or a reduced position. For example, if there were 100 long calls in one
account, and 100 short calls of the same option series were added to
that account, the positions would offset, leaving no open positions.
Firms may maintain different clearing accounts for a variety of
reasons, such as the structure of their businesses, the manner in which
they trade, their risk management procedures, and for capital purposes.
While there are times when a firm may not want to close out open
positions to reduce RWA, there are other times when a firm may
determine it is appropriate to close out positions to accomplish a
reduction in RWA.
In the example above, suppose after making the RWA Transfer
described above, Market Maker A effects a transaction on September 25
that results in 1,000 long calls in class ABC, which clears into its
account with Clearing Member X. If Market Maker A had not effected its
RWA Transfer in August, the 1,000 long calls would have offset against
the 1,000 short calls, eliminating both positions and thus any RWA
capital requirements associated with them. At the end of August, Market
Maker A did not want to close out the 1,000 short calls when it made
its RWA Transfer. However, given changed circumstances in September,
Market Maker A has determined it no longer wants to hold those
positions. The proposed rule change would permit Market Maker A to
effect an RWA Transfer of the 1,000 short calls from its account with
Clearing Member Y to its account with Clearing Member X (or vice
versa), which results in elimination of those positions (and a
reduction in RWA associated with them). As noted above, such netting
would have occurred if Market Maker A cleared the September transaction
directly into its account with Clearing Member Y, or had not effected
an RWA Transfer in August. Netting provides market participants with
appropriate flexibility to conduct their businesses as they see fit
while having the ability to reduce RWA capital requirements when
necessary.
Proposed Rule 997.2NY(d) provides that RWA Transfers may not result
in preferential margin or haircut treatment. Finally, per proposed Rule
997.2NY(g), RWA Transfers may only be effected for options listed on
the Exchange, as transfers of non-Exchange listed options and other
financial instruments are not governed by proposed Rule 997.2NY, and
will be subject to applicable laws, rules, and regulations, including
rules of other self-regulatory organizations (including OCC).\32\
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\32\ All RWA Transfers will be subject to all recordkeeping
requirements applicable to ATP Holders and Clearing Members under
the Act, such as Rule 17a-3 and 17a-4.
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Proposed Rule 997.3NY: In-Kind Exchange of Options Positions and ETF
Shares and UIT Units
The Exchange proposes to adopt Rule 997.3NY regarding in-kind
exchanges of options positions and exchange-traded fund (``Fund'')
shares and unit investment trust (``UIT'') interests. As discussed
further below, the ability to effect ``in kind'' transfers is a key
component of the operational structure of a Fund and a UIT. Currently,
in general, Funds and UITs can effect in-kind transfers with respect to
equity securities and fixed-income securities. The in-kind process is
the means by which assets may be added to or removed from Funds and
UITs. The proposed rule change is substantively identical to rules on
other options exchanges and would align the Exchanges rules with that
of its competitors.\33\
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\33\ See NYSE Arca Rule 6.78A-O and Cboe Options Rule 6.9
(except that the Cboe rule does not include a notice provision
related to the transfers that is contained in Rule 6.78A-O(b) and
proposed Rule 997.2NY(b)). See also Securities and Exchange Act
Release No. 90552 (December 2, 2020), 85 FR 79049 (December 8, 2020)
(SR-NYSEArca-2020-102) (immediately effective filing to adopt Rule
6.78A-O to allow in-kind exchange of options positions and ETF
Shares and UIT Units).
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Proposed Rule 997.3NY would add a circumstance under which off-
floor transfers of options positions would be permitted to occur, in
addition to the circumstances in proposed Rules 997.1NY and 997.2NY.
Specifically, Rule 997.3NY would allow positions in options listed on
the Exchange to be transferred off the Exchange by an ATP Holder in
connection with transactions (a) to purchase or redeem ``creation
units'' of Fund Shares between an ``authorized participant'' \34\ and
the issuer \35\ of such Fund Shares \36\ or (b) to create or redeem
units of a UIT between
[[Page 54725]]
a broker-dealer and the issuer \37\ of such UIT units, which transfers
would occur at the price used to calculate the net asset value
(``NAV'') of such Fund Shares or UIT units, respectively. Allowing the
Exchange to permit off-floor transfers of options positions in
connection with the creation and redemption process would enable the
Exchange to compete with other options exchanges that allow such
transfers.
