81 FR 21430 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.67(c) by Revising the Clearing Member Requirements for Entering an Order Into the Electronic Order Capture System (“EOC”)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 69 (April 11, 2016)
Federal Register Volume 81, Issue 69 (April 11, 2016)
| Page Range | 21430-21433 | |
| FR Document | 2016-08178 |
[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)] [Notices] [Pages 21430-21433] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08178] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77516; File No. SR-NYSEArca-2016-15] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 6.67(c) by Revising the Clearing Member Requirements for Entering an Order Into the Electronic Order Capture System (``EOC'') April 5, 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. On March 30, 2016, the Exchange filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, 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 the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.67(c) by revising the requirements for entering an order into the Electronic Order Capture System (``EOC''). 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 [[Page 21431]] 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Exchange Rule 6.67(c) by revising the requirements for entering an order into the EOC. Specifically, the Exchange proposes to eliminate the pre-trade EOC requirement that OTP Holders or OTP Firms (each an ``OTP''; collectively, ``OTPs'') give up the name of the Clearing Member \4\ responsible for clearing each trade before representing a trade in open outcry.\5\ --------------------------------------------------------------------------- \4\ Rule 6.1(3) defines ``Clearing Member'' as an Exchange OTP which has been admitted to membership in the Options Clearing Corporation pursuant to the provisions of the Rules of the Options Clearing Corporation. \5\ In Amendment No. 1, the Exchange clarified that it is proposing to amend the timing in which Clearing Member information will be entered into the EOC. More specifically, the Exchange noted that Rule 6.67(c) requires the other items included in Rule 6.68(a), including the ``CMTA Information and the name of the clearing OTP Holder or Firm,'' to be included in the EOC ``as the events occur and/or during trade reporting procedures which may occur after the representation and execution of the order.'' --------------------------------------------------------------------------- The EOC is the Exchange's floor-based electronic audit trail and order tracking system that provides an accurate time-sequenced record of all orders and transactions entered and executed on the floor of the Exchange.\6\ This process, commonly referred to as the ``systemization'' of an order, is composed of the contractual terms of an order that are required to be disclosed in order to effect a trade. The EOC was developed to comply with an order of the Commission, which required that the Exchange, in coordination with other exchanges, ``design and implement a consolidated options audit trail system (`COATS'),'' that would ``enable the options exchanges to reconstruct markets promptly, effectively surveil them and enforce order handling, firm quote, trade reporting and other rules.'' \7\ In particular, the Exchange was required incorporate into the audit trail all non- electronic orders ``such that the audit trail provides an accurate, time-sequenced record of electronic and other orders, quotations and transactions on such respondent exchange, beginning with the receipt of an order by such respondent exchange and further documenting the life of the order through the process of execution, partial execution, or cancellation of that order, which audit trail shall be readily retrievable in the common computer format.'' \8\ --------------------------------------------------------------------------- \6\ This system includes the electronic communications interface between booth terminals and the Floor Broker work stations. \7\ See Section IV.B.e.(v) of the Commission's Order Instituting Public Administrative Proceedings Pursuant to Sections 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions (the ``Order''). See Securities Exchange Act Release No. 43268 (September 11, 2000) and Administrative Proceeding File No. 3-10282. \8\ See id. --------------------------------------------------------------------------- Current Rule 6.67(c) sets forth the EOC entry requirements and mandates that every OTP that receives an order for execution on the Exchange ``must immediately, prior to representation in the trading crowd, record the details of the order (including any modification of the terms of the order or cancellation of the order) into the EOC, unless such order has been entered into the Exchange's other electronic order processing facilities (e.g., orders sent electronically through the Exchange's Member Firm Interface).'' \9\ Among other pre-trade EOC requirements under current Rule 6.67(c)(1), every OTP must provide ``the name of the clearing OTP Holder or OTP Firm'' (the ``Give Up Requirement'').\10\ Rule 6.67(c)(1) also provides that ``[t]he remaining elements prescribed in Rule 6.68(a) and any additional information with respect to the order shall be recorded as the events occur and/or during trade reporting procedures which may occur after the representation and execution of the order.'' \11\ --------------------------------------------------------------------------- \9\ See Rule 6.67(c). \10\ See Rule 6.67(c)(1)(vii). Rule 6.67(c)(1) also requires the following data points to be entered upon receipt of an order: (i) The option symbol; (ii) the expiration date of the option; (iii) the exercise price; (iv) buy or sell with applicable limit or stop price or special instructions; (v) call or put; (vi) the quantity of contracts; as well as such other information as may be required by the Exchange from time to time. Rule 6.67(c)(1) also provides that the Exchange may also require additional information if needed and provides that the remaining data elements prescribed in Rule 6.68 [see infra n. 10] are to be recorded as the events occur and/or