80 FR 12664 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.60 and To Adopt Rule 6.61, Which Was Previously Reserved, To Provide Price Protection for Market Maker Quotes
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 46 (March 10, 2015)
Federal Register Volume 80, Issue 46 (March 10, 2015)
| Page Range | 12664-12666 | |
| FR Document | 2015-05497 |
[Federal Register Volume 80, Number 46 (Tuesday, March 10, 2015)] [Notices] [Pages 12664-12666] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-05497] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74441; File No. SR-NYSEArca-2014-150] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.60 and To Adopt Rule 6.61, Which Was Previously Reserved, To Provide Price Protection for Market Maker Quotes March 4, 2015. I. Introduction On December 29, 2014, NYSE Arca, Inc. (``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange Rule 6.60 (Price Protection) and to adopt Exchange Rule 6.61 to provide price protection for Market Maker quotes. The proposed rule change was published for comment in the Federal Register on January 14, 2015.\3\ The Commission received no comment letters on the proposal. On March 2, 2015, the Exchange filed Amendment No. 1 to the proposed rule change.\4\ This order approves the proposed rule change, as modified by Amendment No. 1 thereto. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 74018 (January 8, 2015), 80 FR 1982 (``Notice''). \4\ In Amendment No. 1, the Exchange clarified that it believes that Market Maker bids should not be priced the same as or higher than the corresponding benchmark, which would be the price of the underlying security for call options and the strike price for put options. Amendment No. 1 does not change any of the proposed rule text that was submitted in the original filing. Amendment No. 1 is technical in nature and, therefore, the Commission is not publishing it for comment. --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposed to amend Exchange Rule 6.60 and to adopt Exchange Rule 6.61, which was previously Reserved, to provide price protection for Market Maker quotes. Exchange Rule 6.60 currently applies and will continue to apply solely to orders. Exchange Rule 6.60(b), provides a price protection filter for incoming limit orders, pursuant to which the Exchange rejects limit orders priced a specified percentage \5\ through the National Best Bid (``NBB'') or National Best Offer (``NBO'') (``Limit Order Filter''). To clarify that Exchange Rule 6.60 applies only to orders, the Exchange proposed to append the word ``Orders'' to the Exchange Rule 6.60 header to provide ``Rule 6.60. Price Protection--Orders.'' \6\ --------------------------------------------------------------------------- \5\ Pursuant to Exchange Rule 6.60(b), unless determined otherwise by the Exchange and announced to OTP Holders and OTP Firms via Trader Update, the specified percentage is 100% for the contra- side NBB or NBO priced at or below $1.00 and 50% for contra-side NBB or NBO priced above $1.00. See Notice, supra note 3, at 1983. \6\ See Notice, supra note 3, at 1983. --------------------------------------------------------------------------- A. Proposed Market Maker Quote Price Protection The Exchange proposed to adopt new Exchange Rule 6.61 to provide for a price protection mechanism for quotes entered by a Market Maker. Exchange Rule 6.61(a) will provide price protection filters applicable only for quotes entered by a Market Maker pursuant to Rule 6.37B and will not be applicable to orders entered by a Market Maker. The Exchange proposed to provide for two layers of price protection that will be applicable to all incoming Market Maker quotes.\7\ The first layer of price protection will assess incoming sell quotes against the NBB and incoming buy quotes against the NBO.\8\ The second layer of price protection will assess the price of call or put bids against a specified benchmark. --------------------------------------------------------------------------- \7\ The Exchange states that the proposal will assist with the maintenance of fair and orderly markets by averting the risk of Market Maker quotes sweeping through multiple price points resulting in executions at prices that are through the last sale price or National Best Bid or Best Offer (``NBBO''). See Notice, supra note 3, at 1983. \8\ The Exchange represents that this proposed price protection mechanism is similar to the Exchange's Limit Order Filter. See Notice, supra note 3, at 