Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Rule 6.62P-O, 9188-9192 [2024-02647]
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Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Notices
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BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99470; File No. SR–
NYSEARCA–2024–09]
ddrumheller on DSK120RN23PROD with NOTICES1
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify Rule 6.62P–O
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
U.S.C. 78s(b)(1).
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 (Orders and Modifiers) to
adopt electronic Customer Cross Order
and Complex Customer Cross Order
functionality and to amend Rule 1.1
(Definitions) to clarify the treatment of
Professional Customer interest. 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
Jennie L. Jbara,
Alternate Certifying Officer.
February 5, 2024.
notice is hereby given that on January
23, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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. Purpose
The Exchange proposes to modify
Rule 6.62P–O (Orders and Modifiers) to
adopt electronically-entered Customer
Cross (‘‘C2C’’) Orders and Complex
Customer Cross (‘‘Complex C2C’’)
Orders (collectively, ‘‘Customer Cross
Orders’’). The Exchange also proposes to
amend the definition of ‘‘Customer and
Professional Customer’’ (Rule 1.1.) to
clarify the treatment of Professional
Customer interest.
Proposed Rule 6.62P–O(g)(2): Customer
Cross Orders 4
The Exchange proposes to adopt rules
governing electronically-entered
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4 To reflect the addition of Customer Cross
Orders, the Exchange proposes to amend current
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Customer Cross Orders, which rules are
substantively identical to the recentlyadopted Customer Cross Orders on the
Exchange’s affiliate, NYSE American
LLC (‘‘NYSE American’’).5
Proposed Rule 6.62P–O(g)(2) would
describe Customer Cross Orders.
Proposed Rule 6.62P–O(g)(2)(A) would
provide that a C2C Order and a Complex
C2C Order must be comprised of a
Customer (but not a Professional
Customer) order to buy and a Customer
(but not a Professional Customer) order
to sell at the same price and for the same
quantity. The proposal to limit eligible
interest to Customer but not
Professional Customer interest is
substantively identical to the rules of
NYSE American.6 In addition, as
proposed, a C2C Order or Complex C2C
Order that is not rejected on arrival
would immediately trade in full at its
limit price.7 Further, proposed Rule
6.62P–O(g)(2)(A) would provide that
C2C Orders and Complex C2C Orders
would not route and may be entered
with a Minimum Price Variation
(‘‘MPV’’) of $0.01 regardless of the MPV
of the options series.8 Finally, the
proposed Rule would specify that
Commentary .01 to Rule 6.47A–O would
apply to Customer Cross Orders, which
means that OTP Holders and OTP Firms
may not utilize Customer Cross Orders
to increase their economic gain without
first giving other trading interest on the
Exchange an opportunity to participate
in the trade or to trade at the transaction
price when the OTP Holder or OTP
Firm was already bidding or offering at
that price.9 This proposed handling of
Customer Cross Orders is substantively
identical to the rules on NYSE
Rule 6.62P–O(g) by removing the statement that ‘‘[a]
Cross Order is a Qualified Contingent Cross
(‘‘QCC’’) Order’’ and retaining the title of ‘‘Cross
Orders’’. In addition, the Exchange proposes to
update the title of paragraph Rule 6.62P–O (g)(1) to
‘‘Qualified Contingent Cross (‘‘QCC’’) Orders.’’ The
Exchange believes that these proposed changes
would add clarity and transparency to, and improve
the accuracy of, the Exchange’s rules. See proposed
Rule 6.62P–O(g) and (g)(1).
5 See NYSE American Rule 900.3NYP(g)(2)
(describing single-leg and complex Customer Cross
Orders). See also Securities Exchange Act Release
No. 99231 (December 22, 2023), 88 FR 89783
(December 28, 2023) (SR–NYSEAMER–2023–66)
(immediately effective rule change to adopt
electronically-entered Customer Cross Orders).
6 See NYSE American Rule 900.3NYP(g)(2)(A).
7 See proposed Rule 6.62P–O(g)(2)(A) (providing,
in relevant part, that ‘‘[a] C2C Order or Complex
C2C Order that is not rejected per Rule 6.62P–
O(g)(2)(B) [Execution of C2C Orders] or (C)
[Execution of Complex C2C Orders], respectively,
will immediately trade in full at its limit price’’).
8 Rule 1.1 defines ‘‘Minimum Price Variation’’ or
‘‘MPV’’ as the price variations established by the
Exchange, which for quoting and trading options
traded on the Exchange are set forth in 6.72–O(a).
9 See proposed Rule 6.62P–O(g)(2)(A). See also
Rule 6.47A–O, Commentary .01.
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Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Notices
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American regarding the handling of
such orders on that exchange.10
Proposed Rule 6.62P–O(g)(2)(B)
provides that a C2C Order that has one
option leg would be rejected if received
when the NBBO is crossed or if the C2C
would 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 NBBO and the
Exchange BBO. The Exchange believes
that the proposal would provide for the
efficient entry and execution of C2C
Orders while continuing to protect
same-priced, displayed Customer
interest (i.e., by ensuring that the C2C
Order does not trade ahead of displayed
Customer interest resting in the
Consolidated Book). As noted above, the
proposed C2C Orders would operate in
a manner that is identical to the
handling of single-leg customer cross
orders per NYSE American rules.11
Proposed Rule 6.62P–O(g)(2)(C)
would describe the Exchange’s pricing
requirements for a Complex C2C Order,
which requirements are identical to
those set forth in NYSE American Rule
900.3NYP(g)(2)(C). As is the case per
NYSE American rules, to validate the
price of a Complex C2C Order, the
Exchange would rely on the Derived
BBO (‘‘DBBO’’) as described in Rule
6.91P–O(a)(5).12 If the Exchange is not
able to calculate the DBBO for a
complex strategy because of one of the
circumstances described in Rule 6.91P–
O(a)(5)(B)–(C), the Exchange will not
execute an order for that strategy until
the circumstance is resolved.13
10 See Rule 6.47A–O, Commentary .01 (providing
an identical prohibition to the one set forth in
NYSE American Rule 935NY, Commentary .01,
which prevents order-senders from using the
customer crossing mechanism to increase economic
gain without first providing an opportunity of
eligible interest to trade at the transaction price of
the cross order).