during trade reporting procedures. The Exchange proposes to add the words ``in the EOC'' to Rule 6.67(c)(1) to make clear where the additional information would be recorded. See proposed Rule 6.67(c)(1). \11\ See Rule 6.67(c)(1). The Exchange notes that one such element prescribed in Rule 6.68(a) to be recorded by each OTP is ``CMTA Information and the name of the clearing OTP Holder or Firm,'' and therefore, per Rule 6.67(c)(1), this information would still be disclosed ``as the events occur and/or during trade reporting procedures which may occur after the representation and execution of the order.'' Id. See also Rule 6.68(a) (Record of Orders) (requiring that OTP Holders and OTP Firms maintain a record of each order that includes that the following data elements: (1) CMTA Information and the name of the clearing OTP Holder or Firm; (2) options symbol, expiration month, exercise price and type of options; (3) side of the market and order type; (4) quantity of options; (5) limit or stop price or special conditions; (6) opening or closing transaction; (7) time in force; (8) account origin code; and (9) whether the order was solicited or unsolicited.) See also Rule 6.69 (Reporting Duties), infra n. 12. --------------------------------------------------------------------------- Pursuant to the proposed rule change, OTPs would no longer be subject to the pre-trade Give Up Requirement. Floor Brokers have told the Exchange that the identity of the firm through which each trade will clear is not always initially provided when an order is presented and that waiting to receive this information and enter it into EOC can delay the representation and execution of an order. In today's trading environment of rapidly moving markets and the need to execute an order and hedge a trade in real or near real time, even a slight delay can prove to be detrimental to the handling of an order. The proposed change to eliminate the Give Up Requirement prior to execution of each trade would not impair the Exchange's ability to comply with the Order. Specifically, the EOC would still provide an accurate, time-sequenced record beginning with the receipt of an order and document the life of the order through the process of execution, partial execution, or cancellation. Entry of information pursuant to the Give Up Requirement would occur after the order had been represented and executed in the Trading Crowd.\12\ Thus, only the timing of the disclosure of such information would be affected by this proposal. --------------------------------------------------------------------------- \12\ See id.; see also Commentary .01 to Rule 6.69 (providing that for each transaction executed on the Options Floor, the responsible OTP Holder or OTP Firm will immediately report, among other information, both its assigned broker initial code and the name of the contra clearing member). --------------------------------------------------------------------------- The Exchange notes that, similar to a filing it submitted in 2013,\13\ the proposed rule change relates only to the system entry requirements for floor-based orders and would not change rules governing the record of orders (Rule 6.68). Floor Brokers would [[Page 21432]] continue to be required to maintain proper order records, as part of each trade record, including the identity of the clearing OTP Holder or Firm.\14\ In that regard, Floor Brokers would continue to be required to give up the responsible Clearing Member on each trade as part of each trade record.\15\ --------------------------------------------------------------------------- \13\ See Securities and Exchange Act Release 69080 (March 8, 2013), 78 FR 16329, 16330 (March 14, 2013) (SR-NYSEArca-2013-21) (noting that ``[b]ecause the CMTA information, the opening/closing designation, the account origin code, the time if force and whether an order was solicited or unsolicited are not contractual terms of a trade itself nor are they required data elements pursuant to the Exchange's order format requirements, the Exchange does not believe this information needs to be entered into the EOC prior to an order being represented in the Trading Crowd, but may be entered contemporaneously upon the receipt of such information, even if that occurs after the order had been represented and executed in the Trading Crowd''). \14\ The Exchange notes that another exchange has made modifications to its rules related to the Order. See Securities Exchange Act Release No. 63071 (October 8, 2010), 75 FR 63876, 63877-78 (October 18, 2010) (SR-Phlx-2010-139) (immediately effective filing to amend language related to the timing of the entry of clearing information, noting in relevant part that ``[t]he clearing information, which is the contra-side clearing information, is not required to be entered pursuant to COATS. Rather, this information facilitates the identification of the trade for clearing.''). The Exchange notes that the Philadelphia Stock Exchange proposed these changes to its rules without solicitation of the exchanges that were subject to the Order, including the Exchange. Accordingly, the Exchange believes that exchanges' changes to their rules put in place to comply with the Order are appropriately effected pursuant to the provisions of Section 19(b)(1) of the Act and Rule 19b-4 thereunder. See 15 U.S.C. 78s(b)(1); 17 CFR 240.19b-4. \15\ See supra nn. 11, 12. In addition, the Exchange notes that this proposal would not change rules governing trade reporting requirements (Rule 6.69) (i.e., that ``[t]ransactions not reported to [the Options Pricing Reporting Authority] within 90 seconds after the execution will be designated as `late,' '' per Rule 6.69(a)). The Exchange also notes that last year it revised and detailed the process in which an OTP ``gives up'' or selects a Clearing Member responsible for the clearance of an Exchange transaction (the ``Give Up Process''). See Securities and Exchange Act Release 75641 (August 7, 2015), 80 FR 48577 (August 13, 2015) (SR-NYSEArca-2015-65) (revising the Exchange's Give Up Process through modifications to Rules 6.15, 6.66 and 6.79). