81 FR 17746 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.2 To Create a Reserve Market Maker Options Trading Permit
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 61 (March 30, 2016)
Federal Register Volume 81, Issue 61 (March 30, 2016)
| Page Range | 17746-17749 | |
| FR Document | 2016-07099 |
[Federal Register Volume 81, Number 61 (Wednesday, March 30, 2016)] [Notices] [Pages 17746-17749] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-07099] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77440; File No. SR-NYSEArca-2016-50] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.2 To Create a Reserve Market Maker Options Trading Permit March 24, 2016. 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 March 22, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.2 to create a Reserve Market Maker Options Trading Permit (``Reserve OTP''). The proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. [[Page 17747]] 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 Rule 6.2 to create a Reserve OTP. Under the current NYSE Arca Fee Schedule (Fee Schedule),\4\ an OTP Holder or OTP Firm \5\ acting as a Market Maker must pay a monthly fee for each Options Trading Permit (``OTP'') it utilizes.\6\ In order to act as a Market Maker \7\ on the Exchange Floor, an individual must be specifically named on the relevant Market Maker's OTP. On some occasions, a Market Maker operating on the Floor may be absent from the Floor either briefly or for an entire trading day due to illness or planned absence. When such absences occur, the OTP Holder or OTP Firm may wish to have a Market Maker Authorized Trader \8\ (``MMAT'') employee engage in open outcry trading to cover for the absent Market Maker. However, an MMAT may only step in to cover for the absent Market Maker if it is specifically named on the relevant OTP, and it may not be economical for the OTP Holder or OTP Firm to maintain an additional OTP--or there may not be enough time to complete the approval process for an additional OTP--to address the such [sic] short-term absences. In such cases, the OTP Holder or OTP Firm must carry out its responsibilities with fewer than the optimal number of Market Makers on the Trading Floor. For example, under the Fee Schedule, a total of four OTPs are required to stream quotes electronically into all option issues traded on the Exchange. Additionally, each OTP can have an individual named to act as a Market Maker in open outcry trading on the Floor of the Exchange. Thus, an OTP Holder or OTP Firm with four OTPs may stream quotes in every option issue on the Exchange and have four individuals conduct trading in open outcry on the trading Floor as Market Makers. If one of those four individuals is unavailable due to sickness, vacation or other reason, the OTP Holder or OTP Firm is required to pay for an additional OTP (presently $1,000) in order to have a fifth individual trade in open outcry as a Market Maker. If the OTP Holder or OTP Firm activates an individual on an OTP for any portion of a month, even as little as one day, the OTP Holder or OTP Firm is charged the full monthly OTP fee.\9\ --------------------------------------------------------------------------- \4\ See Fee Schedule, available here, https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. \5\ An OTP Holder is a natural person, in good standing, that has been issued an OTP. See Rule 1.1.(q). An OTP Firm is a sole proprietorship, partnership, corporation, limited liability company or other organization in good standing, who has been issued an OTP or upon whom an OTP Holder has conferred trading privileges on the Exchange. See Rule 1.1.(r). \6\ OTPs are issued by the Exchange for effecting approved securities transactions on the Exchange's Trading Facilities. See Rule 1.1.(p). The cost of each OTP ranges from $6,000, for the first OTP, to $1,000 for the fifth or greater OTP, as the cost decreases as the number of OTPs utilized per month increases. See supra n. 4. The first OTP allows a Market Maker to quote in up to 175 issues; a Market Maker is required to have four OTPs to quote all issues on the Exchange. See id. \7\ A Market Maker is an individual who is registered with the Exchange for the purpose of making transactions as a dealer- specialist on the Floor of the Exchange or for the purpose of submitting quotes electronically and making transactions as a dealer-specialist through the NYSE Arca OX electronic trading system. See Rule 6.32(a). \8\ A Market Maker Authorized Trader is an authorized trader who performs market making activities pursuant to Rule 6 on behalf of an OTP Holder or OTP Firm registered as a Market Maker. See Rule 6.1A(a)(9). A Market Maker Authorized Trader must meet the same registration requirements as a Market Maker before they can be designated as a Market Maker Authorized Trader. See Rule 6.33. \9\ The Monthly OTP fee is based on the maximum number of OTPs held by an OTP Firm or OTP Holder during a calendar month. See supra n. 4, endnote 1. --------------------------------------------------------------------------- The Exchange believes that an option should be available to Market Maker firms to address the short-term absence of an employee in a more economical way, which also would assist the Exchange in maintaining fair and orderly markets. Accordingly, the Exchange proposes new paragraph (i) to Rule 6.2 (Admission to and Conduct on the Options Trading Floor) to create a Reserve