1983. --------------------------------------------------------------------------- 1. NBBO Price Reasonability Check Proposed Exchange Rule 6.61(a)(1) sets forth the Exchange's proposed NBBO price reasonability check, which will compare Market Maker bids with the NBO and Market Maker offers with the NBB. Specifically, provided that an NBBO is available, a Market Maker quote will be rejected if it is priced a specified dollar amount or percentage through the contra-side NBBO as follows: (A) $1.00 for Market Maker bids when the contra-side NBO is priced at or below $1.00; or (B) 50% for Market Maker bids (offers) when the contra-side NBO (NBB) is priced above $1.00. The Exchange will reject inbound Market Maker quotes that exceed the parameters set forth in proposed Exchange Rule 6.61(a)(1)(A)- (B).\9\ The [[Page 12665]] Exchange states that it has proposed a specific dollar threshold for when the NBO is priced at or below $1.00 because, for such low-priced NBOs, the Exchange believes it is appropriate to provide Market Makers with the ability to enter quotes at least $1.00 higher than the prevailing NBO.\10\ For example, if the NBO were $0.06, when using a 100% filter, the Exchange would be required to reject any bids priced $0.12 or more. In addition, the Exchange proposed that pursuant to proposed Exchange Rule 6.61(a)(1)(A), Market Maker offers that arrive when the NBB is priced at or below $1.00 will not be subject to this filter. The Exchange notes that when the NBB is priced at or below $1.00, the price of an offer will be bound by $0.00, and therefore an offer will always be less than $1.00 away from the NBB.\11\ --------------------------------------------------------------------------- \9\ The Exchange states that the proposed percentages are appropriate because they are based on the percentages established for the Limit Order Filter. See Notice, supra note 3, at 1983. \10\ See Notice, supra note 3, at 1983. \11\ The Exchange states that such offer prices would likely not be erroneous and therefore the Exchange does not believe it necessary to reject such Market Maker offers. See Notice, supra note 3, at 1983. --------------------------------------------------------------------------- Because there may be market scenarios that require the proposed parameters to be adjusted, for example, during periods of extreme price volatility, the Exchange has further proposed that the Exchange may revise these parameters, provided such revised parameters are announced to OTP Holders or OTP Firms via a Trader Update.\12\ --------------------------------------------------------------------------- \12\ See proposed Exchange Rule 6.61(a)(1)(A)-(B) (setting forth the specified dollar amount or percentages ``unless determined otherwise by the Exchange and announced to OTP Holders and OTP Firms via Trader Update''). --------------------------------------------------------------------------- The Exchange also proposed that if a Market Maker quote is rejected pursuant to paragraph (a)(1) of the proposed rule, the Exchange will also cancel any resting same-side quote in the affected series from that Market Maker.\13\ According to the Exchange, even if the new quote is rejected because it is priced a specified dollar amount or percentage through the contra-side NBBO, in violation of proposed Exchange Rule 6.61(a)(1), the Market Maker's implicit instruction to cancel the resting quote remains valid nonetheless.\14\ --------------------------------------------------------------------------- \13\ See proposed Exchange Rule 6.61(b). The Exchange states that it believes it is appropriate to reject any resting same-side quote because when a Market Maker submits a new quote, that Market Maker is implicitly instructing the Exchange to cancel any resting quote in that same series. See Notice, supra note 3, at 1983. \14\ See Notice, supra note 3, at 1984 for examples illustrating how proposed Exchange Rule 6.61(a) will operate. --------------------------------------------------------------------------- 2. Underlying Stock Price/Strike Price Check The Exchange also has proposed new Exchange Rule 6.61(a)(2) and (3) which will set forth the Exchange's proposed second layer of price protection filters for Market Maker quotes. These price protection mechanisms will be applicable when either there is no NBBO available, for example, during pre-opening or prior to conducting a re-opening after a trading halt, or if the NBBO is so wide as to not to reflect an appropriate price for the respective options series. Proposed Exchange Rule 6.61(a)(2) will also provide price protection for Market Maker bids in call options. As proposed, if such bids equal or exceed the price of the underlying security, the Market Maker bid will be rejected.