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed change is consistent with Section 6(b) of the Act,\16\ in general, and furthers the objectives of Section 6(b)(5),\17\ 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 the Section 6(b)(5) \18\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b). \17\ 15 U.S.C. 78f(b)(5). \18\ Id. --------------------------------------------------------------------------- Specifically, the proposed change to order entry requirements for the EOC (i.e., eliminating the pre-trade Give Up) is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities by ensuring that the terms of an order continue to be properly systematized prior to the order being represented in the Trading Crowd. The proposed change to eliminate the Give Up Requirement prior to execution of each trade would not impair the Exchange's ability to comply with the Order. Specifically, the EOC would still provide an accurate, time-sequenced record of electronic and other orders, quotations and transactions, beginning with the receipt of the order and documenting the life of the order through the process of execution, partial execution, or cancellation.\19\ --------------------------------------------------------------------------- \19\ See supra n. 7. --------------------------------------------------------------------------- The proposal is also designed to prevent fraudulent and manipulative acts and practices, by ensuring that the Exchange is continues to meet its obligation to create and maintain a time- sequenced record of orders, quotations and transactions on the Exchange. This proposal does not alter--or, as stated above, impair, the Exchange's obligation to incorporate into its audit trail all non- electronic orders to provide an accurate, time-sequenced record of electronic and other orders, quotations and transactions that documents the life of the order from receipt through the execution, partial execution, or cancellation.\20\ Moreover, the proposed change merely removes the Give Up Requirement from pre-trade systemization, it does not alter that give ups must be disclosed as part of the Give Up Process and as part of trade reporting on the Exchange.\21\ Accordingly, nothing in this proposal would alter the Exchange's obligations pursuant to, or ability to comply with, the Order. The Exchange notes that it has previously modified the non-contractual data elements required pursuant to Rule 6.67(c) (i.e., not mandated by the Order).\22\ --------------------------------------------------------------------------- \20\ Id. \21\ See supra nn. 11, 12, 15. \22\ See supra n. 13. --------------------------------------------------------------------------- Finally, the Exchange believes that the proposed change would reduce the burden on Floor Brokers to enter order information prior to representation which would, in turn, promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market by reducing the delay in representation and execution of an order on the Exchange. 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 reduce the burden on Floor Brokers that have reported that the identity of the firm through which each trade will clear is not always initially provided when an order is presented and that waiting to receive this information and enter it into EOC can delay the representation and execution of an order. By reducing Floor Brokers' burden on order entry compliance, the Exchange believes the proposal will improve the competitiveness of Exchange Floor Brokers, by enabling more timely executions of open outcry trades and promoting 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 the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be 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 No. SR-NYSEArca-2016-15 on the subject line. [[Page 21433]] 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 No. SR-NYSEArca-2016-15. 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 such 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 No. SR-NYSEArca-2016-15, and should be submitted on or before May 2, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-08178 Filed 4-8-16; 8:45 am] BILLING CODE 8011-01-P
![21430 Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
operative for 30 days from the date on change should be approved or For the Commission, by the Division of
which it was filed, or such shorter time disapproved. Trading and Markets, pursuant to delegated
as the Commission may designate, it has authority.15
IV. Solicitation of Comments Robert W. Errett,
become effective pursuant to Section
19(b)(3)(A) of the Act 9 and Rule 19b– Interested persons are invited to Deputy Secretary.
4(f)(6) thereunder.10 submit written data, views, and [FR Doc. 2016–08180 Filed 4–8–16; 8:45 am]
A proposed rule change filed arguments concerning the foregoing, BILLING CODE 8011–01–P
pursuant to Rule 19b–4(f)(6) under the including whether the proposed rule
Act 11 normally does not become change is consistent with the Act.
operative for 30 days after the date of its Comments may be submitted by any of SECURITIES AND EXCHANGE
filing. However, Rule 19b–4(f)(6)(iii) 12 the following methods: COMMISSION
permits the Commission to designate a [Release No. 34–77516; File No. SR–
shorter time if such action is consistent Electronic Comments
NYSEArca–2016–15]
with the protection of investors and the • Use the Commission’s Internet
public interest. The Exchange has asked comment form (http://www.sec.gov/ Self-Regulatory Organizations; NYSE
the Commission to waive the 30-day rules/sro.shtml); or Arca, Inc.; Notice of Filing of Proposed
operative delay so that the proposal may Rule Change, as Modified by
become operative immediately upon • Send an email to rule- Amendment No. 1, To Amend Rule
filing. The Exchange stated that the comments@sec.gov. Please include File 6.67(c) by Revising the Clearing
proposed rule change is designed to Number SR–NYSEArca–2016–51 on the Member Requirements for Entering an
assure compliance with Rule 201 of subject line. Order Into the Electronic Order
Regulation SHO 13 by assuring that the Paper Comments Capture System (‘‘EOC’’)
Exchange will not execute or display a
sell short PNP or a sell short PNP Blind • Send paper comments in triplicate April 5, 2016.