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\34\ The Exchange is proposing that, for purposes of proposed
Rule 997.3NY, the term ``authorized participant'' would be defined
as an entity that has a written agreement with the issuer of Fund
Shares or one of its service providers, which allows the authorized
participant to place orders for the purchase and redemption of
creation units (i.e., specified numbers of Fund Shares). See
proposed Rule 997.3NY(a)(1). While an authorized participant may be
an ATP Holder and directly effect transactions in options on the
Exchange, an authorized participant that is not an ATP Holder may
effect transactions in options on the Exchange through an ATP Holder
on its behalf.
\35\ The Exchange proposes that, for purposes of proposed Rule
997.3NY, any issuer of Fund Shares would be registered with the
Commission as an open-end management investment company under the
Investment Company Act of 1940 (the ``1940 Act''). See proposed Rule
997.3NY(a)(2).
\36\ A Fund Share is a share or other security traded on a
national securities exchange and defined as an NMS stock, as set
forth in in Rule 600(b)(47) of Regulation NMS, which includes open-
end management investment companies registered with the Commission.
See Rule 915, Commentary .06.
\37\ The Exchange proposes that, for purposes of proposed Rule
997.3NY, any issuer of UIT units would be a trust registered with
the Commission as a unit investment trust under the 1940 Act. See
proposed Rule 997.3NY(a)(3).
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However, the Exchange believes it is appropriate to include in
proposed Rule 997.3NY(b) the requirement that ATP Holders that engage
in such transfers ``must, upon request of the Exchange, provide to the
Exchange information relating to the transfers in a form and manner
prescribed by the Exchange.'' The Exchange notes that this proposed
provision is identical to the notice provision in NYSE Arca Rule 6.78A-
O(b), and, like that provision, would help ensure that ATP Holders keep
accurate books and records relating to such transfers for review by the
Exchange, which is to the benefit of all market participants.
The Exchange's proposal mirrors other exchange rules in that
applies solely in the context of transfers of options positions
effected in connection with transactions to purchase or redeem creation
units of Fund Shares between Funds and authorized participants,\38\ and
units of UITs between UITs and sponsors. Other than the transfers
covered by the proposed rule, transactions involving options, whether
held by a Fund or an authorized participant, or a UIT or a sponsor
would be fully subject to all applicable Exchange trading rules.
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\38\ See supra note 34. The term ``authorized participant'' is
specific and narrowly defined. As noted in the Investment Company
Act Release No. 33140 (June 28, 2018), 83 FR 37332 (July 31, 2018)
(the ``Proposed ETF Rule Release''), the requirement that only
authorized participants of a Fund may purchase creation units from
(or sell creation units to) a Fund ``is designed to preserve an
orderly creation unit issuance and redemption process between
[Funds] and authorized participants.'' Furthermore, an ``orderly
creation unit issuance and redemption process is of central
importance to the arbitrage mechanism.'' See Proposed ETF Rule
Release at 83 FR 37348.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\39\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\40\ in particular, because it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, 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 and because it is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. As a general matter, the proposed rules are
substantively identical to rules on other options exchanges and would
align the Exchanges rules with that of its competitors. As such, this
proposal would benefit investors by reducing the administrative burden
of determining whether their off-floor transfers comply with multiple
sets of options exchange rules.
---------------------------------------------------------------------------
\39\ 15 U.S.C. 78f(b).
\40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Proposed Rule 997NY: Transactions Off the Exchange
In particular, the Exchange believes proposed Rule 997NY is
consistent with the Act, because it adopts provisions in the Rules
specifically required by Rules 19c-1 and 19c-3 under the Act, setting
forth the Exchange's general prohibition against off-floor transfers.
The proposed rule change will add transparency to the Exchange rules,
which would benefit investors. In addition, as noted herein, proposed
Rule 997NY is substantively identical to the rules of at least one
other options exchange and would therefore allow the Exchange to
compete on equal footing.
Proposed Rule 997.1NY: Off-Floor Transfer of Positions
The Exchange believes that permitting off-floor transfers in very
limited circumstances would allow ATP Holders to accomplish certain
goals efficiently. Proposed Rule 997.1NY is also substantively
identical to the rules of other options exchanges and, consistent with
those rules, the proposed rule permits non-recurring off-floor
transfers in situations involving dissolutions of entities or accounts,
for purposes of donations, mergers or by operation of law. As noted
above for example, an ATP Holder that is undergoing a structural change
and a one-time movement of positions may require a transfer of
positions or an ATP Holder that is leaving a firm that will no longer
be in business may require a transfer of positions to another firm.