OTP. A Reserve OTP would permit an OTP Holder or OTP Firm to have a qualified MMAT employee cover for the absent Market Maker under the firm's OTP, effectively empowering the individual acting as a qualified MMAT to act as a Market Maker in lieu of the absent individual until such time as the absent Market Maker returns. As proposed, when a Market Maker is or will be absent, an OTP Holder or OTP Firm that maintains a Reserve OTP would be required to provide written notice to the Exchange--at least one day in advance-- that it will utilize such Reserve OTP (the ``Notice''). The Notice would identify both the absent Market Maker (who will not be utilizing the Reserve OTP) and the MMAT who will be acting as the substitute Market Maker. While the Notice is in effect, only the specifically named MMAT acting as a substitute Market Maker will be authorized to utilize the OTP. When the original Market Maker returns, the OTP Holder or OTP Firm would provide written notice to the Exchange--at least one day in advance, and, as of the date specified in the notice, the original Market Maker may resume reliance on the OTP and the MMAT would no longer be able to utilize the OTP. In this manner, an OTP Holder or OTP Firm that has purchased the four OTPs required to quote every issue on the Exchange would have the ability to ensure it has sufficient Market Maker coverage in the event of an absence, without having to incur the full OTP fee, by instead paying a Reserve OTP fee of $175 per month, which would be established by a separate fee filing with the Commission.\10\ The proposed fee would be assessed to an OTP Holder for each MMAT in its employ whom the OTP Holder or OTP Firm wishes to be eligible to be named to the OTP to act as a Market Maker to cover for another Market Maker who is otherwise unable to be at work that day. --------------------------------------------------------------------------- \10\ The Exchange will not implement the proposed change until it has filed to modify its fee schedule to address the addition of a Reserve OTP. The Exchange also notes this $175 fee is consistent with fees on other option exchanges. See NYSE Amex Options Fee Schedule, Section III.A. (charging $175 monthly fee for Reserve Floor Market Maker), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf. --------------------------------------------------------------------------- Any natural person to whom a Reserve OTP is issued would be required, as of the date of notice, to (a) be fully qualified and approved by the Exchange to be an OTP Holder or OTP Firm authorized as an MMAT; and (b) meet all of the requirements of an OTP Holder or OTP Firm under the Exchange's rules. Implementation The Exchange proposes to announce the implementation of the proposed rule change via Trader Update. 2. Statutory Basis The Exchange believes that the proposed change is consistent with Section 6(b) of the Act,\11\ in general, and furthers the objectives of Section 6(b)(5),\12\ in particular, in that it is designed 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 facilitation transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with [[Page 17748]] the Section 6(b)(5) \13\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 15 U.S.C. 78f(b)(5). \13\ Id. --------------------------------------------------------------------------- Specifically, the Exchange believes that the proposed rule change would remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest because it would provide a more cost-effective method for OTP Holders or OTP Firms to have fully qualified personnel step in to handle other employees' absences. As such, the proposed change would enable OTP Holders and OTP Firms to better utilize their personnel and resources, thereby contributing to fair and orderly markets. The Exchange notes that the concept of a Reserve OTP is not new or novel and has been in place at other option exchanges for several years. For example, NYSE Amex Options implemented the concept in January 2012.\14\ --------------------------------------------------------------------------- \14\ See Securities Exchange Act Release No. 66237 (January 25, 2012), 77 FR 4848 (January 31, 2012) (SR-NYSEAmex-2012-02) (amending Rule 902NY to create a Reserve Floor Market Maker Amex Trading Permit (``Reserve ATP'')). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that this proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change would relieve the burden on OTP Holders or OTP Firms when they have employees absent from the trading floor and would, in turn, improve the competitiveness of Exchange Market Makers and also promote competition for order flow among market participants and the options exchanges. 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 proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 for 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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(3)(A). \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange's 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. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that such waiver would allow the Exchange to begin implementation of the proposed rule without delay, which the Exchange believes would promote the efficient use of resources and promote competition among the option exchanges. