81 FR 21636 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending the Eighth Amended and Restated Operating Agreement of the Exchange
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 70 (April 12, 2016)
Federal Register Volume 81, Issue 70 (April 12, 2016)
| Page Range | 21636-21639 | |
| FR Document | 2016-08300 |
[Federal Register Volume 81, Number 70 (Tuesday, April 12, 2016)] [Notices] [Pages 21636-21639] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08300] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77536; File No. SR-NYSEMKT-2016-26] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending the Eighth Amended and Restated Operating Agreement of the Exchange April 6, 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 29, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \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 the Eighth Amended and Restated Operating Agreement of the Exchange (``Operating Agreement'') to (1) change the process for nominating non-affiliated directors; (2) remove a reference to an obsolete category of member; and (3) add references to Designated Market Makers. 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. 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 the Operating Agreement to (1) change the process for nominating non-affiliated directors; (2) remove a reference to an obsolete category of member; and (3) add references to Designated Market Makers (``DMMs''). Process for Nominating Non-Affiliated Directors Pursuant to the Operating Agreement, at least 20% of the Board of Directors of the Exchange (``Board'') is made up of ``Non-Affiliated Directors'' (commonly referred to as ``fair representation directors'').\4\ Pursuant to Section 2.03(a) of the Operating Agreement, the nominating and governance committee (``NGC'') of the board of directors of ICE, the indirect parent of the Exchange, nominates the candidates for Non-Affiliated Directors, who are then elected by NYSE Group, as the sole member of the Exchange. The Exchange proposes to amend Section 2.03(a) to have the Director Candidate Recommendation Committee (``DCRC'') of the Exchange assume the role currently played by the ICE NGC, and to make a conforming change to Section 2.03(h)(i). In addition, if the Member Organizations endorse a petition candidate for Non-Affiliate Director, pursuant to Section 2.03(a)(iv) the ICE NGC makes the determination of whether the person is eligible.\5\ The Exchange proposes to amend Section 2.03(a)(iv) to have the Exchange make such determination instead of the ICE NGC. --------------------------------------------------------------------------- \4\ Pursuant to Section 2.03(a) of the Operating Agreement, Non- Affiliate Directors are persons who are not members of the board of directors of Intercontinental Exchange, Inc. (``ICE''). A person may not be a Non-Affiliate Director unless he or she is free of any statutory disqualification, as defined in Section 3(a)(39) of the Exchange Act. Non-Affiliate Directors need not be independent. \5\ Pursuant to Section 2.02 of the Operating Agreement, ``Member Organizations'' refers to members and member organizations, as defined in NYSE MKT Rules 18 and 24, respectively. --------------------------------------------------------------------------- Currently, the nomination by the ICE NGC is the final step in the process for electing a Non-Affiliated Director. First, the DCRC recommends a candidate, whose name then is announced to the Exchange's Member Organizations. The Member Organizations may propose alternate candidates by petition. If there are no petition candidates, the DCRC recommends its candidate to the ICE NGC. If petition candidates are proposed, the ICE NGC makes the determination of whether the candidates are eligible, and then all of the eligible candidates are submitted to the Member Organizations for a vote. The DCRC recommends to the ICE NGC the candidate receiving the highest number of votes. The ICE NGC is obligated to designate the DCRC-recommended candidate as the nominee, and NYSE Group is obligated to elect him or her as a Non-Affiliated Director. The Exchange believes obligating the ICE NGC to nominate the candidates for Non-Affiliated Directors based on the DCRC's unalterable recommendation is neither necessary nor meaningful. Pursuant to Section 2.03(a)(iii) the ICE NGC is obligated to designate whomever the DCRC recommends or, if there is a petition candidate, whomever emerges from the petition process. The ICE NGC does not have any discretion. Removing this unnecessary step would make the NYSE MKT process more efficient. The Exchange believes that having the Exchange determine whether persons endorsed to be petition candidates are eligible also would be more efficient, as it would not require action from the ICE NGC, thereby removing the possibility [[Page 21637]] of any delay in the process. The proposed change would be consistent with the petition process of the Nasdaq Stock Market LLC, in which the exchange determines the eligibility of proposed nominees.