order at or below the national best bid to Brent J. Fields, Secretary, Securities Pursuant to Section 19(b)(1) 1 of the
during a Short Sale Period. The and Exchange Commission, 100 F Street Securities Exchange Act of 1934 (the
Exchange further stated that waiver of NE., Washington, DC 20549–1090. ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
the operative delay would allow the All submissions should refer to File notice is hereby given that, on March
Exchange to implement the rule change Number SR–NYSEArca–2016–51. This 22, 2016, NYSE Arca, Inc. (the
without delay, which would help file number should be included on the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
eliminate potential investor confusion subject line if email is used. To help the the Securities and Exchange
regarding how sell short PNP and PNP Commission process and review your Commission (the ‘‘Commission’’) the
Blind Orders will be treated on arrival comments more efficiently, please use proposed rule change as described in
during a Short Sale Period. The only one method. The Commission will Items I and II below, which Items have
Commission believes the waiver of the post all comments on the Commission’s been prepared by the self-regulatory
operative delay is consistent with the Internet Web site (http://www.sec.gov/ organization. On March 30, 2016, the
protection of investors and the public rules/sro.shtml). Copies of the Exchange filed Amendment No. 1 to the
interest. Therefore, the Commission submission, all subsequent proposed rule change. The Commission
hereby waives the operative delay and amendments, all written statements is publishing this notice to solicit
designates the proposal operative upon with respect to the proposed rule comments on the proposed rule change,
filing.14 change that are filed with the as modified by Amendment No. 1, from
At any time within 60 days of the Commission, and all written interested persons.
filing of the proposed rule change, the communications relating to the I. Self-Regulatory Organization’s
Commission summarily may proposed rule change between the Statement of the Terms of the Substance
temporarily suspend such rule change if Commission and any person, other than of the Proposed Rule Change
it appears to the Commission that such those that may be withheld from the
action is necessary or appropriate in the The Exchange proposes to amend
public in accordance with the
public interest, for the protection of Rule 6.67(c) by revising the
provisions of 5 U.S.C. 552, will be
investors, or otherwise in furtherance of requirements for entering an order into
available for Web site viewing and
the purposes of the Act. If the the Electronic Order Capture System
printing in the Commission’s Public
Commission takes such action, the (‘‘EOC’’). The proposed rule change is
Reference Room, 100 F Street NE.,
Commission shall institute proceedings available on the Exchange’s Web site at
Washington, DC 20549 on official
to determine whether the proposed rule www.nyse.com, at the principal office of
business days between the hours of
the Exchange, and at the Commission’s
10:00 a.m. and 3:00 p.m. Copies of such
9 15 U.S.C. 78s(b)(3)(A). Public Reference Room.
filing also will be available for
10 17 CFR 240.19b–4(f)(6). As required under Rule inspection and copying at the principal II. Self-Regulatory Organization’s
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file office of the Exchange. All comments Statement of the Purpose of, and
the proposed rule change, along with a brief received will be posted without change; Statutory Basis for, the Proposed Rule
description and the text of the proposed rule the Commission does not edit personal Change
change, at least five business days prior to the date identifying information from
of filing of the proposed rule change, or such In its filing with the Commission, the
submissions. You should submit only
mstockstill on DSK4VPTVN1PROD with NOTICES
shorter time as designated by the Commission. self-regulatory organization included
11 17 CFR 240.19b–4(f)(6). information that you wish to make statements concerning the purpose of,
12 17 CFR 240.19b–4(f)(6)(iii). available publicly. All submissions and basis for, the proposed rule change
13 17 CFR 242.201. should refer to File Number SR– and discussed any comments it received
14 For purposes only of waiving the 30-day
NYSEArca–2016–51, and should be
operative delay, the Commission has also submitted on or before May 2, 2016. 1 15 U.S.C. 78s(b)(1).
considered the proposed rule’s impact on
2 15 U.S.C. 78a.
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.
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on the proposed rule change. The text particular, the Exchange was required Pursuant to the proposed rule change,
of those statements may be examined at incorporate into the audit trail all non- OTPs would no longer be subject to the
the places specified in Item IV below. electronic orders ‘‘such that the audit pre-trade Give Up Requirement. Floor
The Exchange has prepared summaries, trail provides an accurate, time- Brokers have told the Exchange that the
set forth in sections A, B, and C below, sequenced record of electronic and identity of the firm through which each
of the most significant parts of such other orders, quotations and trade will clear is not always initially
statements. transactions on such respondent provided when an order is presented
exchange, beginning with the receipt of and that waiting to receive this
A. Self-Regulatory Organization’s information and enter it into EOC can
an order by such respondent exchange
Statement of the Purpose of, and delay the representation and execution
and further documenting the life of the
Statutory Basis for, the Proposed Rule of an order. In today’s trading
order through the process of execution,
Change environment of rapidly moving markets
partial execution, or cancellation of that
1. Purpose order, which audit trail shall be readily and the need to execute an order and
retrievable in the common computer hedge a trade in real or near real time,
The Exchange proposes to amend format.’’ 8 even a slight delay can prove to be
Exchange Rule 6.67(c) by revising the Current Rule 6.67(c) sets forth the detrimental to the handling of an order.