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. As stated in the filing, the Exchange believes that the proposed rule change will enable OTP Holders and OTP Firms to better utilize their personnel and resources, thereby contributing to fair and orderly markets. The Exchange states that it will not implement the proposed rule change until it submits a filing to adopt a fee related to the Reserve OTP. Accordingly, the Commission designates the proposed rule change to be operative upon filing.\19\ --------------------------------------------------------------------------- \17\ 17 CFR 240.19b-4(f)(6). \18\ 17 CFR 240.19b-4(f)(6)(iii). \19\ 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). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEARCA-2016-50 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-2016-50. 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 Web site (http://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 Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2016-50, and should be submitted on or before April 20, 2016. [[Page 17749]] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-07099 Filed 3-29-16; 8:45 am] BILLING CODE 8011-01-P
![17746 Federal Register / Vol. 81, No. 61 / Wednesday, March 30, 2016 / Notices
amount to be invested by each such acquired or disposed of, as the case may SECURITIES AND EXCHANGE
party will be allocated among them pro be. COMMISSION
rata based on each participating party’s 13. Any transaction fee 10 (including
capital available for investment in the break-up or commitment fees but [Release No. 34–77440; File No. SR–
asset class being allocated, up to the excluding broker’s fees contemplated by NYSEArca–2016–50]
amount proposed to be invested by section 17(e) or 57(k) of the Act, as
each. applicable) received in connection with Self-Regulatory Organizations; NYSE
(d) The acquisition of follow-on a Co-Investment Transaction will be Arca, Inc.; Notice of Filing and
investments as permitted by this distributed to the participating Immediate Effectiveness of Proposed
condition will be considered a Co- Investment Companies and the Rule Change To Amend Rule 6.2 To
Investment Transaction for all purposes participating Private Funds on a pro rata
and subject to the other conditions set Create a Reserve Market Maker
basis, based on the amount each Options Trading Permit
forth in the application. invested or committed, as the case may
9. The Independent Directors or be, in such Co-Investment Transaction. March 24, 2016.
Independent Trustees, as applicable, of If any transaction fee is to be held by an
each Investment Company will be Pursuant to Section 19(b)(1) 1 of the
Adviser pending consummation of the
provided quarterly for review all Securities Exchange Act of 1934 (the
Co-Investment Transaction, the fee will
information concerning Potential Co- ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
be deposited into an account
Investment Transactions and Co- maintained by such Adviser at a bank or notice is hereby given that, on March
Investment Transactions, including banks having the qualifications 22, 2016, NYSE Arca, Inc. (the
investments made by the other prescribed in section 26(a)(1) of the Act, ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
Investment Companies and the Private and such account will earn a the Securities and Exchange
Funds that the applicable Investment Commission (the ‘‘Commission’’) the
competitive rate of interest that will also
Company considered but declined to proposed rule change as described in
be divided pro rata among the
participate in, so that the Independent Items I and II below, which Items have
participating Investment Companies and
Directors or Independent Trustees, as been prepared by the self-regulatory
the participating Private Funds based on
applicable, may determine whether all organization. The Commission is
the amount each invests in such Co-
investments made during the preceding publishing this notice to solicit
Investment Transaction. None of the
quarter, including those investments
Investment Companies, the Private comments on the proposed rule change
which the applicable Investment
Funds, the Advisers, nor any affiliated from interested persons.
Company considered but declined to
person of the Investment Companies or
participate in, comply with the I. Self-Regulatory Organization’s
conditions of the Order. In addition, the Private Funds will receive additional
compensation or remuneration of any Statement of the Terms of Substance of
Independent Directors or Independent the Proposed Rule Change
Trustees, as applicable, will consider at kind as a result of, or in connection
least annually the continued with, a Co-Investment Transaction The Exchange proposes to amend
appropriateness for such Investment (other than (a) in the case of the Rule 6.2 to create a Reserve Market
Company of participating in new and participating Investment Companies and
Maker Options Trading Permit
existing Co-Investment Transactions. the participating Private Funds, the pro
(‘‘Reserve OTP’’). The proposed rule
10. The Investment Companies will rata transaction fees described above
change is available on the Exchange’s
maintain the records required by section and fees or other compensation
described in condition 2(c)(iii)(C) and Web site at www.nyse.com, at the
57(f)(3) of the Act as if each of the principal office of the Exchange, and at
Investment Companies were a business (b) in the case of the Advisers,
investment advisory fees paid in the Commission’s Public Reference
development company and as if each of Room.