\6\ --------------------------------------------------------------------------- \6\ See By-Laws of the Nasdaq Stock Market LLC, Art. II, Sec. 1(b) (``The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Member Representative Director.''). --------------------------------------------------------------------------- The Exchange believes that the proposed changes will make its process more consistent with the process by which its affiliate, NYSE Arca, Inc. (``NYSE Arca''), designates its fair representation directors, in which the ICE NGC plays no role.\7\ --------------------------------------------------------------------------- \7\ See Article III, Section 3.02 of the NYSE Arca Bylaws and NYSE Arca Rule 3.2(b)(2). Similarly, the board of directors of The NASDAQ OMX Group, Inc., the sole member of the Nasdaq Stock Market LLC, plays no role in nominating or determining the eligibility of Member Representative Directors. See By-Laws of the Nasdaq Stock Market LLC, Art. II, Sec. 1. --------------------------------------------------------------------------- Accordingly, the Exchange proposes to revise Section 2.03(a)(iii)- (v) of the Operating Agreement to amend the process for electing Non- Affiliated Directors. As proposed, the process would be as follows. First, as is currently the case, the DCRC would recommend a candidate, whose name would be announced to the Member Organizations, and the Member Organizations could propose alternate candidates by petition. Second, if there were no petition candidates, the DCRC would nominate the candidate it had previously recommended. If there were petition candidates, the Exchange would make the eligibility determination of petition candidates, all eligible candidates would be submitted to the Member Organizations for a vote, and the DCRC would nominate the candidate receiving the highest number of votes. Finally, NYSE Group would be obligated to elect the DCRC-nominated candidate as a Non- Affiliated Director. The Exchange would make a conforming change to Section 2.03(h)(i) to state that the DCRC ``will be responsible for nominating Non- Affiliate Director Candidates.'' Currently, the provision states that the DCRC ``will be responsible for recommending Non-Affiliated Director Candidates to the ICE NGC.'' Elimination of a Category of DCRC Membership As noted above, the Operating Agreement requires that the DCRC include representatives from each of four categories of Exchange members. The Exchange proposes to amend Section 2.03(h)(i) of the Operating Agreement to eliminate from the DCRC representatives of the fourth category, which relates to individuals who are ``associated with a Member Organization and spend a majority of their time on the trading floor of the [Exchange] and have as a substantial part of their business the execution of transactions on the trading floor of the [Exchange] for their own account or the account of their Member Organization, but are not registered as a specialist.''\8\ --------------------------------------------------------------------------- \8\ Representatives from the following three categories would continue to be included on the DCRC: (1) Member organizations that engage in a business involving substantial direct contact with securities customers (commonly referred to as ``upstairs firms''), (2) specialists, and (3) floor brokers. The Exchange proposes to add DMMs to category (2), as discussed below. See note 15, infra, and accompanying text. --------------------------------------------------------------------------- This fourth category describes a class of proprietary traders known as Registered Equity Market Makers (``REMM'') on the former American Stock Exchange LLC, a predecessor of the Exchange. REMMs were floor traders who engaged in on-floor proprietary trading, subject to certain requirements intended to have these members effectively function like market makers, pursuant to the exemption for market makers in Section 11(a)(1)(A) of the Exchange Act.\9\ The rules relating to this category of proprietary floor trader were eliminated shortly after the American Stock Exchange LLC was acquired by the NYSE.\10\ In addition, NYSE MKT Rule 114, which governed REMMs, was deleted as obsolete in 2012.\11\ As a result, there are no Exchange members or member organizations that fall under the fourth category specified in Section 2.03(h)(i) of the Operating Agreement, and so the Exchange proposes to delete references to it as obsolete. The changes would make Section 2.03(h)(i) more consistent with the categories of members of the Committee for Review in Section 2.03(h)(iii).