11 See NYSE American Rule 900.3NYP(g)(2)(B).
12 The DBBO provides for the establishment of a
derived (theoretical) bid or offer for a particular
complex strategy. See Rule 6.91P–O(a)(5) (defining
the DBBO and providing that the bid (offer) price
used to calculate the DBBO on each leg will be the
Exchange BB (BO) (if available), bound by the
maximum allowable Away Market Deviation). The
Away Market Deviation, as defined in Rule 6.91P–
O(a)(1), ensures that an ECO does not execute too
far away from the prevailing market. Rule 6.91P–
O(a)(5) also provides for the establishment of the
DBBO in the absence of an Exchange BB (BO), or
ABB(ABO), or both. The Exchange’s definition of
DBBO and its use in relation to Complex C2C
Orders is identical to how this concept is defined
and utilized by NYSE American. Compare Rule
6.91P–O(a)(5) with NYSE American Rule
980NYP(a)(5).
13 See proposed Rule 6.62P–O(g)(2)(C). See also
Rule 6.91P–O(a)(5)(B) (providing that, ‘‘[i]f, for a leg
of a complex strategy, there is neither an Exchange
BBO nor an ABBO, the Exchange will not allow the
complex strategy to trade until, for that leg, there
is either an Exchange BB or BO, or an ABB or ABO,
on at least one side of the market’’) and (a)(5)(C)
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Consistent with this handling, the
Exchange proposes that it would reject
a Complex C2C Order if the Exchange is
unable to calculate the DBBO for a leg
of the Complex C2C Order per Rule
6.91P–O(a)(5)(B) or (a)(5)(C).14
In addition, proposed Rule 6.62P–
O(g)(2)(C) provides that no option leg of
a Complex C2C Order will trade at a
price worse than the Exchange BBO and
such order would be rejected if it fails
to meet the following requirements:
• the transaction price must be at or
between the DBBO and may not equal
the DBBO if the DBBO is calculated
using the Exchange BBO and the
Exchange BBO of any component of the
complex strategy on either side of the
market includes displayed Customer
interest. If the DBB (DBO) includes
displayed Customer interest on the
Exchange, the transaction price must
improve the DBB (DBO) by at least one
cent ($0.01) (per proposed Rule 6.62P–
O(g)(2)(C)(i)); and
• the transaction price must be at or
between the best-priced Complex
Orders to buy and sell in the complex
strategy and may not equal the price of
a resting Customer Complex Order (per
proposed Rule 6.62P–O(g)(2)(C)(ii)).
As noted above the pricing
requirements for the proposed Complex
C2C Orders are identical to NYSE
American’s requirement for such
orders.15
The Exchange also proposes a
conforming change to Rule 6.91P–
O(b)(1) to include Complex Customer
Cross Orders among the type of
Electronic Complex Orders available for
trading on the Exchange, which change
would add clarity, transparency, and
internal consistency to the Exchange’s
rules.16
definition of ‘‘Customer’’ includes a
‘‘Professional Customer’’, as described
below.17
Per Rule 1.1, for options traded on the
Exchange, the terms ‘‘Customer’’ and
‘‘Professional Customer’’ do not include
a broker or dealer.18 When the Exchange
adopted its definition of Professional
Customer nearly a decade ago, it noted
that its definition was ‘‘similar to
designations that have been adopted by
all other options exchanges.’’ 19 At that
time, however, the Exchange explicitly
stated that it was not proposing ‘‘to
revise any order execution or processing
rules, including its priority rules, to
change the treatment of Professional
Customers’’ but noted instead that
‘‘Professional Customer orders will be
treated as Customer orders under
Exchange rules for all purposes, except
those related to order marking.’’ 20 The
Exchange further noted that ‘‘[a]s the
only options Exchange to have not yet
adopted the Professional Customer
definition, the Exchange’s proposal will
allow OTP Holders to mark their
Professional Customer orders similarly
regardless of whether the order is placed
on the Exchange or another options
exchange’’ and that adopting the
Professional Customer designation
would ‘‘facilitate cross-market
initiatives (such as harmonizing rules
relating to Obvious Errors).’’ 21 Although
the Exchange was clear as to its intent
when it adopted the Professional
Customer designation, it did not modify
its definition of ‘‘Customer’’ to reflect
this intention. Thus, for avoidance of
doubt and consistent with the
Exchange’s previously stated intent, the
Exchange proposes to modify the
definition of Customer to include
Rule 1.1: Definitions of Customer and
Professional Customer
The Exchange proposes to modify the
definition of ‘‘Customer’’ to provide
that, ‘‘unless otherwise specified’’, the
17 See proposed Rule (emphasis added). See also
NYSE American Rule 980NYP(b)(1).
18 See Rule 1.1 (defining Customer and
Professional Customer). For order counting
purposes, the term ‘‘Professional Customer’’ applies
to an individual or organization that ‘‘places more
than 390 orders in listed options per day on average
during a calendar month for its own beneficial
account(s).’’ See id.
19 See Securities Exchange Act Release No. 73665
(November 21, 2014), 79 FR 70907, 70908 at n. 7
(November 28, 2014) (SR–NYSEARCA–2014–133)
(immediately effective rule change to adopt the
definition of Professional Customer) (the ‘‘2014
Proposal’’). See id., 79 FR, at 70908 at n. 7 (citing
other options markets that had already adopted the
Professional Customer designation).
20 See id., 79 FR at 70908, n. 8 (specifying that,
at that time, at least two other options exchanges
had adopted a definition of Professional Customer
that was the ‘‘same’’ as the Exchange’s thenproposed definition and that those exchanges
likewise did ‘‘not treat Professional Customers
differently than Customers for purposes of
execution or processing.’’). Thus, from inception,
the treatment of market participants designated as
Professional Customers differed among options
exchanges.