\15\ --------------------------------------------------------------------------- \15\ See proposed Exchange Rule 6.61(a)(2). With a call bid, a Market Maker is bidding to buy an option that would be exercised into the right to acquire the underlying security. The Exchange states that it does not believe that a derivative product, which conveys the right to purchase a security underlying the derivative, should ever be priced the same as or higher than the prevailing price of the underlying security itself. Accordingly, the Exchange believes it is appropriate to reject Market Maker bids for call options that are equal to or in excess of the price of the underlying security. See Notice, supra note 3, at 1984. See also Amendment No. 1, supra note 4. --------------------------------------------------------------------------- Under new Exchange Rule 6.61(a)(2)(A), before the underlying security is open, the Exchange will use the previous day's closing price to determine the price of the underlying security.\16\ Under new Exchange Rule 6.61(a)(2)(B), once the underlying security has opened, the Exchange will use the consolidated last sale price to determine the price of the underlying security. Under new Exchange Rule 6.61(a)(2)(C), during a trading halt of the underlying security, the Exchange will use the consolidated last sale reported immediately prior to the trading halt to determine the price of the underlying security.\17\ New Exchange Rule 6.61(a)(3) will provide for price protection for Market Maker bids in put options. In particular, any Market Maker bid for put options will be rejected if the price of the bid is equal to or greater than the strike price of the option.\18\ --------------------------------------------------------------------------- \16\ According to the Exchange, although the underlying securities may trade in the equities markets outside of 9:30 a.m. ET to 4:00 p.m. ET, the equities market is generally not as liquid during this time and equity market makers generally do not have quoting obligations in after-hours trading. Therefore, the Exchange believes that using the previous day's closing price--based on trading during Core Trading Hours, when the market is most liquid-- provides a more accurate benchmark and thus a more precise price protection filter for underlying securities that have not yet opened. See Notice, supra note 3, at 1984. \17\ The Exchange believes that the consolidated last sale price for an underlying security that has already opened will provide the most accurate benchmark because the market is most liquid during Core Trading Hours. See Notice, supra note 3, at 1984. \18\ The Exchange states that the value of a put can never exceed the strike price of the option, even if the stock goes to zero. For example, a put with a strike price of $50 gives the holder the right to sell the underlying security for $50 (no more, or no less), therefore the Exchange states that it would be illogical to pay $50 or more for the right to sell that underlying security, no matter what the price of the underlying security. See Notice, supra note 3, at 1984. See also Amendment No. 1, supra note 4. --------------------------------------------------------------------------- The Exchange also has proposed that when a Market Maker quote is rejected pursuant to paragraph (a)(2) or (a)(3) of the proposed rule, the Exchange will also cancel all resting quote(s) in the affected class(es) from that Market Maker and will not accept new quote(s) in the affected class(es) until the Market Maker submits a message (which may be automated) to the Exchange to enable the entry of new quotes.\19\ --------------------------------------------------------------------------- \19\ See proposed Exchange Rule 6.61(b). The Exchange believes that this temporary suspension from quoting in the affected option class(es) would operate as a safety valve that forces Market Makers to re-evaluate their positions before requesting to re-enter the market. See Notice, supra note 3, at 1984. See also Notice, supra note 3, at 1984-5 for examples illustrating how proposed Exchange Rule 6.61(a)(2) and (a)(3) would operate. --------------------------------------------------------------------------- B. Implementation The Exchange stated that it would announce the implementation date of the proposed rule change in a Trader Update and publish such announcement at least 30 days prior to implementation. III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, with Section 6(b) of the Act.