\12\ --------------------------------------------------------------------------- \9\ See 17 CFR 240.11a1-5; Division of Market Regulation, United States Securities and Exchange Commission, Market 2000: An Examination of Current Equity Market Developments (January 1994) (``Market 2000''), at A V-7, available at https://www.sec.gov/divisions/marketreg/market2000.pdf. This class of proprietary traders were known as Registered Competitive Market Makers (``RCMM'') on the NYSE. \10\ See Securities Exchange Act Release No. 58705 (October 1, 2008), 73 FR 58995, 58996 (October 8, 2008) (SR-Amex-2008-63). The NYSE eliminated RCMMs shortly thereafter. See Securities Exchange Act Release No. 60356 (July 21, 2009), 74 FR 37281 (July 28, 2009) (SR-NYSE-2009-08). \11\ See Securities Exchange Act Release No. 68306 (November 28, 2012), 77 FR 71846 (December 4, 2012) (SR-NYSEMKT-2012-68). \12\ See Securities Exchange Act Release No. 77008 (February 1, 2016), 81 FR 6311 (February 5, 2016) (SR-NYSEMKT-2015-106). --------------------------------------------------------------------------- References to Designated Market Makers In 2008, the Exchange adopted rules, based on NYSE rules, that transformed specialists in the Exchange's equity market into DMMs.\13\ As a result, market makers on the NYSE MKT equity market are called DMMs and on the NYSE Amex Options LLC (``NYSE Amex Options'') options market are called ``specialists.''\14\ However, several provisions of the Operating Agreement were not updated, and refer only to specialists. Accordingly, the Exchange proposes to amend Sections 2.02 and 2.03(h)(i) to add references to DMMs. --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release Nos. 58705 (Oct. 1, 2008), 73 FR 58995 (Oct. 8. 2008) (SR-Amex-2008-63) (approval order) and 59022 (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR-NYSEALTR- 2008-10) (amending equity rules to conform to NYSE New Market Model Pilot rules). See also Securities Exchange Act Release No. 58845 (October 24, 2008), 73 FR 64379, 64381 (October 29, 2008) (SR-NYSE- 2008-46) (approving rule change to create NYSE New Market Model Pilot). \14\ The Exchange operates a marketplace for trading options through NYSE Amex Options, a facility of the Exchange. See Rule 2-- Equities (i) & (j) (defining DMM) and Rule 927NY (defining specialist). --------------------------------------------------------------------------- Section 2.02 of the Operating Agreement provides that the Board has general supervision over Member Organizations and over approved persons in connection with their conduct with or affecting Member Organizations. Section 2.02 further provides that the Board ``may disapprove of any member acting as a specialist or odd lot dealer''. The Exchange proposes to add ``designated market maker (as defined in Rule 2 of the Company Rules) (`DMM')'' after ``specialist'' in Section 2.02. Section 2.03(h)(i) sets out the categories of individuals that shall be represented on the DCRC. The Exchange proposes to add ``or DMM'' to the references to ``specialist'' in categories (ii) and (iii), so that they reference both types of market makers. The changes would be consistent with the categories of members of the Committee for Review in Section 2.03(h)(iii), which refers to both DMMs and specialists.\15\ --------------------------------------------------------------------------- \15\ See note 12, supra. --------------------------------------------------------------------------- Finally, the Exchange proposes to make technical and conforming changes to the recitals and signature page of the Operating Agreement. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Exchange Act \16\ in general, and with Section 6(b)(1) \17\ in particular, in that it enables the Exchange to be so organized as to have [[Page 21638]] the capacity to be able to carry out the purposes of the Exchange Act and to comply, and to enforce compliance by its exchange members and persons associated with its exchange members, with the provisions of the Exchange Act, the rules and regulations thereunder, and the rules of the Exchange. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b). \17\ 15 U.S.C. 78f(b)(1). --------------------------------------------------------------------------- The proposed change would remove the requirement that the ICE NGC nominate the candidates for Non-Affiliated Directors and have the DCRC nominate the candidates for Non-Affiliated Director directly. This proposed change would remove an unnecessary step in the process of nominating candidates for Non-Affiliated Directors and increase efficiency. In addition, the proposed change would remove the requirement that the ICE NGC make the determination whether persons endorsed to be petition candidates are eligible to be Non-Affiliated Directors, and have the Exchange make such determination instead. By not requiring action from the ICE NGC, the possibility of any resulting delay in the process is removed. For these reasons, the Exchange believes that the proposed rule change would contribute to the orderly operation of the Exchange and would enable the Exchange to be so organized as to have the capacity to carry out the purposes of the Exchange Act and comply and enforce compliance with the provisions of the Exchange Act by its members and persons associated with its members. The Exchange therefore believes that approval of the proposed is consistent with Section 6(b)(1) of the Act. The Exchange believes that amending the Operating Agreement to remove the requirement that the DCRC include representatives from the fourth category of members would remove a reference to an obsolete category, thereby reducing potential confusion that may result from retaining obsolete references in the