Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Rule 6.62P-O(g)(1), 62115-62118 [2023-19357]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices
The Exchange believes that the
proposed rule change would not impose
a burden on competing options
exchanges. The Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues. When
an exchange offers enhanced
functionality (like the proposed Strategy
Limit per Symbol) that distinguishes it
from the competition and participants
find it useful, it has been the Exchange’s
experience that competing exchanges
will move to adopt similar functionality.
Thus, the Exchange believes that this
type of competition amongst exchanges
is beneficial to the entire marketplace as
it can result in enhanced processes,
functionality, and technologies.
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
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
lotter on DSK11XQN23PROD with NOTICES1
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, 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, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
13 17
VerDate Sep<11>2014
17:30 Sep 07, 2023
Jkt 259001
62115
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.14
Sherry R. Haywood,
Assistant Secretary.
Electronic Comments
[FR Doc. 2023–19356 Filed 9–7–23; 8:45 am]
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEARCA–2023–56 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEARCA–2023–56. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEARCA–2023–56 and should be
submitted on or before September 29,
2023.
PO 00000
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98279; File No. SR–
NYSEARCA–2023–57]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify Rule 6.62P–
O(g)(1)
September 1, 2023.
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
18, 2023, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify
Rule 6.62P–O(g)(1) regarding Complex
Qualified Contingent Cross Orders. 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.
14 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
Frm 00070
Fmt 4703
Sfmt 4703
E:\FR\FM\08SEN1.SGM
08SEN1
62116
Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
lotter on DSK11XQN23PROD with NOTICES1
1. Purpose
The Exchange proposes to modify
Rule 6.62P–O(g)(1) regarding Complex
Qualified Contingent Cross (‘‘QCC’’)
Orders to allow Complex QCC Orders in
non-standard ratios (as defined below)
to be processed electronically.
Rule 6.62P–O(f) provides that a
Complex Order is any order involving
the simultaneous purchase and/or sale
of two or more option series in the same
underlying security (the ‘‘legs’’ or
‘‘components’’ of the Complex Order),
for the same account, in a ratio that is
equal to or greater than one-to-three
(.333) and less than or equal to three-toone (3.00) (referred to herein as the
‘‘standard ratio’’ or ‘‘standard ratio
requirement’’).The Exchange currently
permits certain Complex Orders with
ratios greater than three-to-one or less
than one-to-three (‘‘non-standard
ratios’’) for execution on the Exchange’s
trading floor.4 This proposed change is
competitive as at least one other options
exchange permits Complex QCC Orders
in non-standard ratios to be processed
electronically.5 As such, the Exchange
proposes to add new Rule 6.62P–
O(g)(1)(G) to specify that Complex QCC
4 See, e.g., Rule 6.62P–O(h)(6)(B) (regarding
Stock/Complex Orders, which are a subset of
Complex Orders (per Rule 6.62P–O(f)), that are only
available for trading in Open Outcry and are not
subject to the standard ratio requirement).
5 In June 2022, Cboe Exchange, Inc. (‘‘Cboe’’)
began supporting the electronic processing of
certain stock-option orders in non-standard ratios,
including Complex QCC Orders. See Cboe Exchange
Alert, ‘‘Schedule Update—Cboe Options Introduces
New Net, Leg Price Increments and Enhanced
Electronic, Open Outcry Handling for Complex
Orders with Non-Conforming Ratios, Reference ID:
C2022060301 available online at https://
cdn.cboe.com/resources/release_notes/2022/
Schedule-Update-Cboe-Options-Introduces-NewNet-Leg-Price-Increments-and-Enhanced-ElectronicOpen-Outcry-Handling-for-Complex-Orders-withNon-Conforming-Ratios.pdf (providing, in relevant
part, that beginning June 12, 2022, ‘‘automated
handling via COA, COB, AIM, and QCC will be
available for applicable non-conforming orders,
except in SPX/SPXW). See also Securities Exchange
Act Release Nos. 94204 (February 9, 2022), 87 FR
8625 (February 15, 2022) (SR–CBOE–2021–046)
(order approving Cboe’s proposal, as amended, to
permit complex orders with ratios less than one-tothree and greater than three-to-one to be eligible for
electronic processing and to trade in penny
increments); 95006 (May 31, 2022), 87 FR 34334
(June 6, 2022) (SR–CBOE–2022–024) (allowing Cboe
to retain discretion to determine on class-by-class
basis eligibility for electronic processing of complex
orders with ratios less than one-to-three and greater
than three-to-one (i.e., ratios other than the standard
ratio requirement). The current proposal is limited
to allowing Complex QCC Orders regardless of ratio
to be traded electronically. If the Exchange opts to
allow other (non-QCC) Complex Orders in any ratio
to be traded electronically, the Exchange will
submit a separate rule filing.