21 See id., 79 FR at 70908.
(providing, in relevant part that, ‘‘[i]f the best bid
and offer prices (when not based solely on the
Exchange BBO) for a component leg of the complex
strategy are locked or crossed, the Exchange will
not allow an ECO for that strategy to execute against
another ECO until this condition resolves’’). This
proposed handling of Complex C2C Orders is
identical to the handling of such orders on NYSE
American. Compare proposed Rule 6.62P–
O(g)(2)(C) with NYSE American Rule
900.3NYP(g)(2)(C).
14 See proposed Rule 6.62P–O(g)(2)(B). See also
NYSE American Rule 900.3NYP(g)(2)(B).
15 See NYSE American Rule 900.3NYP(g)(2)(C)(i)–
(ii).
16 See proposed Rule 6.91P–O(b)(1) (providing
that Electronic Complex Orders ‘‘may be entered as
Limit Orders, Limit Orders designated as Complex
Only Orders, Complex QCCs, or as Complex
Customer Cross Orders) (emphasis added). See also
NYSE American Rule 980NYP(b)(1).
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Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Notices
Professional Customer, ‘‘unless
otherwise specified’’ in Exchange
rules.22 The Exchange believes this rule
change would add clarity and
transparency to the Exchange’s rules,
making them easier to navigate and
understand.
Implementation
Because of the technology changes
associated with this proposed rule
change, the Exchange will announce the
implementation date by Trader Update,
which, subject to effectiveness of this
proposed rule change, is anticipated to
be in the first quarter of 2024.
ddrumheller on DSK120RN23PROD with NOTICES1
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934,23 in
general, and furthers the objectives of
Section 6(b)(5),24 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
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.
The Exchange believes that the
proposed Customer Cross Orders (for
single-leg and complex interest) would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system because
the proposed rules would allow OTP
Holders and OTP Firms to electronically
trade these types of crossing orders on
the Exchange. The proposed
functionality would benefit investors
and the public interest because it would
enhance and automate each order entry
firms’ ability to submit two-sided
Customer orders—i.e., Customer Cross
Orders (both single-leg and complex).
As such, the proposed rule change
would provide OTP Holders and OTP
Firms with an efficient means of
executing their Customer orders. In
addition, the proposed Customer Cross
Orders would remove impediments to
and perfect the mechanism of a free and
open market and a national market
22 See proposed Rule 1.1 (providing that ‘‘[f]or
options traded on the Exchange, the term
‘Customer’ does not include a broker or dealer and,
unless otherwise specified, includes a ‘‘Professional
Customer’’(emphasis added) See, e.g., proposed
Rule 6.62P–O(g)(2) (specifying that Customer Cross
Orders ‘‘must be comprised of a Customer (but not
a Professional Customer) order to buy and a
Customer (but not a Professional Customer) order to
sell at the same price and for the same quantity’’)).
23 15 U.S.C. 78f(b).
24 15 U.S.C. 78f(b)(5).
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system because OTP Holders and OTP
Firms would be given an additional way
to execute single-leg and Complex
Orders on the Exchange. As noted
herein, the proposed Customer Cross
Orders functionality is identical to
functionality described in the rules of
the Exchange’s affiliate, NYSE
American.25 With this proposal, OTP
Holders and OTP Firms would likewise
have an additional venue on which to
execute two-sided Customer orders
electronically—i.e., Customer Cross
Orders. As such, the proposed order
types may attract additional Customer
order flow (both two-sided and singlesided) to the Exchange, which may, in
turn, result in greater liquidity available
for trading on the Exchange.
Regarding the proposed single-leg
C2C Order type, the Exchange believes
that the adoption of this order type
would provide for the efficient entry
and execution of C2C Orders while
continuing to protect same-priced,
displayed Customer interest (i.e., by
ensuring that the C2C Order does not
trade ahead of displayed Customer
interest resting in the Consolidated
Book). Further, as noted herein, the
proposed order type is not new or novel
because each C2C Order would operate
in a manner that is identical to the
handling of single-leg customer cross
orders per the rules of NYSE
American.26
The proposed Complex C2C Order
would protect investors and the public
interest by assuring that these orders
comply with the existing priority and
allocation rules applicable to the
processing and execution of Complex
Orders per Rule 6.91P–O. In particular,
the proposed Complex C2C Orders
would continue to protect same-priced,
displayed Customer interest and would
ensure that Complex C2C Orders do not
trade ahead of such displayed Customer
interest, whether in the leg markets or
as Customer Complex Orders. The
Exchange believes the proposed
Complex C2C Orders would promote
just and equitable principles of trade
because (as discussed herein) the
proposed orders—which are not new or
novel—would operate in a manner that
is identical to the handling of complex
customer cross orders per the rules of
NYSE American.27
The Exchange believes the proposed
amendment to the Rule 1.1 definition of
Customer and Professional Customer
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
25 See
NYSE American Rule 900.3NYP(g)(2).
NYSE American Rule 900.3NYP(g)(2)(B).
27 See NYSE American Rule 900.3NYP(g)(2)(C).
26 See
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system because it would add clarity and
transparency to—and improve the
accuracy of—the Exchange’s rules
making them easier to comprehend to
the benefit of all market participants.
Finally, the proposed conforming
changes to Rules 6.62P–O(g) and 6.91P–
O(b)(1) to accommodate the adoption of
single-leg and Complex Customer Cross
Orders on the Exchange would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
the rule changes would add clarity and
transparency to—and improve the
accuracy of—the Exchange’s rules
making them easier to comprehend to
the benefit of all market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Exchange’s proposal to adopt a new
electronically-entered crossing order
type (i.e., the Customer Cross Order)
would not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
believes that the proposed change
would not impose a burden on intramarket competition because the
proposed order types would provide
OTP Holders and OTP Firms with the
option of utilizing another means of
executing two-sided Customer interest—
both single-leg and Complex Orders on
the Exchange. The proposed change
would also benefit investors by
providing another venue (i.e., in
addition to NYSE American) on which
Customer Cross Orders may be
submitted electronically.