Exchange's Operating Agreement. The Exchange believes that eliminating such obsolete references would not be inconsistent with the public interest and the protection of investors because investors will not be harmed and in fact would benefit from increased transparency, thereby reducing potential confusion. Removing such obsolete references will also further the goal of transparency and add clarity to the Exchange's rules. The Exchange believes that adding references to DMMs enables the Exchange to be so organized as to have the capacity to be able to carry out the purposes of the Exchange Act and to comply, and to enforce compliance by its exchange members and persons associated with its exchange members, with the provisions of the Exchange Act, the rules and regulations thereunder, and the rules of the Exchange. The proposed addition of a reference to DMMs in Section 2.02 will clarify that the Board has general supervision over all Member Organizations, including the ability to disapprove of any member acting as a DMM, as well as a specialist or odd lot dealer. The proposed addition of references to DMMs in Section 2.03(h)(i) further the goals of Section 6(b)(3) of ensuring fair representation of an exchange's members in the selection of its directors and administration of its affairs by including both types of market makers in the categories of individuals that shall be represented on the DCRC. The Exchange also believes that this filing furthers the objectives of Section 6(b)(5) of the Exchange Act \18\ because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that having the DCRC nominate the candidates for Non-Affiliated Director would remove impediments to and perfect a national market system because the proposed rule change would remove an unnecessary step in the process for nominating candidates for Non- Affiliated Directors and would remove the ICE NGC from making the determination whether persons endorsed to be petition candidates are eligible to be Non-Affiliated Directors. By not requiring action from the ICE NGC, the possibility of any resulting delay in the process is removed. The Exchange believes that the proposed rule change is therefore consistent with and facilitates a governance and regulatory structure that furthers the objectives of Section 6(b)(5) of the Act. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed rule change is not intended to address competitive issues but rather is concerned solely with the administration and functioning of the Exchange and its board of directors. 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 up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the 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 Number SR-NYSEMKT-2016-26 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-NYSEMKT-2016-26. 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 [[Page 21639]] 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-NYSEMKT-2016-26, and should be submitted on or before May 3, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-08300 Filed 4-11-16; 8:45 am] BILLING CODE 8011-01-P
![21636 Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices
On March 23, 2016, the Commission solicit comments on the proposed rule (‘‘NGC’’) of the board of directors of ICE,
issued notice of the Committee meeting change from interested persons. the indirect parent of the Exchange,
(Release No. 33–10058), indicating that nominates the candidates for Non-
I. Self-Regulatory Organization’s
the meeting is open to the public Affiliated Directors, who are then
Statement of the Terms of Substance of
(except during that portion of the the Proposed Rule Change elected by NYSE Group, as the sole
meeting reserved for an administrative member of the Exchange. The Exchange
work session during lunch), and The Exchange proposes to amend the proposes to amend Section 2.03(a) to
inviting the public to submit written Eighth Amended and Restated have the Director Candidate
comments to the Committee. This Operating Agreement of the Exchange Recommendation Committee (‘‘DCRC’’)
Sunshine Act notice is being issued (‘‘Operating Agreement’’) to (1) change of the Exchange assume the role
because a quorum of the Commission the process for nominating non- currently played by the ICE NGC, and to
may attend the meeting. affiliated directors; (2) remove a make a conforming change to Section
reference to an obsolete category of 2.03(h)(i). In addition, if the Member
The agenda for the meeting includes: member; and (3) add references to
Remarks from Commissioners; a Organizations endorse a petition
Designated Market Makers. The candidate for Non-Affiliate Director,
discussion of a recommendation of the proposed rule change is available on the
Investor as Purchaser subcommittee pursuant to Section 2.03(a)(iv) the ICE
Exchange’s Web site at www.nyse.com, NGC makes the determination of
regarding mutual fund cost disclosure; at the principal office of the Exchange,
an update from the Commission’s Office whether the person is eligible.5 The
and at the Commission’s Public Exchange proposes to amend Section
of Compliance Inspections and Reference Room.