VerDate Sep<11>2014
17:30 Sep 07, 2023
Jkt 259001
Orders may be processed electronically
in non-standard ratios.6
Rule 6.62P–O(g)(1) provides that a
QCC Order must be comprised of an
originating order to buy or sell at least
1,000 contracts that is identified as
being part of a qualified contingent
trade coupled with a contra-side order
or orders totaling an equal number of
contracts.7 A Complex QCC Order is a
QCC Order that has more than one
option leg and each option leg must
have at least 1,000 contracts.8 Like QCC
Orders, each Complex QCC Order must
be a part of a ‘‘qualified contingent
trade’’ (‘‘QCT’’), which is a transaction
consisting of two or more component
orders, one of which must be a stock
leg.9 The Exchange notes that there may
be instances when an order sender must
submit a Complex QCC in a nonstandard ratio to meet the QCT criteria
(e.g., to be fully hedged).10
The proposed rule change would have
no impact on the pricing of Complex
QCCs because the same (existing)
pricing requirements apply to all
Complex QCC Orders that are
electronically processed by the
Exchange. Specifically, no option leg of
a Complex QCC Order will trade at a
price worse than the Exchange BBO 11
and a Complex QCC Order will be
rejected based on its price if:
• ‘‘any option leg cannot execute in
compliance with paragraph (g)(1)(C) of
this Rule’’, i.e., cannot meet the pricing
requirements for single-leg QCC
Orders’’; 12
6 See proposed Rule 6.62P–O(g)(1)(G) (‘‘Complex
QCC Orders are eligible for electronic processing
regardless of the ratio in the component legs.’’). The
Exchange notes that other options exchanges offer
Complex QCC Orders, however, the rules of these
options exchanges are silent as to whether they
permit Complex QCC Orders in non-standard ratios
to be processed electronically. See, e.g., Nasdaq ISE,
LLC (‘‘ISE’’) Options 3, Section 12(d) (describing
Complex Qualified Cross Orders).
7 See Rule 6.62P–O(g)(1)(B) for the definition of
a Qualified Contingent Trade.
8 See Rule 6.62P–O(g)(1) (defining Complex QCC
Orders). See also Rule 6.62P–O(g)(1)(D) regarding
pricing requirements for Complex QCCs. This
proposal does not alter the pricing requirements for
Complex QCC Orders and such requirements apply
regardless of whether a Complex QCC Order has a
standard (or non-standard) ratio.
9 See Rule 6.62P–O(g)(1)(B)(i). See generally Rule
6.62P–O(g)(1)(B) (setting forth criteria for a
Qualified Contingent Trade).
10 See Rule 6.62P–O(g)(1)(B)(vi) (providing that
the QCT transaction must be ‘‘fully hedged (without
regard to any prior existing position) as a result of
other components of the contingent trade.’’).
11 See Rule 6.62P–O(g)(1)(D) (providing that ‘‘no
option leg [of a Complex QCC Order] will trade at
a price worse than the Exchange BBO’’).