The Exchange believes that the
proposed change would enhance
intermarket competition. The Exchange
believes that adopting Customer Cross
Orders would promote competition as it
would afford OTP Holders and OTP
Firms another venue on which to
execute two-sided Customer orders for
single-leg and complex trading interest.
Further, the Exchange anticipates that
this proposal will create new
opportunities for the Exchange to attract
new business to the Exchange. As such,
the Exchange believes that this proposal
does not create an undue burden on
intermarket competition. Rather, the
Exchange believes that the proposed
rule would bolster intermarket
competition by promoting fair
competition among individual markets.
The Exchange does not believe the
proposed amendment to the Rule 1.1
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definition of Customer and Professional
Customer would impose any undue
burden on intra-market or intermarket
competition as all market participants
on the Exchange would be subject to the
updated definition. In addition, the
proposal to limit the availability of the
proposed Customer Cross Orders to
interest submitted on behalf of
Customers would align the Exchange
with the rules of NYSE American,
which has the same limitation.28
In addition, the proposed conforming
changes to Rules 6.62P–O(g) and 6.91P–
O(b)(1) to accommodate the addition of
single-leg and Complex Customer Cross
Orders would not impose an undue
burden on intra-market or intermarket
competition but would instead add
clarity, transparency, and internal
consistency to the Exchange’s 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 29 and Rule
19b–4(f)(6) thereunder.30 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.31
A proposed rule change filed under
Rule 19b–4(f)(6) 32 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),33 the Commission
28 See
NYSE American Rule 900.3NYP(g)(2).
U.S.C. 78s(b)(3)(A)(iii).
30 17 CFR 240.19b–4(f)(6).
31 Id. 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.
32 17 CFR 240.19b–4(f)(6).
33 17 CFR 240.19b–4(f)(6)(iii).
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may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The Exchange
states that waiver of the operative delay
will provide market participants with an
additional venue for executing twosided single-leg and complex Customer
orders electronically. In addition, the
proposed change to the definition of
‘‘Customer’’ is designed to reflect the
Exchange’s intention when it adopted
the definition of definition of
Professional Customer in 2014, as
described above.
The proposed C2C and Complex C2C
Orders are substantively identical to
order types adopted by the Exchange’s
affiliate, NYSE American.34 Among
other things, the proposed rules protect
the priority of displayed Customer
interest on the Exchange by providing
that a C2C Order with one option leg
will be rejected if it would trade at the
same price as a displayed Customer
order on the Exchange’s Consolidated
Book.35 In addition, a Complex C2C
Order must trade at a price that is (i)
better than the DBB (DBO) if the DBB
(DBO) includes displayed Customer
interest on the Exchange, and (ii) better
than a resting Customer Complex Order
on the Exchange.36 Consistent with the
rules of other options exchanges that
offer customer cross orders, the
proposed Customer Cross Orders are
limited to Customer orders.37 The
proposed change to the definition of
Customer is designed to ensure that the
definition reflects the Exchange’s
intention, as described in the 2014
Proposal, to treat Professional
Customers as Customers, unless
otherwise specified. The proposed
conforming changes to Exchange Rules
6.62P–O(g)(1) and 6.91P–O(b)(1) will
update the Exchange’s rules to reflect
the addition of Customer Cross Orders.
The proposal, which does not raise new
or novel regulatory issues, will provide
market participants with an additional
venue for crossing single-leg and
complex Customer Cross Orders
electronically. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
34 See NYSE American Rule 900.3NYP(g)(2) and
note 5, supra.
35 See proposed Exchange Rule 6.62P–
O(g)(2)(B)(i).
36 See proposed Exchange Rule 6.62P–O(g)(2)(C).
37 See proposed Exchange Rule 6.62P–O(g)(2)(A)
and NYSE American Rule 900.3NYP(g)(2)(A). See
also Cboe Rule 5.38(f).
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
9191
proposed rule change operative upon
filing.38
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.
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–2024–09 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–2024–09. 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
38 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
E:\FR\FM\09FEN1.SGM
09FEN1
9192
Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Notices
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–2024–09 and should be
submitted on or before March 1, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–02647 Filed 2–8–24; 8:45 am]
BILLING CODE 8011–01–P
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99471; File No. SR–IEX–
2024–04]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Pursuant to
IEX Rule 15.110 To Amend IEX’s Fee
Schedule
February 5, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
24, 2024, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘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
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
ddrumheller on DSK120RN23PROD with NOTICES1
4 thereunder,5 the Exchange is filing
with the Commission a proposed rule
change to amend its Fee Schedule, 6
pursuant to IEX Rule 15.110(a) and (c)
(the ‘‘Fee Schedule’’), to revise the Fee
Codes 7 applicable to transactions that
involve a Post Only order that executes
on entry. Changes to the Fee Schedule
pursuant to this proposal are effective
upon filing,8 and the Exchange plans to
implement the changes on February 15,
2024.
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule, pursuant to IEX Rule
15.110(a) and (c), to revise the Fee
Codes applicable to transactions that
involve a Post Only order that executes
on entry. IEX recently filed a rule
change to introduce a Post Only order
parameter instruction and a Trade Now
instruction.9 The Post Only Filing was
effective on filing but will not be
implemented until February 15, 2024.10
Additional Fee
Codes
Description
Y .........................
W ........................
Post Only order executes on entry ..........................................
Resting order removes against Post Only order .....................
39 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.
4 15 U.S.C. 78s(b)(1).
5 17 CFR 240.19b–4.
6 See Fee Schedule at https://
www.iexexchange.io/resources/trading/fee-schedule
for the complete list of fee code combinations and
their corresponding fees.
1 15
VerDate Sep<11>2014
17:20 Feb 08, 2024
Jkt 262001
Frm 00080
Fee Schedule Changes
IEX proposes to introduce two new
Fee Codes, to specify (1) when a Post
Only order executed on entry, and (2)
when a resting non-displayed order
with a Trade Now instruction removed
liquidity from a Post Only order that
executed on entry. Specifically, as
proposed, Fee Code Y will be included
on any execution report for a Post Only
order that executes on entry, and Fee
Code W will be included on any
execution report for a resting order with
a Trade Now instruction that removes
liquidity against an incoming liquidityadding Post Only order. IEX proposes to
add these Fee Codes to the Fee Code
Modifiers table on the IEX Fee Schedule
as follows:
Fee
See Relevant Fee Code Combinations Below.