Examinations; subcommittee reports; a 2.03(a)(iv) to have the Exchange make
discussion regarding cybersecurity and II. Self-Regulatory Organization’s such determination instead of the ICE
related investor protection concerns; Statement of the Purpose of, and NGC.
reflections on the first full term of Statutory Basis for, the Proposed Rule Currently, the nomination by the ICE
Investor Advisory Committee Change NGC is the final step in the process for
membership; and a nonpublic electing a Non-Affiliated Director. First,
In its filing with the Commission, the the DCRC recommends a candidate,
administrative work session during self-regulatory organization included
lunch. whose name then is announced to the
statements concerning the purpose of, Exchange’s Member Organizations. The
For further information, please and basis for, the proposed rule change Member Organizations may propose
contact the Office of the Secretary at and discussed any comments it received alternate candidates by petition. If there
(202) 551–5400. on the proposed rule change. The text are no petition candidates, the DCRC
Dated: April 7, 2016.
of those statements may be examined at recommends its candidate to the ICE
the places specified in Item IV below. NGC. If petition candidates are
Brent J. Fields,
The Exchange has prepared summaries, proposed, the ICE NGC makes the
Secretary. set forth in sections A, B, and C below,
[FR Doc. 2016–08445 Filed 4–8–16; 11:15 am]
determination of whether the candidates
of the most significant parts of such are eligible, and then all of the eligible
BILLING CODE 8011–01–P statements. candidates are submitted to the Member
A. Self-Regulatory Organization’s Organizations for a vote. The DCRC
SECURITIES AND EXCHANGE Statement of the Purpose of, and the recommends to the ICE NGC the
COMMISSION Statutory Basis for, the Proposed Rule candidate receiving the highest number
Change of votes. The ICE NGC is obligated to
designate the DCRC-recommended
[Release No. 34–77536; File No. SR– 1. Purpose candidate as the nominee, and NYSE
NYSEMKT–2016–26]
The Exchange proposes to amend the Group is obligated to elect him or her
Self-Regulatory Organizations; NYSE Operating Agreement to (1) change the as a Non-Affiliated Director.
MKT LLC; Notice of Filing of Proposed process for nominating non-affiliated The Exchange believes obligating the
Rule Change Amending the Eighth directors; (2) remove a reference to an ICE NGC to nominate the candidates for
Amended and Restated Operating obsolete category of member; and (3) Non-Affiliated Directors based on the
Agreement of the Exchange add references to Designated Market DCRC’s unalterable recommendation is
Makers (‘‘DMMs’’). neither necessary nor meaningful.
April 6, 2016.
Process for Nominating Non-Affiliated Pursuant to Section 2.03(a)(iii) the ICE
Pursuant to Section 19(b)(1) 1 of the Directors NGC is obligated to designate whomever
Securities Exchange Act of 1934 (the the DCRC recommends or, if there is a
Pursuant to the Operating Agreement, petition candidate, whomever emerges
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 at least 20% of the Board of Directors of
notice is hereby given that, on March from the petition process. The ICE NGC
the Exchange (‘‘Board’’) is made up of does not have any discretion. Removing
29, 2016, NYSE MKT LLC (the ‘‘Non-Affiliated Directors’’ (commonly
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with this unnecessary step would make the
referred to as ‘‘fair representation NYSE MKT process more efficient.