12 See Rule 6.62P–O(g)(1)(D)(i). See also Rule
6.62P–O(g)(1)(C) (Execution of QCC Orders) (‘‘A
QCC Order with one option leg will be rejected if
received when the NBBO is crossed or if it will
trade at a price that (i) is at the same price as a
displayed Customer order on the Consolidated Book
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
• ‘‘the best-priced Complex Order(s)
on the Exchange contain(s) displayed
Customer interest and the Complex QCC
Order price does not improve such
displayed Customer interest by 0.01;’’ 13
or
• ‘‘the price of the QCC Order is
worse than the best-priced Complex
Orders in the Consolidated Book.’’ 14
Thus, under this proposal, the
Exchange would ensure that every
component leg of a Complex QCC Order
(regardless of ratio) would trade at a
price that is equal to or better than the
Exchange BBO and better than
displayed Customer interest on the
Exchange in the same manner as it does
today. In other words, the proposed rule
change continues to protect interest in
the leg markets as well as displayed
Customer interest on the Exchange.
Implementation
The Exchange will announce by
Trader Update the implementation date
of the proposed rule change, which
implementation will be no later than 90
days after the effectiveness of this rule
change.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’),15 in general, and furthers
the objectives of Section 6(b)(5) of the
Act,16 in particular, in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in 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
and (ii) is not at or between the NBB’’ and requiring
that ‘‘[a] QCC Order with one option leg will never
trade at a price worse than the Exchange BBO.’’).
13 See Rule 6.62P–O(g)(1)(D)(ii). The Exchange
proposes to amend current Rule 6.62P–O(g)(1)(D)(ii)
to clarify that the Complex QCC Order must price
improve any displayed Customer interest by ‘‘at
least’’ one penny ($0.01), which would make the
Rule more accurate. See proposed Rule 6.62P–
O(g)(1)(D)(ii).
14 See Rule 6.62P–O(g)(1)(D)(iii). The Exchange
proposes to amend current Rule 6.62P–
O(g)(1)(D)(iii) to clarify that this provision refers to
the price of the ‘‘Complex’’ QCC Order, which
would make the Rule more accurate. See proposed
Rule 6.62P–O(g)(1)(D)(iii). The Exchange would
continue to reject Complex QCC Orders (regardless
of ratio) if ‘‘the prices of the best-priced Complex
Orders in the Consolidated Book are crossed’’; or
‘‘for any option leg there is no NBO.’’ See Rule
6.62P–O(g)(1)(D)(iii), (iv), respectively.
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
E:\FR\FM\08SEN1.SGM
08SEN1
Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
system and, in general, to protect
investors and the public interest.
In particular, the proposed rule
change will remove impediments to and
perfect the mechanism of a free and
open market and a national market
system because it will enable the
Exchange to compete on equal footing
with other exchanges that permit
trading of Complex QCCs with nonstandard ratios.17 The proposed rule
change would continue to protect
investors and the public interest
because the (approved) pricing
requirements for Complex QCC Orders
would continue to apply to Complex
QCC Orders with non-standard ratios.
As such, the proposal would ensure that
the Complex QCC Order is priced equal
to or better than the best-priced
Complex Order(s) and, if there is
displayed Customer interest on such
order(s), that the execution price of the
Complex QCC Order improves the price
of the displayed Customer interest and
improves the price of displayed
Customer interest on each component
leg of the Complex QCC Order.
In addition, the proposed change
would promote just and equitable
principles of trade, 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 because it would provide
another venue for electronically
executing Complex QCC Orders with
non-standard ratios. The proposed
change would also increase
opportunities for execution of Complex
QCC Orders with non-standard ratios,
which benefits all investors. The
Exchange also believes that the
proposed rule change would not permit
unfair discrimination among market
participants, as all market participants
may opt to trade Complex QCC Orders
with non-standard ratios.
The Exchange believes that the
proposed clarifying changes would
ensure accuracy of the proposed rule,
which benefits all investors.18
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that its
proposed rule change will impose any
burden on intra-market competition as it
would apply equally to all market
participants that opt to submit Complex
17 See
18 See
supra note 5.
supra notes 13–14.
VerDate Sep<11>2014
17:30 Sep 07, 2023
Jkt 259001
QCC Orders with non-standard ratios for
electronic processing, which orders the
Exchange will process in a uniform
manner.