requirements for entering an order into EOC entry requirements and mandates The proposed change to eliminate the
the EOC. Specifically, the Exchange that every OTP that receives an order for Give Up Requirement prior to execution
proposes to eliminate the pre-trade EOC execution on the Exchange ‘‘must of each trade would not impair the
requirement that OTP Holders or OTP immediately, prior to representation in Exchange’s ability to comply with the
Firms (each an ‘‘OTP’’; collectively, the trading crowd, record the details of Order. Specifically, the EOC would still
‘‘OTPs’’) give up the name of the the order (including any modification of provide an accurate, time-sequenced
Clearing Member 4 responsible for the terms of the order or cancellation of record beginning with the receipt of an
clearing each trade before representing a the order) into the EOC, unless such order and document the life of the order
trade in open outcry.5 order has been entered into the through the process of execution, partial
The EOC is the Exchange’s floor-based Exchange’s other electronic order execution, or cancellation. Entry of
electronic audit trail and order tracking processing facilities (e.g., orders sent information pursuant to the Give Up
system that provides an accurate time- electronically through the Exchange’s Requirement would occur after the
sequenced record of all orders and Member Firm Interface).’’ 9 Among other order had been represented and
transactions entered and executed on pre-trade EOC requirements under executed in the Trading Crowd.12 Thus,
the floor of the Exchange.6 This process, current Rule 6.67(c)(1), every OTP must only the timing of the disclosure of such
commonly referred to as the provide ‘‘the name of the clearing OTP information would be affected by this
‘‘systemization’’ of an order, is Holder or OTP Firm’’ (the ‘‘Give Up proposal.
composed of the contractual terms of an Requirement’’).10 Rule 6.67(c)(1) also The Exchange notes that, similar to a
order that are required to be disclosed provides that ‘‘[t]he remaining elements filing it submitted in 2013,13 the
in order to effect a trade. The EOC was prescribed in Rule 6.68(a) and any proposed rule change relates only to the
developed to comply with an order of additional information with respect to system entry requirements for floor-
the Commission, which required that the order shall be recorded as the events based orders and would not change
the Exchange, in coordination with occur and/or during trade reporting rules governing the record of orders
other exchanges, ‘‘design and procedures which may occur after the (Rule 6.68). Floor Brokers would
implement a consolidated options audit representation and execution of the
trail system (‘COATS’),’’ that would order.’’ 11 (requiring that OTP Holders and OTP Firms
maintain a record of each order that includes that
‘‘enable the options exchanges to the following data elements: (1) CMTA Information
reconstruct markets promptly, (September 11, 2000) and Administrative and the name of the clearing OTP Holder or Firm;
effectively surveil them and enforce Proceeding File No. 3–10282. (2) options symbol, expiration month, exercise price
8 See id.
order handling, firm quote, trade and type of options; (3) side of the market and order
9 See Rule 6.67(c). type; (4) quantity of options; (5) limit or stop price
reporting and other rules.’’ 7 In 10 See Rule 6.67(c)(1)(vii). Rule 6.67(c)(1) also or special conditions; (6) opening or closing
requires the following data points to be entered transaction; (7) time in force; (8) account origin
4 Rule 6.1(3) defines ‘‘Clearing Member’’ as an
upon receipt of an order: (i) The option symbol; (ii) code; and (9) whether the order was solicited or
Exchange OTP which has been admitted to the expiration date of the option; (iii) the exercise unsolicited.) See also Rule 6.69 (Reporting Duties),
membership in the Options Clearing Corporation price; (iv) buy or sell with applicable limit or stop infra n. 12.
pursuant to the provisions of the Rules of the price or special instructions; (v) call or put; (vi) the 12 See id.; see also Commentary .01 to Rule 6.69
Options Clearing Corporation. quantity of contracts; as well as such other (providing that for each transaction executed on the
5 In Amendment No. 1, the Exchange clarified
information as may be required by the Exchange Options Floor, the responsible OTP Holder or OTP
that it is proposing to amend the timing in which from time to time. Rule 6.67(c)(1) also provides that Firm will immediately report, among other
Clearing Member information will be entered into the Exchange may also require additional information, both its assigned broker initial code
the EOC. More specifically, the Exchange noted that information if needed and provides that the and the name of the contra clearing member).