the Securities and Exchange directors’’).4 Pursuant to Section 2.03(a) The Exchange believes that having the
Commission (the ‘‘Commission’’) the of the Operating Agreement, the Exchange determine whether persons
asabaliauskas on DSK3SPTVN1PROD with NOTICES
proposed rule change as described in nominating and governance committee endorsed to be petition candidates are
Items I, II, and III below, which Items
eligible also would be more efficient, as
have been prepared by the self- 4 Pursuant to Section 2.03(a) of the Operating
it would not require action from the ICE
regulatory organization. The Agreement, Non-Affiliate Directors are persons who
NGC, thereby removing the possibility
Commission is publishing this notice to are not members of the board of directors of
Intercontinental Exchange, Inc. (‘‘ICE’’). A person
may not be a Non-Affiliate Director unless he or she 5 Pursuant to Section 2.02 of the Operating
1 15 U.S.C.78s(b)(1). is free of any statutory disqualification, as defined Agreement, ‘‘Member Organizations’’ refers to
2 15 U.S.C. 78a.
in Section 3(a)(39) of the Exchange Act. Non- members and member organizations, as defined in
3 17 CFR 240.19b–4. Affiliate Directors need not be independent. NYSE MKT Rules 18 and 24, respectively.
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![Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices 21637
of any delay in the process. The Agreement to eliminate from the DCRC References to Designated Market Makers
proposed change would be consistent representatives of the fourth category, In 2008, the Exchange adopted rules,
with the petition process of the Nasdaq which relates to individuals who are based on NYSE rules, that transformed
Stock Market LLC, in which the ‘‘associated with a Member specialists in the Exchange’s equity
exchange determines the eligibility of Organization and spend a majority of market into DMMs.13 As a result, market
proposed nominees.6 their time on the trading floor of the makers on the NYSE MKT equity market
The Exchange believes that the [Exchange] and have as a substantial are called DMMs and on the NYSE
proposed changes will make its process part of their business the execution of Amex Options LLC (‘‘NYSE Amex
more consistent with the process by transactions on the trading floor of the Options’’) options market are called
which its affiliate, NYSE Arca, Inc. [Exchange] for their own account or the ‘‘specialists.’’14 However, several
(‘‘NYSE Arca’’), designates its fair account of their Member Organization, provisions of the Operating Agreement
representation directors, in which the but are not registered as a specialist.’’8 were not updated, and refer only to
ICE NGC plays no role.7 specialists. Accordingly, the Exchange
Accordingly, the Exchange proposes This fourth category describes a class
of proprietary traders known as proposes to amend Sections 2.02 and
to revise Section 2.03(a)(iii)–(v) of the
Registered Equity Market Makers 2.03(h)(i) to add references to DMMs.
Operating Agreement to amend the
(‘‘REMM’’) on the former American Section 2.02 of the Operating
process for electing Non-Affiliated
Stock Exchange LLC, a predecessor of Agreement provides that the Board has
Directors. As proposed, the process
the Exchange. REMMs were floor traders general supervision over Member
would be as follows. First, as is
who engaged in on-floor proprietary Organizations and over approved
currently the case, the DCRC would
persons in connection with their
recommend a candidate, whose name trading, subject to certain requirements
conduct with or affecting Member
would be announced to the Member intended to have these members
Organizations. Section 2.02 further
Organizations, and the Member effectively function like market makers,
provides that the Board ‘‘may
Organizations could propose alternate pursuant to the exemption for market disapprove of any member acting as a
candidates by petition. Second, if there makers in Section 11(a)(1)(A) of the specialist or odd lot dealer’’. The
were no petition candidates, the DCRC Exchange Act.9 The rules relating to this Exchange proposes to add ‘‘designated
would nominate the candidate it had category of proprietary floor trader were market maker (as defined in Rule 2 of
previously recommended. If there were eliminated shortly after the American the Company Rules) (‘DMM’)’’ after
petition candidates, the Exchange Stock Exchange LLC was acquired by ‘‘specialist’’ in Section 2.02.