See Relevant Fee Code Combinations Below.
7 Fee Codes are identified on each execution
report message from the Exchange in the Trade
Liquidity Indicator (FIX tag 9730) field. See
‘‘Transaction Fees/Definitions’’ on the Fee
Schedule.
8 15 U.S.C. 78s(b)(3)(A)(ii).
9 See Securities Exchange Act Release No. 98988
(November 20, 2023), 88 FR 82926 (November 27,
2023) (SR–IEX–2023–13) (‘‘Post Only Filing’’).
PO 00000
As described in the Post Only Filing,
Members 11 may attach a Post Only
parameter instruction to any
displayable, non-routable order priced
at or above $1.00 per share (i.e., a Post
Only order).12 A Post Only order will
not remove contra-side liquidity from
the IEX Order Book 13 on entry (and will
rest on the Order Book as a displayed
liquidity adding order), except in two
specific circumstances: (i) if the value of
such execution when removing liquidity
equals or exceeds the value of such
execution if the order instead posted to
the IEX Order Book and subsequently
provided liquidity, including the
applicable fees charged or rebates
provided (the ‘‘Sum of Fees’’), or (ii) if
the contra-side resting order with which
the incoming order could match is a
non-displayed order with a ‘‘Trade
Now’’ instruction.14 When an incoming
Post Only order matches a resting order
with a Trade Now instruction, the
resting order converts into an executable
order that removes liquidity against the
incoming Post Only order, and the
incoming Post Only order becomes the
liquidity adding order.
Fmt 4703
Sfmt 4703
10 See IEX Trading Alert 2024–003, available at
https://iextrading.com/alerts/#/239.
11 See IEX Rule 1.160(s).
12 If a Member submits a Post Only order that is
priced below $1.00 per share, the Exchange will
disregard the Post Only instruction. See IEX Rule
11.190(b)(20)(A).
13 See IEX Rule 1.160(p).
14 See IEX Rule 11.190(b)(21).
E:\FR\FM\09FEN1.SGM
09FEN1
]]>Agencies
[Federal Register Volume 89, Number 28 (Friday, February 9, 2024)]
[Notices]
[Pages 9188-9192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02647]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99470; File No. SR-NYSEARCA-2024-09]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Modify Rule
6.62P-O
February 5, 2024.
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 January 23, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 modify Rule 6.62P-O (Orders and Modifiers)
to adopt electronic Customer Cross Order and Complex Customer Cross
Order functionality and to amend Rule 1.1 (Definitions) to clarify the
treatment of Professional Customer interest. 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 Exchange proposes to modify Rule 6.62P-O (Orders and Modifiers)
to adopt electronically-entered Customer Cross (``C2C'') Orders and
Complex Customer Cross (``Complex C2C'') Orders (collectively,
``Customer Cross Orders''). The Exchange also proposes to amend the
definition of ``Customer and Professional Customer'' (Rule 1.1.) to
clarify the treatment of Professional Customer interest.
Proposed Rule 6.62P-O(g)(2): Customer Cross Orders \4\
---------------------------------------------------------------------------
\4\ To reflect the addition of Customer Cross Orders, the
Exchange proposes to amend current Rule 6.62P-O(g) by removing the
statement that ``[a] Cross Order is a Qualified Contingent Cross
(``QCC'') Order'' and retaining the title of ``Cross Orders''. In
addition, the Exchange proposes to update the title of paragraph
Rule 6.62P-O (g)(1) to ``Qualified Contingent Cross (``QCC'')
Orders.'' The Exchange believes that these proposed changes would
add clarity and transparency to, and improve the accuracy of, the
Exchange's rules. See proposed Rule 6.62P-O(g) and (g)(1).
---------------------------------------------------------------------------
The Exchange proposes to adopt rules governing electronically-
entered Customer Cross Orders, which rules are substantively identical
to the recently-adopted Customer Cross Orders on the Exchange's
affiliate, NYSE American LLC (``NYSE American'').\5\
---------------------------------------------------------------------------
\5\ See NYSE American Rule 900.3NYP(g)(2) (describing single-leg
and complex Customer Cross Orders). See also Securities Exchange Act
Release No. 99231 (December 22, 2023), 88 FR 89783 (December 28,
2023) (SR-NYSEAMER-2023-66) (immediately effective rule change to
adopt electronically-entered Customer Cross Orders).
---------------------------------------------------------------------------
Proposed Rule 6.62P-O(g)(2) would describe Customer Cross Orders.
Proposed Rule 6.62P-O(g)(2)(A) would provide that a C2C Order and a
Complex C2C Order must be comprised of a Customer (but not a
Professional Customer) order to buy and a Customer (but not a
Professional Customer) order to sell at the same price and for the same
quantity. The proposal to limit eligible interest to Customer but not
Professional Customer interest is substantively identical to the rules
of NYSE American.\6\ In addition, as proposed, a C2C Order or Complex
C2C Order that is not rejected on arrival would immediately trade in
full at its limit price.\7\ Further, proposed Rule 6.62P-O(g)(2)(A)
would provide that C2C Orders and Complex C2C Orders would not route
and may be entered with a Minimum Price Variation (``MPV'') of $0.01
regardless of the MPV of the options series.\8\ Finally, the proposed
Rule would specify that Commentary .01 to Rule 6.47A-O would apply to
Customer Cross Orders, which means that OTP Holders and OTP Firms may
not utilize Customer Cross Orders to increase their economic gain
without first giving other trading interest on the Exchange an
opportunity to participate in the trade or to trade at the transaction
price when the OTP Holder or OTP Firm was already bidding or offering
at that price.\9\ This proposed handling of Customer Cross Orders is
substantively identical to the rules on NYSE
[[Page 9189]]
American regarding the handling of such orders on that exchange.\10\
---------------------------------------------------------------------------
\6\ See NYSE American Rule 900.3NYP(g)(2)(A).