Rule 6.67(c) requires the other items included in remaining data elements prescribed in Rule 6.68 13 See Securities and Exchange Act Release 69080
Rule 6.68(a), including the ‘‘CMTA Information and [see infra n. 10] are to be recorded as the events (March 8, 2013), 78 FR 16329, 16330 (March 14,
the name of the clearing OTP Holder or Firm,’’ to occur and/or during trade reporting procedures. 2013) (SR–NYSEArca–2013–21) (noting that
be included in the EOC ‘‘as the events occur and/ The Exchange proposes to add the words ‘‘in the ‘‘[b]ecause the CMTA information, the opening/
or during trade reporting procedures which may EOC’’ to Rule 6.67(c)(1) to make clear where the closing designation, the account origin code, the
occur after the representation and execution of the additional information would be recorded. See time if force and whether an order was solicited or
order.’’ proposed Rule 6.67(c)(1). unsolicited are not contractual terms of a trade itself
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6 This system includes the electronic 11 See Rule 6.67(c)(1). The Exchange notes that nor are they required data elements pursuant to the
communications interface between booth terminals one such element prescribed in Rule 6.68(a) to be Exchange’s order format requirements, the
and the Floor Broker work stations. recorded by each OTP is ‘‘CMTA Information and Exchange does not believe this information needs
7 See Section IV.B.e.(v) of the Commission’s the name of the clearing OTP Holder or Firm,’’ and to be entered into the EOC prior to an order being
Order Instituting Public Administrative Proceedings therefore, per Rule 6.67(c)(1), this information represented in the Trading Crowd, but may be
Pursuant to Sections 19(h)(1) of the Securities would still be disclosed ‘‘as the events occur and/ entered contemporaneously upon the receipt of
Exchange Act of 1934, Making Findings and or during trade reporting procedures which may such information, even if that occurs after the order
Imposing Remedial Sanctions (the ‘‘Order’’). See occur after the representation and execution of the had been represented and executed in the Trading
Securities Exchange Act Release No. 43268 order.’’ Id. See also Rule 6.68(a) (Record of Orders) Crowd’’).
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![21432 Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices
continue to be required to maintain equitable principles of trade, to foster B. Self-Regulatory Organization’s
proper order records, as part of each cooperation and coordination with Statement on Burden on Competition
trade record, including the identity of persons engaged in facilitating The Exchange does not believe that
the clearing OTP Holder or Firm.14 In transactions in securities by ensuring this proposed rule change would
that regard, Floor Brokers would that the terms of an order continue to be impose any burden on competition not
continue to be required to give up the properly systematized prior to the order necessary or appropriate in furtherance
responsible Clearing Member on each being represented in the Trading Crowd. of the purposes of the Act. The
trade as part of each trade record.15 The proposed change to eliminate the proposed rule change would reduce the
2. Statutory Basis Give Up Requirement prior to execution burden on Floor Brokers that have
The Exchange believes that the of each trade would not impair the reported that the identity of the firm
proposed change is consistent with Exchange’s ability to comply with the through which each trade will clear is
Section 6(b) of the Act,16 in general, and Order. Specifically, the EOC would still not always initially provided when an
furthers the objectives of Section provide an accurate, time-sequenced order is presented and that waiting to
6(b)(5),17 in particular, in that it is record of electronic and other orders, receive this information and enter it into
designed to promote just and equitable quotations and transactions, beginning EOC can delay the representation and
principles of trade, to foster cooperation with the receipt of the order and execution of an order. By reducing Floor
and coordination with persons engaged documenting the life of the order Brokers’ burden on order entry
in regulating, clearing, settling, through the process of execution, partial compliance, the Exchange believes the
processing information with respect to, execution, or cancellation.19 proposal will improve the
and facilitation transactions in competitiveness of Exchange Floor
The proposal is also designed to Brokers, by enabling more timely
securities, to remove impediments to, prevent fraudulent and manipulative
and perfect the mechanism of a free and executions of open outcry trades and
acts and practices, by ensuring that the promoting competition for order flow
open market and, in general, to protect Exchange is continues to meet its
investors and the public interest. among market participants and the
obligation to create and maintain a time- options exchanges.
Additionally, the Exchange believes the
sequenced record of orders, quotations
proposed rule change is consistent with C. Self-Regulatory Organization’s
the Section 6(b)(5) 18 requirement that and transactions on the Exchange. This
proposal does not alter—or, as stated Statement on Comments on the
the rules of an exchange not be designed Proposed Rule Change Received From
to permit unfair discrimination between above, impair, the Exchange’s obligation
Members, Participants, or Others
customers, issuers, brokers, or dealers. to incorporate into its audit trail all non-
Specifically, the proposed change to electronic orders to provide an accurate, No written comments were solicited
order entry requirements for the EOC time-sequenced record of electronic and or received with respect to the proposed
(i.e., eliminating the pre-trade Give Up) other orders, quotations and rule change.