The Exchange does not believe that its
proposed rule change will impose any
burden on inter-market competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
rather the Exchange believes that its
proposal will promote inter-market
competition. As noted here, the
proposed change is competitive as
another options exchange currently
permits Complex QCC Orders with nonstandard ratios to be traded
electronically. The Exchange’s proposal
will enhance inter-market competition
by providing an additional venue where
investors may electronically execute
Complex QCC Orders with non-standard
ratios, giving investors greater flexibility
and a choice of where to send their
orders. Market participants may find it
more convenient to access one exchange
over another or may choose to
concentrate volume at a particular
exchange to maximize the impact of
volume-based incentive programs or
may prefer the trade execution services
of one exchange over another.
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
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 19 and Rule 19b–
4(f)(6) thereunder.20 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, 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, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
20 17
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
62117
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEARCA–2023–57 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEARCA–2023–57. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
E:\FR\FM\08SEN1.SGM
08SEN1
62118
Federal Register / Vol. 88, No. 173 / Friday, September 8, 2023 / Notices
SR–NYSEARCA–2023–57 and should be
submitted on or before September 29,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–19357 Filed 9–7–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98276; File No. SR–LCH
SA–2023–005]
Self-Regulatory Organizations; LCH
SA; Order Approving Proposed Rule
Change Relating to Portfolio Margining
September 1, 2023.
I. Introduction
On May 30, 2023, Banque Centrale de
Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (‘‘Proposed Rule
Change’’) to revise its portfolio
margining program (‘‘Program’’) and
make other unrelated changes. The
Proposed Rule Change was published
for comment in the Federal Register on
July 19, 2023.3 The Commission has not
received any comments on the Proposed
Rule Change. For the reasons discussed
below, the Commission is approving the
Proposed Rule Change.
II. Description of the Proposed Rule
Change
LCH SA is a clearing agency that
offers clearing of, among other things,
credit-default swaps (‘‘CDS’’).4 LCH SA
is registered with the Commission for
clearing CDS that are security-based
swaps (‘‘SBS’’) and with the Commodity
Futures Trading Commission (‘‘CFTC’’)
for clearing CDS that are swaps. As part
of its CDS clearing business, LCH offers
clearing of CDS submitted by Clearing
Members on behalf of their U.S. clients.
As part of this U.S. client clearing, LCH
21 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 97888 (July
13, 2023), 88 FR 46221 (July 19, 2023) (File No. SR–
LCH–2023–005) (‘‘Notice’’).
4 Capitalized terms used but not defined herein
have the meanings specified in the LCH SA Rule
Book (‘‘Rule Book’’), CDS Clearing Supplement
(‘‘Supplement’’), CDS Clearing Procedures
(‘‘Procedures’’), and FCM/BD CDS Clearing
Regulations (‘‘Regulations’’), as applicable.
lotter on DSK11XQN23PROD with NOTICES1
1 15
VerDate Sep<11>2014
17:30 Sep 07, 2023
Jkt 259001
previously proposed, and the
Commission approved, certain changes
to its rules and procedures to allow for
portfolio margining.5
Portfolio margining is the practice by
which transactions in SBS are cleared
and held on a commingled basis with
transactions in swaps. Under such a
portfolio margining arrangement,
Clearing Members are able to maintain
reduced levels of margin that are
commensurate with the risks of the
portfolio based on correlations in a
Clearing Member’s cleared CDS
positions consisting of both swaps and
SBS. LCH is required to conduct its
portfolio margining program pursuant to
the terms and conditions of an
exemptive order issued by the
Commission,6 as well as an exemptive
order issued by the Commodity Futures
Trading Commission (‘‘CFTC’’).7 Under
these orders, LCH SA’s Clearing
Members that are registered future
commission merchants (‘‘FCM’’) and
broker-dealers (‘‘BD’’) are authorized to
clear and hold SBS transactions a
commingled basis with cleared swaps
on behalf of their clients (‘‘FCM/BD
Clients’’).