the investments permitted under these accordance with the respective
conditions were approved by the investment advisory agreements). II. Self-Regulatory Organization’s
Required Majority under section 57(f) of 14. If the Holders own in the aggregate Statement of the Purpose of, and
the Act. more than 25 percent of the Shares of Statutory Basis for, the Proposed Rule
11. No Independent Directors or an Investment Company, then the Change
Independent Trustees, as applicable, Holders will vote such Shares as
will also be a director, general partner, directed by an independent third party In its filing with the Commission, the
managing member or principal, or when voting on (1) the election of self-regulatory organization included
otherwise an ‘‘affiliated person’’ (as directors; (2) the removal of one or more statements concerning the purpose of,
defined in the Act) of any Private Fund. directors; or (3) any other matter under and basis for, the proposed rule change
12. The expenses, if any, associated either the Act or applicable state law and discussed any comments it received
with acquiring, holding or disposing of affecting the Board’s composition, size, on the proposed rule change. The text
any securities acquired in a Co- or manner of election. of those statements may be examined at
Investment Transaction (including, For the Commission, by the Division of the places specified in Item IV below.
without limitation, the expenses of the Investment Management, under delegated The Exchange has prepared summaries,
distribution of any such securities authority. set forth in sections A, B, and C below,
registered for sale under the 1933 Act)
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Brent J. Fields, of the most significant parts of such
will, to the extent not payable by the Secretary. statements.
Advisers under their respective advisory [FR Doc. 2016–07101 Filed 3–29–16; 8:45 am]
agreements with the Investment
BILLING CODE 8011–01–P
Companies and the Private Funds, be
shared by the participating Investment 10 Applicants are not requesting and the staff is
Companies and the participating Private not providing any relief for transaction fees
1 15 U.S.C. 78s(b)(1).
Funds in proportion to the relative received in connection with any Co-Investment
2 15 U.S.C. 78a.
amounts of the securities held or being Transaction. 3 17 CFR 240.19b–4.
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A. Self-Regulatory Organization’s responsibilities with fewer than the one day in advance, and, as of the date
Statement of the Purpose of, and the optimal number of Market Makers on specified in the notice, the original
Statutory Basis for, the Proposed Rule the Trading Floor. For example, under Market Maker may resume reliance on
Change the Fee Schedule, a total of four OTPs the OTP and the MMAT would no
1. Purpose are required to stream quotes longer be able to utilize the OTP. In this
electronically into all option issues manner, an OTP Holder or OTP Firm
The Exchange proposes to amend traded on the Exchange. Additionally, that has purchased the four OTPs
Rule 6.2 to create a Reserve OTP. each OTP can have an individual named required to quote every issue on the
Under the current NYSE Arca Fee to act as a Market Maker in open outcry Exchange would have the ability to
Schedule (Fee Schedule),4 an OTP trading on the Floor of the Exchange. ensure it has sufficient Market Maker
Holder or OTP Firm 5 acting as a Market Thus, an OTP Holder or OTP Firm with coverage in the event of an absence,
Maker must pay a monthly fee for each four OTPs may stream quotes in every without having to incur the full OTP
Options Trading Permit (‘‘OTP’’) it option issue on the Exchange and have fee, by instead paying a Reserve OTP fee
utilizes.6 In order to act as a Market four individuals conduct trading in of $175 per month, which would be
Maker 7 on the Exchange Floor, an open outcry on the trading Floor as established by a separate fee filing with
individual must be specifically named Market Makers. If one of those four the Commission.10 The proposed fee
on the relevant Market Maker’s OTP. On individuals is unavailable due to
some occasions, a Market Maker would be assessed to an OTP Holder for
sickness, vacation or other reason, the each MMAT in its employ whom the
operating on the Floor may be absent OTP Holder or OTP Firm is required to
from the Floor either briefly or for an OTP Holder or OTP Firm wishes to be
pay for an additional OTP (presently eligible to be named to the OTP to act
entire trading day due to illness or $1,000) in order to have a fifth
planned absence. When such absences as a Market Maker to cover for another
individual trade in open outcry as a Market Maker who is otherwise unable
occur, the OTP Holder or OTP Firm may
Market Maker. If the OTP Holder or OTP to be at work that day.