is designed to promote just and transactions that documents the life of III. Date of Effectiveness of the
the order from receipt through the Proposed Rule Change and Timing for
14 The Exchange notes that another exchange has
execution, partial execution, or Commission Action
made modifications to its rules related to the Order. cancellation.20 Moreover, the proposed
See Securities Exchange Act Release No. 63071
change merely removes the Give Up Within 45 days of the date of
(October 8, 2010), 75 FR 63876, 63877–78 (October publication of this notice in the Federal
18, 2010) (SR–Phlx–2010–139) (immediately Requirement from pre-trade
effective filing to amend language related to the Register or within such longer period (i)
systemization, it does not alter that give
timing of the entry of clearing information, noting as the Commission may designate up to
ups must be disclosed as part of the
in relevant part that ‘‘[t]he clearing information, 90 days of such date if it finds such
which is the contra-side clearing information, is not Give Up Process and as part of trade longer period to be appropriate and
required to be entered pursuant to COATS. Rather, reporting on the Exchange.21 publishes its reasons for so finding or
this information facilitates the identification of the
trade for clearing.’’). The Exchange notes that the
Accordingly, nothing in this proposal (ii) as to which the Exchange consents,
Philadelphia Stock Exchange proposed these would alter the Exchange’s obligations the Commission shall: (a) By order
changes to its rules without solicitation of the pursuant to, or ability to comply with, approve or disapprove such proposed
exchanges that were subject to the Order, including the Order. The Exchange notes that it
the Exchange. Accordingly, the Exchange believes rule change, or (b) institute proceedings
that exchanges’ changes to their rules put in place has previously modified the non- to determine whether the proposed rule
to comply with the Order are appropriately effected contractual data elements required change should be disapproved.
pursuant to the provisions of Section 19(b)(1) of the pursuant to Rule 6.67(c) (i.e., not
Act and Rule 19b–4 thereunder. See 15 U.S.C.
mandated by the Order).22 IV. Solicitation of Comments
78s(b)(1); 17 CFR 240.19b–4.
15 See supra nn. 11, 12. In addition, the Exchange
Finally, the Exchange believes that Interested persons are invited to
notes that this proposal would not change rules the proposed change would reduce the submit written data, views, and
governing trade reporting requirements (Rule 6.69) arguments concerning the foregoing,
(i.e., that ‘‘[t]ransactions not reported to [the burden on Floor Brokers to enter order
Options Pricing Reporting Authority] within 90 information prior to representation including whether the proposed rule
seconds after the execution will be designated as change is consistent with the Act.
which would, in turn, promote just and
‘late,’ ’’ per Rule 6.69(a)). The Exchange also notes Comments may be submitted by any of
that last year it revised and detailed the process in equitable principles of trade and remove
the following methods:
which an OTP ‘‘gives up’’ or selects a Clearing impediments to and perfect the
Member responsible for the clearance of an mechanism of a free and open market by Electronic Comments
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Exchange transaction (the ‘‘Give Up Process’’). See
Securities and Exchange Act Release 75641 (August
reducing the delay in representation and • Use the Commission’s Internet
7, 2015), 80 FR 48577 (August 13, 2015) (SR– execution of an order on the Exchange. comment form (http://www.sec.gov/
NYSEArca–2015–65) (revising the Exchange’s Give rules/sro.shtml); or
Up Process through modifications to Rules 6.15,
6.66 and 6.79).
19 See supra n. 7. • Send an email to rule-
16 15 U.S.C. 78f(b). 20 Id. comments@sec.gov. Please include File
17 15 U.S.C. 78f(b)(5). 21 See supra nn. 11, 12, 15. No. SR–NYSEArca–2016–15 on the
18 Id. 22 See supra n. 13. subject line.
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![Federal Register / Vol. 81, No. 69 / Monday, April 11, 2016 / Notices 21433
Paper Comments SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
COMMISSION Statement of the Purpose of, and the
• Send paper comments in triplicate Statutory Basis for, the Proposed Rule
to Secretary, Securities and Exchange Change
[Release No. 34–77521; File No. SR–
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
NYSEArca–2016–53] 1. Purpose
The purpose of this filing is to add
All submissions should refer to File No. Self-Regulatory Organizations; NYSE
fees for Reserve Market Maker Options
SR–NYSEArca–2016–15. This file Arca, Inc.; Notice of Filing and
Trading Permits (each a ‘‘Reserve
number should be included on the Immediate Effectiveness of Proposed OTP’’).