The purpose of the Proposed Rule
Change is to revise and update LCH
SA’s portfolio margining program (the
‘‘Program’’). The Proposed Rule Change
would amend certain provisions of the
Rule Book and Procedures regarding
collateral, the client collateral buffer,
and the release of collateral to a Clearing
Member. The Proposed Rule Change
would update LCH SA’s Liquidity Risk
Modelling Framework (‘‘LRMF’’) with
respect to the liquidity resources and
requirements applicable to FCM/BD
Clearing Members. Finally, The
Proposed Rule Change will also make
other miscellaneous amendments to
LCH SA’s Rule Book and Procedures.
These miscellaneous amendments cover
Time References, Real Time Session,
and Personnel Requirements.
5 See Order Approving Proposed Rule Change to
Adopt ICC’s Enhanced Margin Methodology,
Exchange Act Release No. 66001 (Dec. 16, 2011).
6 Exchange Act Release 34–93501 Order Granting
Conditional Exemptions Under the Securities
Exchange Act of 1934 in Connection With the
Portfolio Margining of Cleared Swaps and SecurityBased Swaps That Are Credit Default Swaps’’, 86
FR 61357 (November 5, 2021) (‘‘Portfolio Margining
Order’’). The Portfolio Margining Order replaced a
similar Commission order issued in 2012. See Order
Granting Conditional Exemptions under the
Securities Exchange Act of 1934 in Connection with
Portfolio Margining of Swaps and Security-based
Swaps, Exchange Act Release No. 68433 (Dec. 12,
2012) 77 FR 75211 (Dec. 19, 2012).
7 See Treatment of Funds Held in Connection
with Clearing by LCH SA of Single-Name Credit
Default Swaps, Including Spun-Out Component
Transactions (Nov. 1, 2021), available at https://
www.cftc.gov/media/6711/lchsa4dorder11022021/
download.
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
A. Portfolio Margining Program
As discussed above, LCH first
established the Program in 2021.
Currently, the basis for the Program is
primarily Article 6.2.1.1 of the Rule
Book and Section 3 of the Procedures.
As discussed further below, the
Proposed Rule Change would delete
Article 6.2.1.1 from the Rule Book,
replace it with a new Regulation 7, and
revise Section 3 of the Procedures.
Article 6.2.1.1(iii) of the Rule Book and
Regulation 7
Article 6.2.1.1(iii) currently provides
that an FCM/BD Clearing Member that
is both an FCM and a BD may elect to
clear and hold FCM/BD Cleared
Transactions that are SBS for FCM/BD
Clients in the FCM/BD Swaps Client
Account Structure on a commingled
basis with Cleared Swaps and margin
such combined positions on a portfolio
basis in compliance with Applicable
Laws, provided that each FCM/BD
Client is an eligible contract participant
as defined in Section 1a(18) of the
Commodity Exchange Act. As
mentioned, the Proposed Rule Change
would delete this provision and replace
with a new Regulation 7, as part of the
FCM/BD CDS Clearing Regulations.
New Regulation 7 would maintain the
requirements currently found in Article
6.2.1.1(iii) while also clarifying
operation of the program.
Paragraph (a) of Regulation 7, In
General, would define Program as the
ability of FCM/BD Clearing Members,
on behalf of their FCM/BD clients, to
portfolio margin FCM/BD Cleared
Transactions 8 that are SBS with FCM/
BD Cleared Transactions that are
Cleared Swaps.9
Paragraph (b) of Regulation 7,
Participation, would state that FCM/BD
Clearing Members may participate in
the Program by providing LCH SA
materials that LCH SA may require from
time to time.10 This section would also
provide that, in providing these
materials to LCH SA, the FCM/BD
Clearing Member shall be deemed to
represent that: (i) it is both an FCM and
a BD and neither such status has been
8 The Proposed Rule Change would define the
term ‘‘FCM/BD Portfolio Margining Transaction’’ to
mean an FCM/BD Cleared Transaction that is an
SBS and which is held in the FCM/BD Swaps Client
Account Structure pursuant to the Portfolio
Margining Program. The Proposed Rule Change
would add references to this new defined term,
where relevant, in the Regulations, the Procedures,
and the Rule Book.