\7\ See proposed Rule 6.62P-O(g)(2)(A) (providing, in relevant
part, that ``[a] C2C Order or Complex C2C Order that is not rejected
per Rule 6.62P-O(g)(2)(B) [Execution of C2C Orders] or (C)
[Execution of Complex C2C Orders], respectively, will immediately
trade in full at its limit price'').
\8\ Rule 1.1 defines ``Minimum Price Variation'' or ``MPV'' as
the price variations established by the Exchange, which for quoting
and trading options traded on the Exchange are set forth in 6.72-
O(a).
\9\ See proposed Rule 6.62P-O(g)(2)(A). See also Rule 6.47A-O,
Commentary .01.
\10\ See Rule 6.47A-O, Commentary .01 (providing an identical
prohibition to the one set forth in NYSE American Rule 935NY,
Commentary .01, which prevents order-senders from using the customer
crossing mechanism to increase economic gain without first providing
an opportunity of eligible interest to trade at the transaction
price of the cross order).
---------------------------------------------------------------------------
Proposed Rule 6.62P-O(g)(2)(B) provides that a C2C Order that has
one option leg would be rejected if received when the NBBO is crossed
or if the C2C would 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 NBBO and the Exchange BBO. The Exchange believes that the
proposal would provide for the efficient entry and execution of C2C
Orders while continuing to protect same-priced, displayed Customer
interest (i.e., by ensuring that the C2C Order does not trade ahead of
displayed Customer interest resting in the Consolidated Book). As noted
above, the proposed C2C Orders would operate in a manner that is
identical to the handling of single-leg customer cross orders per NYSE
American rules.\11\
---------------------------------------------------------------------------
\11\ See NYSE American Rule 900.3NYP(g)(2)(B).
---------------------------------------------------------------------------
Proposed Rule 6.62P-O(g)(2)(C) would describe the Exchange's
pricing requirements for a Complex C2C Order, which requirements are
identical to those set forth in NYSE American Rule 900.3NYP(g)(2)(C).
As is the case per NYSE American rules, to validate the price of a
Complex C2C Order, the Exchange would rely on the Derived BBO
(``DBBO'') as described in Rule 6.91P-O(a)(5).\12\ If the Exchange is
not able to calculate the DBBO for a complex strategy because of one of
the circumstances described in Rule 6.91P-O(a)(5)(B)-(C), the Exchange
will not execute an order for that strategy until the circumstance is
resolved.\13\ Consistent with this handling, the Exchange proposes that
it would reject a Complex C2C Order if the Exchange is unable to
calculate the DBBO for a leg of the Complex C2C Order per Rule 6.91P-
O(a)(5)(B) or (a)(5)(C).\14\
---------------------------------------------------------------------------
\12\ The DBBO provides for the establishment of a derived
(theoretical) bid or offer for a particular complex strategy. See
Rule 6.91P-O(a)(5) (defining the DBBO and providing that the bid
(offer) price used to calculate the DBBO on each leg will be the
Exchange BB (BO) (if available), bound by the maximum allowable Away
Market Deviation). The Away Market Deviation, as defined in Rule
6.91P-O(a)(1), ensures that an ECO does not execute too far away
from the prevailing market. Rule 6.91P-O(a)(5) also provides for the
establishment of the DBBO in the absence of an Exchange BB (BO), or
ABB(ABO), or both. The Exchange's definition of DBBO and its use in
relation to Complex C2C Orders is identical to how this concept is
defined and utilized by NYSE American. Compare Rule 6.91P-O(a)(5)
with NYSE American Rule 980NYP(a)(5).
\13\ See proposed Rule 6.62P-O(g)(2)(C). See also Rule 6.91P-
O(a)(5)(B) (providing that, ``[i]f, for a leg of a complex strategy,
there is neither an Exchange BBO nor an ABBO, the Exchange will not
allow the complex strategy to trade until, for that leg, there is
either an Exchange BB or BO, or an ABB or ABO, on at least one side
of the market'') and (a)(5)(C) (providing, in relevant part that,
``[i]f the best bid and offer prices (when not based solely on the
Exchange BBO) for a component leg of the complex strategy are locked
or crossed, the Exchange will not allow an ECO for that strategy to
execute against another ECO until this condition resolves''). This
proposed handling of Complex C2C Orders is identical to the handling
of such orders on NYSE American. Compare proposed Rule 6.62P-
O(g)(2)(C) with NYSE American Rule 900.3NYP(g)(2)(C).
\14\ See proposed Rule 6.62P-O(g)(2)(B). See also NYSE American
Rule 900.3NYP(g)(2)(B).
---------------------------------------------------------------------------
In addition, proposed Rule 6.62P-O(g)(2)(C) provides that no option
leg of a Complex C2C Order will trade at a price worse than the
Exchange BBO and such order would be rejected if it fails to meet the
following requirements:
the transaction price must be at or between the DBBO and
may not equal the DBBO if the DBBO is calculated using the Exchange BBO
and the Exchange BBO of any component of the complex strategy on either
side of the market includes displayed Customer interest. If the DBB
(DBO) includes displayed Customer interest on the Exchange, the
transaction price must improve the DBB (DBO) by at least one cent
($0.01) (per proposed Rule 6.62P-O(g)(2)(C)(i)); and
the transaction price must be at or between the best-
priced Complex Orders to buy and sell in the complex strategy and may
not equal the price of a resting Customer Complex Order (per proposed
Rule 6.62P-O(g)(2)(C)(ii)).
As noted above the pricing requirements for the proposed Complex
C2C Orders are identical to NYSE American's requirement for such
orders.\15\
---------------------------------------------------------------------------
\15\ See NYSE American Rule 900.3NYP(g)(2)(C)(i)-(ii).