subject line if email is used. To help the Rule Change Amending the NYSE Arca Under the current NYSE Arca Fee
Commission process and review your Options Fee Schedule To Add Fees for Schedule (Fee Schedule),4 an OTP
comments more efficiently, please use Reserve Market Maker Options Trading Holder or OTP Firm 5 acting as a Market
only one method. The Commission will Permits Maker must pay a monthly fee for each
post all comments on the Commission’s Options Trading Permit (‘‘OTP’’) it
April 5, 2016
Internet Web site (http://www.sec.gov/ utilizes.6 In order to act as a Market
rules/sro.shtml). Copies of the Pursuant to Section 19(b)(1) 1 of the Maker 7 on the Exchange Floor, an
submission, all subsequent Securities Exchange Act of 1934 (the individual must be specifically named
amendments, all written statements ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 on the relevant Market Maker’s OTP. On
with respect to the proposed rule notice is hereby given that, on March occasions when a Market Maker
change that are filed with the 25, 2016, NYSE Arca, Inc. (the operating on the Floor may is [sic]
Commission, and all written ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with absent, the OTP Holder or OTP Firm
communications relating to the the Securities and Exchange may wish to have a Market Maker
proposed rule change between the Commission (the ‘‘Commission’’) the Authorized Trader 8 (‘‘MMAT’’)
Commission and any person, other than proposed rule change as described in employee engage in open outcry trading
Items I, II, and III below, which Items to cover for the absent Market Maker.
those that may be withheld from the
have been prepared by the self- However, an MMAT may only step in to
public in accordance with the
regulatory organization. The cover for the absent Market Maker if it
provisions of 5 U.S.C. 552, will be is specifically named on the relevant
available for Web site viewing and Commission is publishing this notice to
solicit comments on the proposed rule OTP; if such individual is not named,
printing in the Commission’s Public the OTP Holder or OTP Firm would be
Reference Room, 100 F Street NE., change from interested persons.
charged the full monthly fee if it
Washington, DC 20549 on official I. Self-Regulatory Organization’s activates the OTP to allow that
business days between the hours of Statement of the Terms of Substance of individual to stand in for as briefly as
10:00 a.m. and 3:00 p.m. Copies of such the Proposed Rule Change one day.9
filing also will be available for
inspection and copying at the principal The Exchange proposes to amend the 4 See Fee Schedule, available here, https://
office of the Exchange. All comments NYSE Arca Options Fee Schedule (‘‘Fee www.nyse.com/publicdocs/nyse/markets/arca-
Schedule’’) to add fees for Reserve options/NYSE_Arca_Options_Fee_Schedule.pdf.
received will be posted without change; 5 An OTP Holder is a natural person, in good
the Commission does not edit personal Market Maker Options Trading Permits. standing, that has been issued an OTP. See Rule
identifying information from The Exchange proposes to implement 1.1.(q). An OTP Firm is a sole proprietorship,
submissions. You should submit only the fee change effective April 1, 2016. partnership, corporation, limited liability company
The proposed rule change is available or other organization in good standing, who has
information that you wish to make been issued an OTP or upon whom an OTP Holder
available publicly. All submissions on the Exchange’s Web site at has conferred trading privileges on the Exchange.
should refer to File No. SR–NYSEArca– www.nyse.com, at the principal office of See Rule 1.1.(r).
2016–15, and should be submitted on or the Exchange, and at the Commission’s 6 OTPs are issued by the Exchange for effecting
Public Reference Room. approved securities transactions on the Exchange’s
before May 2, 2016. Trading Facilities. See Rule 1.1.(p). The cost of each
II. Self-Regulatory Organization’s OTP ranges from $6,000, for the first OTP, to $1,000
For the Commission, by the Division of
for the fifth or greater OTP, as the cost decreases
Trading and Markets, pursuant to delegated Statement of the Purpose of, and as the number of OTPs utilized per month
authority.23 Statutory Basis for, the Proposed Rule increases. See supra n. 4. The first OTP allows a
Robert W. Errett, Change Market Maker to quote in up to 175 issues; a Market
Maker is required to have four OTPs to quote all
Deputy Secretary. In its filing with the Commission, the issues on the Exchange. See id.
7 A Market Maker is an individual who is
[FR Doc. 2016–08178 Filed 4–8–16; 8:45 am] self-regulatory organization included registered with the Exchange for the purpose of
BILLING CODE 8011–01–P statements concerning the purpose of, making transactions as a dealer-specialist on the
and basis for, the proposed rule change Floor of the Exchange or for the purpose of
and discussed any comments it received submitting quotes electronically and making
transactions as a dealer-specialist through the NYSE
on the proposed rule change. The text Arca OX electronic trading system. See Rule 6.32(a).
of those statements may be examined at 8 A Market Maker Authorized Trader is an
the places specified in Item IV below. authorized trader who performs market making
activities pursuant to Rule 6 on behalf of an OTP
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The Exchange has prepared summaries,
Holder or OTP Firm registered as a Market Maker.
set forth in sections A, B, and C below, See Rule 6.1A(a)(9). A Market Maker Authorized
of the most significant parts of such Trader must meet the same registration
statements. requirements as a Market Maker before they can be
designated as a Market Maker Authorized Trader.
See Rule 6.33.
1 15 U.S.C. 78s(b)(1). 9 The Monthly OTP fee is based on the maximum
2 15 U.S.C. 78a. number of OTPs held by an OTP Firm or OTP
23 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4. Continued
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Document Created: 2016-04-09 00:11:17
Document Modified: 2016-04-09 00:11:17
| 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 21430 |
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