9 The Definitions section of the Regulations will
be amended to define the ‘‘Portfolio Margining
Program’’ by making a direct reference to
Regulation 7(a) in the Regulations.
10 A ‘‘Clearing Member’’ is defined as a general
member or a select member, as the context requires.
E:\FR\FM\08SEN1.SGM
08SEN1
]]>Agencies
[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Notices]
[Pages 62115-62118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19357]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98279; File No. SR-NYSEARCA-2023-57]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify Rule
6.62P-O(g)(1)
September 1, 2023.
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 18, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Rule 6.62P-O(g)(1) regarding
Complex Qualified Contingent Cross Orders. The proposed rule change is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
[[Page 62116]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify Rule 6.62P-O(g)(1) regarding
Complex Qualified Contingent Cross (``QCC'') Orders to allow Complex
QCC Orders in non-standard ratios (as defined below) to be processed
electronically.
Rule 6.62P-O(f) provides that a Complex Order is any order
involving the simultaneous purchase and/or sale of two or more option
series in the same underlying security (the ``legs'' or ``components''
of the Complex Order), for the same account, in a ratio that is equal
to or greater than one-to-three (.333) and less than or equal to three-
to-one (3.00) (referred to herein as the ``standard ratio'' or
``standard ratio requirement'').The Exchange currently permits certain
Complex Orders with ratios greater than three-to-one or less than one-
to-three (``non-standard ratios'') for execution on the Exchange's
trading floor.\4\ This proposed change is competitive as at least one
other options exchange permits Complex QCC Orders in non-standard
ratios to be processed electronically.\5\ As such, the Exchange
proposes to add new Rule 6.62P-O(g)(1)(G) to specify that Complex QCC
Orders may be processed electronically in non-standard ratios.\6\
---------------------------------------------------------------------------
\4\ See, e.g., Rule 6.62P-O(h)(6)(B) (regarding Stock/Complex
Orders, which are a subset of Complex Orders (per Rule 6.62P-O(f)),
that are only available for trading in Open Outcry and are not
subject to the standard ratio requirement).
\5\ In June 2022, Cboe Exchange, Inc. (``Cboe'') began
supporting the electronic processing of certain stock-option orders
in non-standard ratios, including Complex QCC Orders. See Cboe
Exchange Alert, ``Schedule Update--Cboe Options Introduces New Net,
Leg Price Increments and Enhanced Electronic, Open Outcry Handling
for Complex Orders with Non-Conforming Ratios, Reference ID:
C2022060301 available online at https://cdn.cboe.com/resources/release_notes/2022/Schedule-Update-Cboe-Options-Introduces-New-Net-Leg-Price-Increments-and-Enhanced-Electronic-Open-Outcry-Handling-for-Complex-Orders-with-Non-Conforming-Ratios.pdf (providing, in
relevant part, that beginning June 12, 2022, ``automated handling
via COA, COB, AIM, and QCC will be available for applicable non-
conforming orders, except in SPX/SPXW). See also Securities Exchange
Act Release Nos. 94204 (February 9, 2022), 87 FR 8625 (February 15,
2022) (SR-CBOE-2021-046) (order approving Cboe's proposal, as
amended, to permit complex orders with ratios less than one-to-three
and greater than three-to-one to be eligible for electronic
processing and to trade in penny increments); 95006 (May 31, 2022),
87 FR 34334 (June 6, 2022) (SR-CBOE-2022-024) (allowing Cboe to
retain discretion to determine on class-by-class basis eligibility
for electronic processing of complex orders with ratios less than
one-to-three and greater than three-to-one (i.e., ratios other than
the standard ratio requirement). The current proposal is limited to
allowing Complex QCC Orders regardless of ratio to be traded
electronically. If the Exchange opts to allow other (non-QCC)
Complex Orders in any ratio to be traded electronically, the
Exchange will submit a separate rule filing.