wish to have a Market Maker
Firm activates an individual on an OTP
Authorized Trader 8 (‘‘MMAT’’) Any natural person to whom a
for any portion of a month, even as little
employee engage in open outcry trading Reserve OTP is issued would be
as one day, the OTP Holder or OTP Firm
to cover for the absent Market Maker. required, as of the date of notice, to (a)
is charged the full monthly OTP fee.9
However, an MMAT may only step in to The Exchange believes that an option be fully qualified and approved by the
cover for the absent Market Maker if it should be available to Market Maker Exchange to be an OTP Holder or OTP
is specifically named on the relevant firms to address the short-term absence Firm authorized as an MMAT; and (b)
OTP, and it may not be economical for meet all of the requirements of an OTP
of an employee in a more economical
the OTP Holder or OTP Firm to Holder or OTP Firm under the
way, which also would assist the
maintain an additional OTP—or there Exchange’s rules.
Exchange in maintaining fair and
may not be enough time to complete the
orderly markets. Accordingly, the Implementation
approval process for an additional
Exchange proposes new paragraph (i) to
OTP—to address the such [sic] short- The Exchange proposes to announce
Rule 6.2 (Admission to and Conduct on
term absences. In such cases, the OTP the implementation of the proposed rule
the Options Trading Floor) to create a
Holder or OTP Firm must carry out its change via Trader Update.
Reserve OTP. A Reserve OTP would
permit an OTP Holder or OTP Firm to
4 See Fee Schedule, available here, https://
2. Statutory Basis
www.nyse.com/publicdocs/nyse/markets/arca- have a qualified MMAT employee cover
options/NYSE_Arca_Options_Fee_Schedule.pdf. for the absent Market Maker under the The Exchange believes that the
5 An OTP Holder is a natural person, in good
firm’s OTP, effectively empowering the proposed change is consistent with
standing, that has been issued an OTP. See Rule individual acting as a qualified MMAT
1.1.(q). An OTP Firm is a sole proprietorship, Section 6(b) of the Act,11 in general, and
partnership, corporation, limited liability company to act as a Market Maker in lieu of the furthers the objectives of Section
or other organization in good standing, who has absent individual until such time as the 6(b)(5),12 in particular, in that it is
been issued an OTP or upon whom an OTP Holder absent Market Maker returns. designed to promote just and equitable
has conferred trading privileges on the Exchange. As proposed, when a Market Maker is
See Rule 1.1.(r). principles of trade, to foster cooperation
6 OTPs are issued by the Exchange for effecting or will be absent, an OTP Holder or OTP and coordination with persons engaged
approved securities transactions on the Exchange’s Firm that maintains a Reserve OTP in regulating, clearing, settling,
Trading Facilities. See Rule 1.1.(p). The cost of each would be required to provide written processing information with respect to,
OTP ranges from $6,000, for the first OTP, to $1,000 notice to the Exchange—at least one day
for the fifth or greater OTP, as the cost decreases and facilitation transactions in
as the number of OTPs utilized per month in advance—that it will utilize such securities, to remove impediments to,
increases. See supra n. 4. The first OTP allows a Reserve OTP (the ‘‘Notice’’). The Notice and perfect the mechanism of a free and
Market Maker to quote in up to 175 issues; a Market would identify both the absent Market open market and, in general, to protect
Maker is required to have four OTPs to quote all Maker (who will not be utilizing the
issues on the Exchange. See id. investors and the public interest.
7 A Market Maker is an individual who is Reserve OTP) and the MMAT who will Additionally, the Exchange believes the
registered with the Exchange for the purpose of be acting as the substitute Market proposed rule change is consistent with
making transactions as a dealer-specialist on the Maker. While the Notice is in effect,
Floor of the Exchange or for the purpose of only the specifically named MMAT 10 The Exchange will not implement the proposed
submitting quotes electronically and making
acting as a substitute Market Maker will change until it has filed to modify its fee schedule
asabaliauskas on DSK3SPTVN1PROD with NOTICES
transactions as a dealer-specialist through the NYSE
Arca OX electronic trading system. See Rule 6.32(a). be authorized to utilize the OTP. When to address the addition of a Reserve OTP. The
8 A Market Maker Authorized Trader is an the original Market Maker returns, the Exchange also notes this $175 fee is consistent with
authorized trader who performs market making fees on other option exchanges. See NYSE Amex
OTP Holder or OTP Firm would provide Options Fee Schedule, Section III.A. (charging $175
activities pursuant to Rule 6 on behalf of an OTP
Holder or OTP Firm registered as a Market Maker.