\20\ In particular, the Commission finds that the proposed rule change is consistent with Sections 6(b)(5) of the Act,\21\ which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in [[Page 12666]] general, to protect investors and the public interest. --------------------------------------------------------------------------- \20\ 15 U.S.C. 78f(b). In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \21\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The proposed rule change provides a price protection mechanism for quotes entered by a Market Maker when an NBBO is available that are priced a specified dollar amount or percentage through the last sale or prevailing contra-side market, which the Exchange believes is evidence of error. The Commission believes that the proposed price protection mechanism is reasonably designed to promote just and equitable principles of trade by preventing potential price dislocation that could result from erroneous Market Maker quotes sweeping through multiple price points resulting in executions at prices that are through the last sale price or NBBO.\22\ --------------------------------------------------------------------------- \22\ See Notice, supra note 3, at 1985. --------------------------------------------------------------------------- The Exchange's proposed use of benchmarks to check the reasonability of Market Maker bids for call and put options affords a second layer of price protection to Market Maker quotes. The Commission believes that the additional price reasonability check on Market Maker bids that are priced equal to or greater than the price of the underlying security for call options, and equal to or greater than the strike price for put options, is reasonably designed to operate in manner that would remove impediments to and perfect the mechanism of a free and open market and protect investors and the public interest. Further, the Commission notes the Exchange's belief that the additional risk controls that result in the cancellation of a Market Maker's resting same side quote and/or the temporary suspension a Market Maker's quoting activity in the affected option class(es), as applicable, provide market participants with additional protection from anomalous executions.\23\ --------------------------------------------------------------------------- \23\ See Notice, supra note 3, at 1985. --------------------------------------------------------------------------- Accordingly, the Commission believes that the proposed price protection for Market Maker quotes is reasonably designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\24\ that the proposed rule change (SR-NYSEArca-2014-150), as modified by Amendment No. 1, be, and hereby is, approved. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\25\ --------------------------------------------------------------------------- \25\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Jill M. Peterson, Assistant Secretary. [FR Doc. 2015-05497 Filed 3-9-15; 8:45 am] BILLING CODE 8011-01-P
![12664 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
including whether the proposed rule SECURITIES AND EXCHANGE National Best Bid (‘‘NBB’’) or National
change is consistent with the Act. COMMISSION Best Offer (‘‘NBO’’) (‘‘Limit Order
Comments may be submitted by any of Filter’’). To clarify that Exchange Rule
[Release No. 34–74441; File No. SR–
the following methods: NYSEArca–2014–150]
6.60 applies only to orders, the
Exchange proposed to append the word
Electronic Comments
Self-Regulatory Organizations; NYSE ‘‘Orders’’ to the Exchange Rule 6.60
• Use the Commission’s Internet Arca, Inc.; Order Granting Approval of header to provide ‘‘Rule 6.60. Price
comment form (http://www.sec.gov/ a Proposed Rule Change, as Modified Protection—Orders.’’ 6
rules/sro.shtml); or by Amendment No. 1, To Amend Rule
• Send an email to rule-comments@ 6.60 and To Adopt Rule 6.61, Which
Was Previously Reserved, To Provide A. Proposed Market Maker Quote Price
sec.gov. Please include File Number SR– Protection
PHLX–2015–20 on the subject line. Price Protection for Market Maker
Quotes The Exchange proposed to adopt new
Paper Comments Exchange Rule 6.61 to provide for a
March 4, 2015.