\6\ See proposed Rule 6.62P-O(g)(1)(G) (``Complex QCC Orders are
eligible for electronic processing regardless of the ratio in the
component legs.''). The Exchange notes that other options exchanges
offer Complex QCC Orders, however, the rules of these options
exchanges are silent as to whether they permit Complex QCC Orders in
non-standard ratios to be processed electronically. See, e.g.,
Nasdaq ISE, LLC (``ISE'') Options 3, Section 12(d) (describing
Complex Qualified Cross Orders).
---------------------------------------------------------------------------
Rule 6.62P-O(g)(1) provides that a QCC Order must be comprised of
an originating order to buy or sell at least 1,000 contracts that is
identified as being part of a qualified contingent trade coupled with a
contra-side order or orders totaling an equal number of contracts.\7\ A
Complex QCC Order is a QCC Order that has more than one option leg and
each option leg must have at least 1,000 contracts.\8\ Like QCC Orders,
each Complex QCC Order must be a part of a ``qualified contingent
trade'' (``QCT''), which is a transaction consisting of two or more
component orders, one of which must be a stock leg.\9\ The Exchange
notes that there may be instances when an order sender must submit a
Complex QCC in a non-standard ratio to meet the QCT criteria (e.g., to
be fully hedged).\10\
---------------------------------------------------------------------------
\7\ See Rule 6.62P-O(g)(1)(B) for the definition of a Qualified
Contingent Trade.
\8\ See Rule 6.62P-O(g)(1) (defining Complex QCC Orders). See
also Rule 6.62P-O(g)(1)(D) regarding pricing requirements for
Complex QCCs. This proposal does not alter the pricing requirements
for Complex QCC Orders and such requirements apply regardless of
whether a Complex QCC Order has a standard (or non-standard) ratio.
\9\ See Rule 6.62P-O(g)(1)(B)(i). See generally Rule 6.62P-
O(g)(1)(B) (setting forth criteria for a Qualified Contingent
Trade).
\10\ See Rule 6.62P-O(g)(1)(B)(vi) (providing that the QCT
transaction must be ``fully hedged (without regard to any prior
existing position) as a result of other components of the contingent
trade.'').
---------------------------------------------------------------------------
The proposed rule change would have no impact on the pricing of
Complex QCCs because the same (existing) pricing requirements apply to
all Complex QCC Orders that are electronically processed by the
Exchange. Specifically, no option leg of a Complex QCC Order will trade
at a price worse than the Exchange BBO \11\ and a Complex QCC Order
will be rejected based on its price if:
---------------------------------------------------------------------------
\11\ See Rule 6.62P-O(g)(1)(D) (providing that ``no option leg
[of a Complex QCC Order] will trade at a price worse than the
Exchange BBO'').
---------------------------------------------------------------------------
``any option leg cannot execute in compliance with
paragraph (g)(1)(C) of this Rule'', i.e., cannot meet the pricing
requirements for single-leg QCC Orders''; \12\
---------------------------------------------------------------------------
\12\ See Rule 6.62P-O(g)(1)(D)(i). See also Rule 6.62P-
O(g)(1)(C) (Execution of QCC Orders) (``A QCC Order with one option
leg will be rejected if received when the NBBO is crossed or if it
will trade at a price that (i) is at the same price as a displayed
Customer order on the Consolidated Book and (ii) is not at or
between the NBB'' and requiring that ``[a] QCC Order with one option
leg will never trade at a price worse than the Exchange BBO.'').
---------------------------------------------------------------------------
``the best-priced Complex Order(s) on the Exchange
contain(s) displayed Customer interest and the Complex QCC Order price
does not improve such displayed Customer interest by 0.01;'' \13\ or
---------------------------------------------------------------------------
\13\ See Rule 6.62P-O(g)(1)(D)(ii). The Exchange proposes to
amend current Rule 6.62P-O(g)(1)(D)(ii) to clarify that the Complex
QCC Order must price improve any displayed Customer interest by ``at
least'' one penny ($0.01), which would make the Rule more accurate.
See proposed Rule 6.62P-O(g)(1)(D)(ii).