Also, an ATP Holder may require a transfer of positions to make a
capital contribution. The above-referenced circumstances are non-
recurring situations where the transferor continues to maintain some
ownership interest or manage the positions transferred. By contrast,
repeated or routine transfers between entities or accounts--even if
there is no change in beneficial ownership as a result of the
transfer--is inconsistent with the purposes for which the proposed rule
will be adopted. Accordingly, such activity would not be permitted
under the proposed rule. The proposed rule change would provide market
participants that experience these limited, non-recurring events with
an efficient and effective means to transfer positions in these
situations. The Exchange believes the proposed rule change regarding
permissible transfer prices would provide market participants with
flexibility to determine the price appropriate for their business,
which maintain cost bases in accordance with normal accounting
practices and removes impediments to a free and open market.
The proposed rule change which requires notice and maintenance of
records would ensure the Exchange is able to review off-floor transfers
for compliance with the Exchange rules, which prevents fraudulent and
manipulative acts and practices. The requirement to retain records is
consistent with the requirements of Rule 17a-3 and 17a-4 under the Act.
Similar to the rules of other options exchanges, the Exchange would
permit a presidential exemption.\41\ The Exchange believes that this
exemption is consistent with the Act because the Exchange's Chief
Executive Officer or President (or his or her designee(s)) would
consider an exemption in very limited circumstances (i.e., to
facilitate non-routine, nonrecurring movements of positions not
designed to circumvent the normal auction market process). Proposed
Rule 997.1NY(f) specifically provides that the Exchange's Chief
Executive Officer or President (or his or her designee(s)) may in his
or her judgment allow an off-floor transfer if it is necessary or
appropriate for the maintenance of a fair and orderly market and the
protection of investors and is in the public interest, including due to
unusual or extraordinary circumstances such as the market value of the
Person's positions will be comprised by having to comply with the
requirement to trade on the Exchange pursuant to the normal auction
process or, when in the judgment of the President, Chief Executive
Officer, or his or her designee(s), market conditions
[[Page 54726]]
make trading on the Exchange impractical. These standards within
paragraph (f) of the proposed rule are intended to provide guidance
concerning the use of this exemption to the benefit of investors and
the investing public for the maintenance of a fair and orderly market
and the protection of investors and is in the public interest.
---------------------------------------------------------------------------
\41\ See ISE Options 6, Section 5(f); MIAX Rule 1326(f). See
also Cboe Rule 6.8(f).
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Finally, the Exchange believes the conforming change to delete
paragraph (d) to Rule 957NY in light of the comparable notice
requirement in proposed Rule 997.1NY(d) would reduce redundancy, add
clarity, transparency and internal consistent to Exchange rules.
Proposed Rule 997.2NY: Off-Floor RWA Transfers
The Exchange believes proposed Rule 997.2NY to permit RWA
Transfers, which is substantially the same as the rules of other
options markets, would remove impediments to and perfect the mechanism
of a free and open market and a national market system by providing
liquidity in the listed options market. The Exchange believes providing
market participants with an efficient process to reduce RWA capital
requirements attributable to open positions in clearing accounts with
U.S. bank-affiliated clearing firms may contribute to additional
liquidity in the listed options market, which, in general, protects
investors and the public interest.
The proposal to permit RWA Transfers to occur on a routine,
recurring basis and result in netting, also provides market
participants with sufficient flexibility to reduce RWA capital
requirements at times necessary to comply with requirements imposed on
them by clearing firms. This would permit market participants to
respond to then-current market conditions, including volatility and
increased volume, by reducing the RWA capital requirements associated
with any new positions they may open while those conditions exist.
Given the additional capital that may become available to market
participants as a result of the RWA Transfers, market participants
would be able to continue to provide liquidity to the market, even
during periods of increased volume and volatility, which liquidity
ultimately benefits investors. It is not possible for market
participants to predict what market conditions will exist at a specific
time, and when volatility will occur. The proposed rule change to
permit routine, recurring RWA Transfers (without any required prior
written notice) would provide market participants with the ability to
respond to these conditions whenever they occur. Permitting such
transfers on a routine, recurring basis will provide market
participants with the flexibility to comply with applicable
restrictions when necessary to avoid position limits on future options
activity. In addition, with respect to netting, as discussed above,
firms may maintain different clearing accounts for a variety of
reasons, such as the structure of their businesses, the manner in which
they trade, their risk management procedures, and for capital purposes.
Netting may otherwise occur with respect to a firm's positions if it
structured its clearing accounts differently, such as by using a
universal account. Therefore, the proposed rule change will permit
netting while allowing firms to continue to maintain different clearing
accounts in a manner consistent with their businesses.