would make the eligibility the NYSE.10 In addition, NYSE MKT Section 2.03(h)(i) sets out the
determination of petition candidates, all Rule 114, which governed REMMs, was categories of individuals that shall be
eligible candidates would be submitted deleted as obsolete in 2012.11 As a represented on the DCRC. The Exchange
to the Member Organizations for a vote, result, there are no Exchange members proposes to add ‘‘or DMM’’ to the
and the DCRC would nominate the or member organizations that fall under references to ‘‘specialist’’ in categories
candidate receiving the highest number the fourth category specified in Section (ii) and (iii), so that they reference both
of votes. Finally, NYSE Group would be 2.03(h)(i) of the Operating Agreement, types of market makers. The changes
obligated to elect the DCRC-nominated and so the Exchange proposes to delete would be consistent with the categories
candidate as a Non-Affiliated Director.
references to it as obsolete. The changes of members of the Committee for
The Exchange would make a
would make Section 2.03(h)(i) more Review in Section 2.03(h)(iii), which
conforming change to Section 2.03(h)(i)
consistent with the categories of refers to both DMMs and specialists.15
to state that the DCRC ‘‘will be
members of the Committee for Review Finally, the Exchange proposes to
responsible for nominating Non-
in Section 2.03(h)(iii).12 make technical and conforming changes
Affiliate Director Candidates.’’
to the recitals and signature page of the
Currently, the provision states that the
8 Representatives from the following three Operating Agreement.
DCRC ‘‘will be responsible for
categories would continue to be included on the
recommending Non-Affiliated Director DCRC: (1) Member organizations that engage in a 2. Statutory Basis
Candidates to the ICE NGC.’’ business involving substantial direct contact with The Exchange believes that the
securities customers (commonly referred to as
Elimination of a Category of DCRC ‘‘upstairs firms’’), (2) specialists, and (3) floor proposed rule change is consistent with
Membership brokers. The Exchange proposes to add DMMs to Section 6(b) of the Exchange Act 16 in
As noted above, the Operating
category (2), as discussed below. See note 15, infra, general, and with Section 6(b)(1) 17 in
and accompanying text. particular, in that it enables the
Agreement requires that the DCRC 9 See 17 CFR 240.11a1–5; Division of Market
include representatives from each of Regulation, United States Securities and Exchange
Exchange to be so organized as to have
four categories of Exchange members. Commission, Market 2000: An Examination of
13 See Securities Exchange Act Release Nos.
Current Equity Market Developments (January 1994)
The Exchange proposes to amend (‘‘Market 2000’’), at A V–7, available at https:// 58705 (Oct. 1, 2008), 73 FR 58995 (Oct. 8. 2008)
Section 2.03(h)(i) of the Operating www.sec.gov/divisions/marketreg/market2000.pdf. (SR–Amex–2008–63) (approval order) and 59022
This class of proprietary traders were known as (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR–
6 See By-Laws of the Nasdaq Stock Market LLC, Registered Competitive Market Makers (‘‘RCMM’’) NYSEALTR–2008–10) (amending equity rules to
Art. II, Sec. 1(b) (‘‘The Company may require any on the NYSE. conform to NYSE New Market Model Pilot rules).
proposed nominee to furnish such other 10 See Securities Exchange Act Release No. 58705 See also Securities Exchange Act Release No. 58845
information as it may reasonably require to (October 1, 2008), 73 FR 58995, 58996 (October 8, (October 24, 2008), 73 FR 64379, 64381 (October 29,
asabaliauskas on DSK3SPTVN1PROD with NOTICES
determine the eligibility of such proposed nominee 2008) (SR–Amex–2008–63). The NYSE eliminated 2008) (SR–NYSE–2008–46) (approving rule change
to serve as a Member Representative Director.’’). RCMMs shortly thereafter. See Securities Exchange to create NYSE New Market Model Pilot).
14 The Exchange operates a marketplace for
7 See Article III, Section 3.02 of the NYSE Arca Act Release No. 60356 (July 21, 2009), 74 FR 37281
Bylaws and NYSE Arca Rule 3.2(b)(2). Similarly, (July 28, 2009) (SR–NYSE–2009–08). trading options through NYSE Amex Options, a
the board of directors of The NASDAQ OMX Group, 11 See Securities Exchange Act Release No. 68306 facility of the Exchange. See Rule 2—Equities (i) &
Inc., the sole member of the Nasdaq Stock Market (November 28, 2012), 77 FR 71846 (December 4, (j) (defining DMM) and Rule 927NY (defining
LLC, plays no role in nominating or determining the 2012) (SR–NYSEMKT–2012–68). specialist).