written notice to the Exchange—at least monthly fee for Reserve Floor Market Maker),
See Rule 6.1A(a)(9). A Market Maker Authorized available here, https://www.nyse.com/publicdocs/
Trader must meet the same registration 9 The Monthly OTP fee is based on the maximum nyse/markets/amex-options/NYSE_Amex_Options_
requirements as a Market Maker before they can be number of OTPs held by an OTP Firm or OTP Fee_Schedule.pdf.
11 15 U.S.C. 78f(b).
designated as a Market Maker Authorized Trader. Holder during a calendar month. See supra n. 4,
See Rule 6.33. endnote 1. 12 15 U.S.C. 78f(b)(5).
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For the Commission, by the Division of of the most significant parts of such price), except during periods of quote
Trading and Markets, pursuant to delegated statements. instability, as defined in proposed Rule
authority.20 7.31P(h)(3)(D), as described in greater
Brent J. Fields, A. Self-Regulatory Organization’s
detail below. This proposed rule text is
Statement of the Purpose of, and the
Secretary. based on proposed IEX Rule
Statutory Basis for, the Proposed Rule
[FR Doc. 2016–07099 Filed 3–29–16; 8:45 am] 11.190(a)(10), but with non-substantive
Change
BILLING CODE 8011–01–P differences to use Pillar terminology to
1. Purpose describe how the Discretionary Pegged
The Exchange proposes to amend Order would operate on the Exchange.
SECURITIES AND EXCHANGE NYSE Arca Equites Rule 7.31P(h) Unlike IEX, the Exchange proposes to
COMMISSION (Orders and Modifiers) (‘‘Rule 7.31P’’) to price a Discretionary Pegged Order
add a new Discretionary Pegged Order. based on the PBBO rather than the
[Release No. 34–77441; File No. SR–
NYSEArca–2016–44] The proposed new order is based on the NBBO, which is the reference price that
Discretionary Peg Order as proposed by the Exchange uses for its Pegged Orders
Self-Regulatory Organizations; NYSE Investors’ Exchange, LLC (‘‘IEX’’) in its under Rule 7.31P(h).
Arca, Inc.; Notice of Filing of Proposed Form 1 Application seeking registration Proposed Rule 7.31P(h)(3)(A) would
Rule Change Amending NYSE Arca as a national securities exchange under provide that Discretionary Pegged
Equities Rule 7.31P(h) To Add a New Section 6 of the Act (‘‘IEX Form 1 Orders would not be displayed, must be
Discretionary Pegged Order Application’’).4 The Exchange proposes designated Day, and would be eligible to
to adopt the Discretionary Pegged Order be designated for the Core Trading
March 24, 2016.
for its Pillar trading platform only. Session only. Accordingly, the proposed
Pursuant to Section 19(b)(1) 1 of the As proposed, Rule 7.31P(h)(3) would rule would provide that Discretionary
Securities Exchange Act of 1934 (the provide that a Discretionary Pegged Pegged Orders that include a
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Order would be a Pegged Order 5 to buy designation for the Early Trading
notice is hereby given that, on March (sell) that upon entry to the NYSE Arca Session or Late Trading Session would
11, 2016, NYSE Arca, Inc. (the Marketplace 6 would be assigned a be rejected. This proposed rule text is
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with working price 7 equal to the lower based on proposed IEX Rules
the Securities and Exchange (higher) of the midpoint of the PBBO 8 11.190(a)(10)(F) (a Discretionary Peg
Commission (the ‘‘Commission’’) the (‘‘Midpoint Price’’) or the limit price of Order is eligible to trade only during
proposed rule change as described in the order. Any untraded shares of such IEX’s Regular Market Session) and
Items I and II below, which Items have order would be assigned a working price 11.190(a)(10)(H) (a Discretionary Peg
been prepared by the self-regulatory equal to the lower (higher) of the PBB Order is not eligible to display). Unlike
organization. The Commission is (PBO) or the order’s limit price and IEX, the Exchange proposes that a
publishing this notice to solicit Discretionary Pegged Order be Day time-
would automatically be adjusted in
comments on the proposed rule change in-force and not include any other time-
response to changes to the PBB (PBO)
from interested persons. in-force instruction. The descriptions
for buy (sell) orders up (down) to the
set forth in proposed IEX Rule
I. Self-Regulatory Organization’s order’s limit price. In order to trade with
11.190(a)(10)(A), (C), and (E) are set
Statement of the Terms of Substance of contra-side orders on the NYSE Arca
forth in current Rule 7.31P(h), which
the Proposed Rule Change Book, a Discretionary Pegged Order to
defines Pegged Orders as a Limit Order
buy (sell) would exercise the least
The Exchange proposes to amend that does not route. Therefore, the
amount of price discretion necessary
NYSE Arca Equities Rule 7.31P(h) Exchange proposes not to specify these
from its working price to its
(Orders and Modifiers) to add a new requirements separately for the
discretionary price (defined as the lower
Discretionary Pegged Order. The proposed Discretionary Pegged Order.