The Exchange recognizes the numerous benefits of executing options
transactions on exchanges, including price transparency, potential
price improvement, and a clearing guarantee. However, the Exchange
believes it is appropriate to permit RWA Transfers to occur off the
Exchange, as these benefits are inapplicable to RWA Transfers, which
are narrow in scope and intended to achieve a limited beneficial
purpose. RWA Transfers are not intended to be a competitive trading
tool. There is no need for price discovery or improvement, as the
purpose of the transfer is to reduce RWA asset capital requirements
attributable to a market participants' positions. Unlike trades on an
exchange, the price at which an RWA Transfers occurs is immaterial--the
resulting reduction in RWA is the critical part of the transfer. RWA
Transfers will result in no change in ownership, and thus they do not
constitute trades with a counterparty (and thus eliminating the need
for a counterparty guarantee). The transactions that resulted in the
open positions to be transferred as an RWA Transfer were already
guaranteed by a Clearing Member, and the positions will continue to be
subject to OCC rules, as they will continue to be held in an account
with a Clearing Member. The narrow scope of the proposed rule change
and the limited, beneficial purpose of RWA Transfers make allowing RWA
Transfers to occur off the floor appropriate and important to support
the provision of liquidity in the listed options market.
The proposed rule change does not unfairly discriminate against
market participants, as all ATP Holders and non-ATP Holders with open
positions in options listed on the Exchange may use the proposed off-
floor transfer process to reduce the RWA capital requirements of
Clearing Members. Finally, this proposed rule change would align
Exchange rules with those of other options exchanges, thereby allowing
the Exchange to compete on equal footing.
Proposed Rule 997.3NY: In-Kind Exchange of Options Positions and ETF
Shares and UIT Units
The Exchange believes proposed Rule 997.3NY to permit off-floor
transfers in connection with the in-kind Fund and UIT creation and
redemption process would promote just and equitable principles of trade
as it would permit Funds and UITs that invest in options traded on the
Exchange to utilize the in-kind creation and redemption process that is
available for Funds and UITs that invest in equities and fixed-income
securities.
The Exchange believes it is appropriate to require ATP Holders that
engage in off-floor transfers as provided in proposed Rule 997.3NY(b)
to keep records of such transactions such that this information could
be shared with the Exchange upon request. The Exchange believes this
provision, which is identical to NYSE Arca Rule 6.78A-O(b), would
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade because the provision would help
ensure that ATP Holders keep accurate books and records relating to
such transfers for review by the Exchange, which is to the benefit of
all market participants. Finally, this proposed rule change would align
Exchange rules with those of other options exchanges, thereby allowing
the Exchange to compete on equal footing.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal would not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of Section 6(b)(8) of the Act.\42\ The proposed rules are
not intended to be competitive trading tools, but rather to set forth
the general prohibition against off-floor transactions and to
facilitate certain off-floor transactions in limited circumstances that
meet the enumerated criteria.
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78f(b)(8).
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The Exchange does not believe the proposed rule change regarding
off-floor position transfers set forth in the proposed rules would
impose an undue burden on intra-market competition as
[[Page 54727]]
the transfer procedure(s) may be utilized by any ATP Holder and the
rule would apply uniformly to all ATP Holders. Use of each off-floor
transfer procedure is voluntary and all ATP Holders may use each such
procedure to transfer positions as long as the criteria in the proposed
rule are satisfied.
The Exchange does not believe the proposed rule change will impose
an undue burden on inter-market competition. As indicated above, it is
intended to provide an additional clearly delineated and limited
circumstance in which options positions can be transferred off an
exchange (as well as to set forth the general prohibition against such
transfers). Additionally, as discussed above, the proposed rule change
is substantively identical to the rules of other options exchanges and
would allow the Exchange to compete on equal footing. Moreover, the
Exchange believes having similar rules related to off-floor position
transfers to those of other options exchanges will reduce the
administrative burden on market participants of determining whether
their transfers comply with multiple sets of rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \43\ and Rule 19b-4(f)(6) thereunder.\44\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\45\
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\43\ 15 U.S.C. 78s(b)(3)(A)(iii).
\44\ 17 CFR 240.19b-4(f)(6).
\45\ 15 U.S.C. 78s(b)(3)(A)(iii). Rule 19b-4(f)(6)(iii) requires
a self-regulatory organization 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
Commission notes that the Exchange satisfied this requirement.
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) of the Act \46\ to determine whether the proposed
rule change should be approved or disapproved.
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\46\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2022-36 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-2022-36. 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-2022-36 and should be submitted
on or before September 28, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
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\47\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19226 Filed 9-6-22; 8:45 am]
BILLING CODE 8011-01-P