price protection mechanism for quotes
• Send paper comments in triplicate I. Introduction entered by a Market Maker. Exchange
to Brent J. Fields, Secretary, Securities Rule 6.61(a) will provide price
and Exchange Commission, 100 F Street On December 29, 2014, NYSE Arca,
Inc. (‘‘Exchange’’) filed with the protection filters applicable only for
NE., Washington, DC 20549. quotes entered by a Market Maker
Securities and Exchange Commission
All submissions should refer to File (‘‘Commission’’), pursuant to Section pursuant to Rule 6.37B and will not be
Number SR–PHLX–2015–20. This file 19(b)(1) of the Securities Exchange Act applicable to orders entered by a Market
number should be included on the of 1934 (‘‘Act’’) 1 and Rule 19b–4 Maker. The Exchange proposed to
subject line if email is used. To help the thereunder,2 a proposed rule change to provide for two layers of price
Commission process and review your amend Exchange Rule 6.60 (Price protection that will be applicable to all
comments more efficiently, please use Protection) and to adopt Exchange Rule incoming Market Maker quotes.7 The
only one method. The Commission will 6.61 to provide price protection for first layer of price protection will assess
post all comments on the Commission’s Market Maker quotes. The proposed rule incoming sell quotes against the NBB
Internet Web site (http://www.sec.gov/ change was published for comment in and incoming buy quotes against the
rules/sro.shtml). Copies of the the Federal Register on January 14, NBO.8 The second layer of price
submission, all subsequent 2015.3 The Commission received no protection will assess the price of call or
amendments, all written statements comment letters on the proposal. On put bids against a specified benchmark.
with respect to the proposed rule March 2, 2015, the Exchange filed 1. NBBO Price Reasonability Check
change that are filed with the Amendment No. 1 to the proposed rule
Commission, and all written change.4 This order approves the Proposed Exchange Rule 6.61(a)(1)
communications relating to the proposed rule change, as modified by sets forth the Exchange’s proposed
proposed rule change between the Amendment No. 1 thereto. NBBO price reasonability check, which
Commission and any person, other than will compare Market Maker bids with
II. Description of the Proposal the NBO and Market Maker offers with
those that may be withheld from the
public in accordance with the The Exchange proposed to amend the NBB. Specifically, provided that an
provisions of 5 U.S.C. 552, will be Exchange Rule 6.60 and to adopt NBBO is available, a Market Maker
available for Web site viewing and Exchange Rule 6.61, which was quote will be rejected if it is priced a
printing in the Commission’s Public previously Reserved, to provide price specified dollar amount or percentage
Reference Room, 100 F Street NE., protection for Market Maker quotes. through the contra-side NBBO as
Washington, DC 20549, on official Exchange Rule 6.60 currently applies follows:
business days between the hours of and will continue to apply solely to (A) $1.00 for Market Maker bids when
10:00 a.m. and 3:00 p.m. Copies of such orders. Exchange Rule 6.60(b), provides the contra-side NBO is priced at or
filing also will be available for a price protection filter for incoming below $1.00; or
inspection and copying at the principal limit orders, pursuant to which the (B) 50% for Market Maker bids (offers)
office of the Exchange. All comments Exchange rejects limit orders priced a when the contra-side NBO (NBB) is
received will be posted without change; specified percentage 5 through the priced above $1.00.
the Commission does not edit personal The Exchange will reject inbound
identifying information from
1 15 U.S.C. 78s(b)(1). Market Maker quotes that exceed the
submissions. You should submit only
2 17 CFR 240.19b–4. parameters set forth in proposed
3 See Securities Exchange Act Release No. 74018
information that you wish to make Exchange Rule 6.61(a)(1)(A)–(B).9 The
(January 8, 2015), 80 FR 1982 (‘‘Notice’’).
available publicly. All submissions 4 In Amendment No. 1, the Exchange clarified
6 See
that it believes that Market Maker bids should not Notice, supra note 3, at 1983.
should refer to File Number SR–PHLX– 7 The Exchange states that the proposal will assist
be priced the same as or higher than the
2015–20 and should be submitted on or corresponding benchmark, which would be the with the maintenance of fair and orderly markets
before March 31, 2015. price of the underlying security for call options and by averting the risk of Market Maker quotes
the strike price for put options. Amendment No. 1 sweeping through multiple price points resulting in
For the Commission, by the Division of executions at prices that are through the last sale
does not change any of the proposed rule text that
Trading and Markets, pursuant to delegated was submitted in the original filing. Amendment price or National Best Bid or Best Offer (‘‘NBBO’’).
mstockstill on DSK4VPTVN1PROD with NOTICES
authority.14 No. 1 is technical in nature and, therefore, the See Notice, supra note 3, at 1983.