---------------------------------------------------------------------------
``the price of the QCC Order is worse than the best-priced
Complex Orders in the Consolidated Book.'' \14\
---------------------------------------------------------------------------
\14\ See Rule 6.62P-O(g)(1)(D)(iii). The Exchange proposes to
amend current Rule 6.62P-O(g)(1)(D)(iii) to clarify that this
provision refers to the price of the ``Complex'' QCC Order, which
would make the Rule more accurate. See proposed Rule 6.62P-
O(g)(1)(D)(iii). The Exchange would continue to reject Complex QCC
Orders (regardless of ratio) if ``the prices of the best-priced
Complex Orders in the Consolidated Book are crossed''; or ``for any
option leg there is no NBO.'' See Rule 6.62P-O(g)(1)(D)(iii), (iv),
respectively.
---------------------------------------------------------------------------
Thus, under this proposal, the Exchange would ensure that every
component leg of a Complex QCC Order (regardless of ratio) would trade
at a price that is equal to or better than the Exchange BBO and better
than displayed Customer interest on the Exchange in the same manner as
it does today. In other words, the proposed rule change continues to
protect interest in the leg markets as well as displayed Customer
interest on the Exchange.
Implementation
The Exchange will announce by Trader Update the implementation date
of the proposed rule change, which implementation will be no later than
90 days after the effectiveness of this rule change.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\15\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\16\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in 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
[[Page 62117]]
system and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the proposed rule change will remove impediments to
and perfect the mechanism of a free and open market and a national
market system because it will enable the Exchange to compete on equal
footing with other exchanges that permit trading of Complex QCCs with
non-standard ratios.\17\ The proposed rule change would continue to
protect investors and the public interest because the (approved)
pricing requirements for Complex QCC Orders would continue to apply to
Complex QCC Orders with non-standard ratios. As such, the proposal
would ensure that the Complex QCC Order is priced equal to or better
than the best-priced Complex Order(s) and, if there is displayed
Customer interest on such order(s), that the execution price of the
Complex QCC Order improves the price of the displayed Customer interest
and improves the price of displayed Customer interest on each component
leg of the Complex QCC Order.
---------------------------------------------------------------------------
\17\ See supra note 5.
---------------------------------------------------------------------------
In addition, the proposed change would promote just and equitable
principles of trade, 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 because it would provide
another venue for electronically executing Complex QCC Orders with non-
standard ratios. The proposed change would also increase opportunities
for execution of Complex QCC Orders with non-standard ratios, which
benefits all investors. The Exchange also believes that the proposed
rule change would not permit unfair discrimination among market
participants, as all market participants may opt to trade Complex QCC
Orders with non-standard ratios.
The Exchange believes that the proposed clarifying changes would
ensure accuracy of the proposed rule, which benefits all investors.\18\
---------------------------------------------------------------------------
\18\ See supra notes 13-14.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that its proposed rule change will impose any burden on intra-
market competition as it would apply equally to all market participants
that opt to submit Complex QCC Orders with non-standard ratios for
electronic processing, which orders the Exchange will process in a
uniform manner.
The Exchange does not believe that its proposed rule change will
impose any burden on inter-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act, rather the
Exchange believes that its proposal will promote inter-market
competition. As noted here, the proposed change is competitive as
another options exchange currently permits Complex QCC Orders with non-
standard ratios to be traded electronically. The Exchange's proposal
will enhance inter-market competition by providing an additional venue
where investors may electronically execute Complex QCC Orders with non-
standard ratios, giving investors greater flexibility and a choice of
where to send their orders. Market participants may find it more
convenient to access one exchange over another or may choose to
concentrate volume at a particular exchange to maximize the impact of
volume-based incentive programs or may prefer the trade execution
services of one exchange over another.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). In addition, 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, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEARCA-2023-57 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEARCA-2023-57. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number
[[Page 62118]]
SR-NYSEARCA-2023-57 and should be submitted on or before September 29,
2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19357 Filed 9-7-23; 8:45 am]
BILLING CODE 8011-01-P