(higher) of the Midpoint Price or the Unlike IEX’s proposed Discretionary Peg
proposed rule change is available on the Discretionary Pegged Order’s limit
Exchange’s Web site at www.nyse.com, Order, the Exchange’s proposed
at the principal office of the Exchange, 4 See proposed IEX Rules 11.190(a)(10) and
Discretionary Pegged Order would have
and at the Commission’s Public 11.190(g) in Exhibit B to IEX’s Form 1 Application to include a limit price.
Reference Room. and Securities Exchange Act Release No. 75925 Proposed Rule 7.31P(h)(3)(B) would
(Sept. 15, 2015), 80 FR 57261 (Sept. 22, 2015) (File provide that when exercising discretion,
II. Self-Regulatory Organization’s No. 10–222). Discretionary Pegged Orders would
Statement of the Purpose of, and 5 A ‘‘Pegged Order’’ is defined in Rule 7.31P(h) as
maintain their time priority at their
Statutory Basis for, the Proposed Rule a Limit Order that does not route with a working
price that is pegged to a dynamic reference price.
working price as Priority 3—Non-
Change If the designated reference price is higher (lower) Display Orders and would be prioritized
In its filing with the Commission, the than the limit price of a Pegged Order to buy (sell), behind Priority 3—Non-Display Orders
the working price will be the limit price of the with a working price equal to the
self-regulatory organization included order.
statements concerning the purpose of, 6 The term ‘‘NYSE Arca Marketplace’’ is defined
discretionary price of a Discretionary
and basis for, the proposed rule change in Rule 1.1(e) as the electronic securities Pegged Order at the time of execution.
and discussed any comments it received communications and trading facility designated by If multiple Discretionary Pegged Orders
on the proposed rule change. The text the Board of Directors through which orders of are exercising price discretion during
Users are consolidated for execution and/or display. the same book processing action, they
asabaliauskas on DSK3SPTVN1PROD with NOTICES
of those statements may be examined at 7 The term ‘‘working price’’ is defined in Rule
the places specified in Item IV below. 7.36P(a)(3) as the price at which an order is eligible
would maintain their relative time
The Exchange has prepared summaries, to trade at any given time, which may be different priority at the discretionary price. This
set forth in sections A, B, and C below, from the limit price or display price of the order. proposed rule text is based on the last
The term ‘‘limit price’’ is defined in Rule two full sentences of proposed IEX Rule
7.36P(a)(2) as the highest (lowest) specified price at 11.190(a)(10), with non-substantive
20 17 CFR 200.30–3(a)(12). which a Limit Order to buy (sell) is eligible to trade.
1 15 U.S.C. 78s(b)(1). 8 The term ‘‘PBBO’’ is defined in Rule 1.1(dd) as differences to use Pillar terminology to
2 15 U.S.C. 78a.
the highest Protected Bid and the lowest Protected describe the relative ranking and
3 17 CFR 240.19b–4. Offer. priority of Discretionary Pegged Orders.
VerDate Sep<11>2014 18:06 Mar 29, 2016 Jkt 238001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\30MRN1.SGM 30MRN1](https://thefederalregister.org/doc/81_FR_17807/page/4.svg)
Document Created: 2016-03-30 09:28:32
Document Modified: 2016-03-30 09:28:32
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 17746 |
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