Commission is not publishing it for comment. 8 The Exchange represents that this proposed
Brent J. Fields,
5 Pursuant to Exchange Rule 6.60(b), unless price protection mechanism is similar to the
Secretary. determined otherwise by the Exchange and Exchange’s Limit Order Filter. See Notice, supra
[FR Doc. 2015–05481 Filed 3–9–15; 8:45 am] announced to OTP Holders and OTP Firms via note 3, at 1983.
BILLING CODE 8011–01–P
Trader Update, the specified percentage is 100% for 9 The Exchange states that the proposed
the contra-side NBB or NBO priced at or below percentages are appropriate because they are based
$1.00 and 50% for contra-side NBB or NBO priced on the percentages established for the Limit Order
14 17 CFR 200.30–3(a)(12). above $1.00. See Notice, supra note 3, at 1983. Filter. See Notice, supra note 3, at 1983.
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![12666 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
general, to protect investors and the rule change is consistent with the Act order types and order instructions, as
public interest. and the rules and regulations further described below.
The proposed rule change provides a thereunder applicable to a national The text of the proposed rule change
price protection mechanism for quotes securities exchange. is available at the Exchange’s Web site
entered by a Market Maker when an It is therefore ordered, pursuant to at www.batstrading.com, at the
NBBO is available that are priced a Section 19(b)(2) of the Act,24 that the principal office of the Exchange, and at
specified dollar amount or percentage proposed rule change (SR–NYSEArca– the Commission’s Public Reference
through the last sale or prevailing 2014–150), as modified by Amendment Room.
contra-side market, which the Exchange No. 1, be, and hereby is, approved.
believes is evidence of error. The II. Self-Regulatory Organization’s
For the Commission, by the Division of
Commission believes that the proposed Statement of the Purpose of, and the
Trading and Markets, pursuant to delegated
price protection mechanism is authority.25 Statutory Basis for, the Proposed Rule
reasonably designed to promote just and Jill M. Peterson,
Change
equitable principles of trade by Assistant Secretary. In its filing with the Commission, the
preventing potential price dislocation [FR Doc. 2015–05497 Filed 3–9–15; 8:45 am] Exchange included statements
that could result from erroneous Market concerning the purpose of, and basis for,
BILLING CODE 8011–01–P
Maker quotes sweeping through the proposed rule change and discussed
multiple price points resulting in any comments it received on the
executions at prices that are through the SECURITIES AND EXCHANGE proposed rule change. The text of these
last sale price or NBBO.22 COMMISSION statements may be examined at the
The Exchange’s proposed use of places specified in Item IV below. The
benchmarks to check the reasonability [Release No. 34–74439; File No. SR–EDGX–
2015–08] Exchange has prepared summaries, set
of Market Maker bids for call and put forth in Sections A, B and C below, of
options affords a second layer of price the most significant parts of such
Self-Regulatory Organizations; EDGX
protection to Market Maker quotes. The statements.