---------------------------------------------------------------------------
The Exchange also proposes a conforming change to Rule 6.91P-
O(b)(1) to include Complex Customer Cross Orders among the type of
Electronic Complex Orders available for trading on the Exchange, which
change would add clarity, transparency, and internal consistency to the
Exchange's rules.\16\
---------------------------------------------------------------------------
\16\ See proposed Rule 6.91P-O(b)(1) (providing that Electronic
Complex Orders ``may be entered as Limit Orders, Limit Orders
designated as Complex Only Orders, Complex QCCs, or as Complex
Customer Cross Orders) (emphasis added). See also NYSE American Rule
980NYP(b)(1).
---------------------------------------------------------------------------
Rule 1.1: Definitions of Customer and Professional Customer
The Exchange proposes to modify the definition of ``Customer'' to
provide that, ``unless otherwise specified'', the definition of
``Customer'' includes a ``Professional Customer'', as described
below.\17\
---------------------------------------------------------------------------
\17\ See proposed Rule (emphasis added). See also NYSE American
Rule 980NYP(b)(1).
---------------------------------------------------------------------------
Per Rule 1.1, for options traded on the Exchange, the terms
``Customer'' and ``Professional Customer'' do not include a broker or
dealer.\18\ When the Exchange adopted its definition of Professional
Customer nearly a decade ago, it noted that its definition was
``similar to designations that have been adopted by all other options
exchanges.'' \19\ At that time, however, the Exchange explicitly stated
that it was not proposing ``to revise any order execution or processing
rules, including its priority rules, to change the treatment of
Professional Customers'' but noted instead that ``Professional Customer
orders will be treated as Customer orders under Exchange rules for all
purposes, except those related to order marking.'' \20\ The Exchange
further noted that ``[a]s the only options Exchange to have not yet
adopted the Professional Customer definition, the Exchange's proposal
will allow OTP Holders to mark their Professional Customer orders
similarly regardless of whether the order is placed on the Exchange or
another options exchange'' and that adopting the Professional Customer
designation would ``facilitate cross-market initiatives (such as
harmonizing rules relating to Obvious Errors).'' \21\ Although the
Exchange was clear as to its intent when it adopted the Professional
Customer designation, it did not modify its definition of ``Customer''
to reflect this intention. Thus, for avoidance of doubt and consistent
with the Exchange's previously stated intent, the Exchange proposes to
modify the definition of Customer to include
[[Page 9190]]
Professional Customer, ``unless otherwise specified'' in Exchange
rules.\22\ The Exchange believes this rule change would add clarity and
transparency to the Exchange's rules, making them easier to navigate
and understand.
---------------------------------------------------------------------------
\18\ See Rule 1.1 (defining Customer and Professional Customer).
For order counting purposes, the term ``Professional Customer''
applies to an individual or organization that ``places more than 390
orders in listed options per day on average during a calendar month
for its own beneficial account(s).'' See id.
\19\ See Securities Exchange Act Release No. 73665 (November 21,
2014), 79 FR 70907, 70908 at n. 7 (November 28, 2014) (SR-NYSEARCA-
2014-133) (immediately effective rule change to adopt the definition
of Professional Customer) (the ``2014 Proposal''). See id., 79 FR,
at 70908 at n. 7 (citing other options markets that had already
adopted the Professional Customer designation).
\20\ See id., 79 FR at 70908, n. 8 (specifying that, at that
time, at least two other options exchanges had adopted a definition
of Professional Customer that was the ``same'' as the Exchange's
then-proposed definition and that those exchanges likewise did ``not
treat Professional Customers differently than Customers for purposes
of execution or processing.''). Thus, from inception, the treatment
of market participants designated as Professional Customers differed
among options exchanges.
\21\ See id., 79 FR at 70908.
\22\ See proposed Rule 1.1 (providing that ``[f]or options
traded on the Exchange, the term `Customer' does not include a
broker or dealer and, unless otherwise specified, includes a
``Professional Customer''(emphasis added) See, e.g., proposed Rule
6.62P-O(g)(2) (specifying that Customer Cross Orders ``must be
comprised of a Customer (but not a Professional Customer) order to
buy and a Customer (but not a Professional Customer) order to sell
at the same price and for the same quantity'')).
---------------------------------------------------------------------------
Implementation
Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date by
Trader Update, which, subject to effectiveness of this proposed rule
change, is anticipated to be in the first quarter of 2024.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\23\ in general, and furthers the
objectives of Section 6(b)(5),\24\ 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 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.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed Customer Cross Orders (for
single-leg and complex interest) would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because the proposed rules would allow OTP Holders and OTP Firms
to electronically trade these types of crossing orders on the Exchange.
The proposed functionality would benefit investors and the public
interest because it would enhance and automate each order entry firms'
ability to submit two-sided Customer orders--i.e., Customer Cross
Orders (both single-leg and complex). As such, the proposed rule change
would provide OTP Holders and OTP Firms with an efficient means of
executing their Customer orders. In addition, the proposed Customer
Cross Orders would remove impediments to and perfect the mechanism of a
free and open market and a national market system because OTP Holders
and OTP Firms would be given an additional way to execute single-leg
and Complex Orders on the Exchange. As noted herein, the proposed
Customer Cross Orders functionality is identical to functionality
described in the rules of the Exchange's affiliate, NYSE American.\25\
With this proposal, OTP Holders and OTP Firms would likewise have an
additional venue on which to execute two-sided Customer orders
electronically--i.e., Customer Cross Orders. As such, the proposed
order types may attract additional Customer order flow (both two-sided
and single-sided) to the Exchange, which may, in turn, result in
greater liquidity available for trading on the Exchange.
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\25\ See NYSE American Rule 900.3NYP(g)(2).
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Regarding the proposed single-leg C2C Order type, the Exchange
believes that the adoption of this order type would provide for the
efficient entry and execution of C2C Orders while continuing to protect
same-priced, displayed Customer interest (i.e., by ensuring that the
C2C Order does not trade ahead of displayed Customer interest resting
in the Consolidated Book). Further, as noted herein, the proposed order
type is not new or novel because each C2C Order would operate in a
manner that is identical to the handling of single-leg customer cross
orders per the rules of NYSE American.\26\
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\26\ See NYSE American Rule 900.3NYP(g)(2)(B).
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The proposed Complex C2C Order would protect investors and the
public interest by assuring that these orders comply with the existing
priority and allocation rules applicable to the processing and
execution of Complex Orders per Rule 6.91P-O. In particular, the
proposed Complex C2C Orders would continue to protect same-priced,
displayed Customer interest and would ensure that Complex C2C Orders do
not trade ahead of such displayed Customer interest, whether in the leg
markets or as Customer Complex Orders. The Exchange believes the
proposed Complex C2C Orders would promote just and equitable principles
of trade because (as discussed herein) the proposed orders--which are
not new or novel--would operate in a manner that is identical to the
handling of complex customer cross orders per the rules of NYSE
American.\27\
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\27\ See NYSE American Rule 900.3NYP(g)(2)(C).
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The Exchange believes the proposed amendment to the Rule 1.1
definition of Customer and Professional Customer would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would add clarity and transparency
to--and improve the accuracy of--the Exchange's rules making them
easier to comprehend to the benefit of all market participants.
Finally, the proposed conforming changes to Rules 6.62P-O(g) and
6.91P-O(b)(1) to accommodate the adoption of single-leg and Complex
Customer Cross Orders on the Exchange would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because the rule changes would add clarity and transparency to--
and improve the accuracy of--the Exchange's rules making them easier to
comprehend to the benefit of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Specifically, the Exchange's
proposal to adopt a new electronically-entered crossing order type
(i.e., the Customer Cross Order) would not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. The Exchange believes that the proposed change would not
impose a burden on intra-market competition because the proposed order
types would provide OTP Holders and OTP Firms with the option of
utilizing another means of executing two-sided Customer interest--both
single-leg and Complex Orders on the Exchange. The proposed change
would also benefit investors by providing another venue (i.e., in
addition to NYSE American) on which Customer Cross Orders may be
submitted electronically.
The Exchange believes that the proposed change would enhance
intermarket competition. The Exchange believes that adopting Customer
Cross Orders would promote competition as it would afford OTP Holders
and OTP Firms another venue on which to execute two-sided Customer
orders for single-leg and complex trading interest. Further, the
Exchange anticipates that this proposal will create new opportunities
for the Exchange to attract new business to the Exchange. As such, the
Exchange believes that this proposal does not create an undue burden on
intermarket competition. Rather, the Exchange believes that the
proposed rule would bolster intermarket competition by promoting fair
competition among individual markets.
The Exchange does not believe the proposed amendment to the Rule
1.1
[[Page 9191]]
definition of Customer and Professional Customer would impose any undue
burden on intra-market or intermarket competition as all market
participants on the Exchange would be subject to the updated
definition. In addition, the proposal to limit the availability of the
proposed Customer Cross Orders to interest submitted on behalf of
Customers would align the Exchange with the rules of NYSE American,
which has the same limitation.\28\
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\28\ See NYSE American Rule 900.3NYP(g)(2).
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In addition, the proposed conforming changes to Rules 6.62P-O(g)
and 6.91P-O(b)(1) to accommodate the addition of single-leg and Complex
Customer Cross Orders would not impose an undue burden on intra-market
or intermarket competition but would instead add clarity, transparency,
and internal consistency to the Exchange's 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 \29\ and Rule 19b-4(f)(6) thereunder.\30\
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.\31\
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\29\ 15 U.S.C. 78s(b)(3)(A)(iii).
\30\ 17 CFR 240.19b-4(f)(6).
\31\ Id. 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \32\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\33\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange states that
waiver of the operative delay will provide market participants with an
additional venue for executing two-sided single-leg and complex
Customer orders electronically. In addition, the proposed change to the
definition of ``Customer'' is designed to reflect the Exchange's
intention when it adopted the definition of definition of Professional
Customer in 2014, as described above.
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\32\ 17 CFR 240.19b-4(f)(6).
\33\ 17 CFR 240.19b-4(f)(6)(iii).
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The proposed C2C and Complex C2C Orders are substantively identical
to order types adopted by the Exchange's affiliate, NYSE American.\34\
Among other things, the proposed rules protect the priority of
displayed Customer interest on the Exchange by providing that a C2C
Order with one option leg will be rejected if it would trade at the
same price as a displayed Customer order on the Exchange's Consolidated
Book.\35\ In addition, a Complex C2C Order must trade at a price that
is (i) better than the DBB (DBO) if the DBB (DBO) includes displayed
Customer interest on the Exchange, and (ii) better than a resting
Customer Complex Order on the Exchange.\36\ Consistent with the rules
of other options exchanges that offer customer cross orders, the
proposed Customer Cross Orders are limited to Customer orders.\37\ The
proposed change to the definition of Customer is designed to ensure
that the definition reflects the Exchange's intention, as described in
the 2014 Proposal, to treat Professional Customers as Customers, unless
otherwise specified. The proposed conforming changes to Exchange Rules
6.62P-O(g)(1) and 6.91P-O(b)(1) will update the Exchange's rules to
reflect the addition of Customer Cross Orders. The proposal, which does
not raise new or novel regulatory issues, will provide market
participants with an additional venue for crossing single-leg and
complex Customer Cross Orders electronically. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change operative upon filing.\38\
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\34\ See NYSE American Rule 900.3NYP(g)(2) and note 5, supra.
\35\ See proposed Exchange Rule 6.62P-O(g)(2)(B)(i).
\36\ See proposed Exchange Rule 6.62P-O(g)(2)(C).
\37\ See proposed Exchange Rule 6.62P-O(g)(2)(A) and NYSE
American Rule 900.3NYP(g)(2)(A). See also Cboe Rule 5.38(f).
\38\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
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-2024-09 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-2024-09. 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
[[Page 9192]]
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-
2024-09 and should be submitted on or before March 1, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02647 Filed 2-8-24; 8:45 am]
BILLING CODE 8011-01-P