Exchange, Inc.; Notice of Filing of a
Commission believes that the additional
Proposed Rule Change, as Modified by A. Self-Regulatory Organization’s
price reasonability check on Market
Amendment No. 1, To Amend Rules Statement of the Purpose of, and the
Maker bids that are priced equal to or
11.6, 11.8, 11.9, 11.10 and 11.11 of Statutory Basis for, the Proposed Rule
greater than the price of the underlying
EDGX Exchange, Inc. Change
security for call options, and equal to or
greater than the strike price for put March 4, 2015. 1. Purpose
options, is reasonably designed to Pursuant to Section 19(b)(1) of the
operate in manner that would remove Securities Exchange Act of 1934 (the On June 5, 2014, Chair Mary Jo White
impediments to and perfect the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 asked all national securities exchanges
mechanism of a free and open market notice is hereby given that on February to conduct a comprehensive review of
and protect investors and the public 20, 2015, EDGX Exchange, Inc. (the each order type offered to members and
interest. Further, the Commission notes ‘‘Exchange’’ or ‘‘EDGX’’) filed with the how it operates.5 The Exchange notes
the Exchange’s belief that the additional Securities and Exchange Commission that a comprehensive rule filing
risk controls that result in the (‘‘Commission’’) the proposed rule clarifying and updating Exchange rules
cancellation of a Market Maker’s resting change as described in Items I, II and III was recently approved.6 However, based
same side quote and/or the temporary below, which items have been prepared on the request from Chair White, the
suspension a Market Maker’s quoting by the self-regulatory organization. On Exchange did indeed conduct further
activity in the affected option class(es), February 27, 2015, the Exchange filed review of each order types and its
as applicable, provide market Amendment No. 1 to the proposal.3 The operation. The proposals set forth below
participants with additional protection Commission is publishing this notice, as are based on this comprehensive review
from anomalous executions.23 modified by Amendment No. 1, to and are intended to clarify and to
Accordingly, the Commission believes solicit comments on the proposed rule include additional specificity regarding
that the proposed price protection for change from interested persons. the current functionality of the
Market Maker quotes is reasonably Exchange’s System, including the
I. Self-Regulatory Organization’s operation of its order types and order
designed to prevent fraudulent and Statement of the Terms of the Substance
manipulative acts and practices, to instructions. The proposals set forth
of the Proposed Rule Change below are intended to supplement the
promote just and equitable principles of
trade, to foster cooperation and The Exchange filed a proposal to recently approved filing based on
coordination with persons engaged in amend Rules 11.6, 11.8, 11.9, 11.10 and further review conducted by the
regulating, clearing, settling, processing 11.11 to clarify and to include Exchange and are intended to clarify
information with respect to, and additional specificity regarding the and enhance the understandability of
facilitating transactions in securities, to current functionality of the Exchange’s the Exchange’s rules related to the
remove impediments to and perfect the System,4 including the operation of its ranking and execution of orders. The
mechanism of a free and open market proposal is also intended to add
24 15 U.S.C. 78s(b)(2).
and a national market system, and, in 25 17
additional detail with respect to the
CFR 200.30–3(a)(12).
general, to protect investors and the 1 15
handling of orders with a Discretionary
U.S.C. 78s(b)(1).
mstockstill on DSK4VPTVN1PROD with NOTICES
public interest. 2 17 CFR 240.19b–4.
3 Amendment No. 1 replaces SR–EDGX–2015–08 5 See Mary Jo White, Chair, Commission, Speech
IV. Conclusion and supersedes such filing in its entirety. at the Sandler O’Neill & Partners, L.P. Global
For the foregoing reasons, the 4 The term ‘‘System’’ is defined as ‘‘the electronic Exchange and Brokerage Conference, (June 5, 2014)
communications and trading facility designated by (available at http://www.sec.gov/News/Speech/
Commission finds that the proposed Detail/Speech/1370542004312#.VD2HW610w6Y).
the Board through which securities orders of Users
are consolidated for ranking, execution and, when 6 Securities Exchange Act Release No. 73468
22 See Notice, supra note 3, at 1985. applicable, routing away.’’ See Exchange Rule (October 29, 2014), 79 FR 65450 (November 4, 2014)
23 See Notice, supra note 3, at 1985. 1.5(cc). (SR–EDGX–2014–18).
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Document Created: 2018-02-21 09:34:55
Document Modified: 2018-02-21 09:34:55
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| FR Citation | 80 FR 12664 |
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