15 See note 12, supra.
eligibility of Member Representative Directors. See 12 See Securities Exchange Act Release No. 77008
16 15 U.S.C. 78f(b).
By-Laws of the Nasdaq Stock Market LLC, Art. II, (February 1, 2016), 81 FR 6311 (February 5, 2016)
Sec. 1. (SR–NYSEMKT–2015–106). 17 15 U.S.C. 78f(b)(1).
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![Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices 21639
communications relating to the I. Self-Regulatory Organization’s differential guidelines specified in Rule
proposed rule change between the Statement of the Terms of Substance of 6.37(b)(1)(A)–(E).6 Assuming the bid-ask
Commission and any person, other than the Proposed Rule Change differential is within the acceptable
those that may be withheld from the The Exchange proposes changes to range, the OX System matches up orders
public in accordance with the Rule 6.64 (OX Opening Process) with and quotes based on price-time
provisions of 5 U.S.C. 552, will be respect to opening trading in an options priority 7 and executes the orders that
available for Web site viewing and series. The proposed rule change is are matched at the midpoint pricing.8
printing in the Commission’s Public available on the Exchange’s Web site at Any orders in the OX System that are
Reference Room, 100 F Street NE., www.nyse.com, at the principal office of not executed in the Auction Process
the Exchange, and at the Commission’s become eligible for the Core Trading
Washington, DC 20549, on official
Public Reference Room. Session immediately after the
business days between the hours of
conclusion of the Auction Process. If the
10:00 a.m. and 3:00 p.m. Copies of the II. Self-Regulatory Organization’s OX System does not open a series with
filing also will be available for Statement of the Purpose of, and an Auction Process, the OX System
inspection and copying at the principal Statutory Basis for, the Proposed Rule shall open the series for trading after
office of the Exchange. All comments Change receiving notification of an initial NBBO
received will be posted without change; disseminated by OPRA for the series or
In its filing with the Commission, the
the Commission does not edit personal on a Market Maker quote, provided that
self-regulatory organization included
identifying information from statements concerning the purpose of, the bid-ask differential does not exceed
submissions. You should submit only and basis for, the proposed rule change the bid-ask differential specified under
information that you wish to make and discussed any comments it received Rule 6.37A(b)(4).9
available publicly. All submissions on the proposed rule change. The text Proposed Modifications to the Opening
should refer to File Number SR– of those statements may be examined at Process
NYSEMKT–2016–26, and should be the places specified in Item IV below.
submitted on or before May 3, 2016. The Exchange has prepared summaries, First, the Exchange proposes to
set forth in sections A, B, and C below, change Rule 6.64(b) regarding how the
For the Commission, by the Division of OX System determines when to start the
Trading and Markets, pursuant to delegated of the most significant parts of such
statements. Auction Process. Current paragraph (b)
authority.19
of the Rule provides that ‘‘[a]fter the
Robert W. Errett, A. Self-Regulatory Organization’s primary market for the underlying
Deputy Secretary. Statement of the Purpose of, and the security disseminates the opening trade
[FR Doc. 2016–08300 Filed 4–11–16; 8:45 am] Statutory Basis for, the Proposed Rule or the opening quote, the related option
BILLING CODE 8011–01–P
Change series will be opened automatically.’’
1. Purpose However, because it is possible that
either an opening quote or opening
The Exchange is proposing changes to trade alone may not accurately reflect
SECURITIES AND EXCHANGE
Rule 6.64 with respect to opening the state of the market, the Exchange
COMMISSION
trading in an option series as described proposes to specify that an option series
below. will be opened automatically, ‘‘once the
[Release No. 34–77539; File No. SR–
Opening Process primary market for the underlying
NYSEARCA–2016–49]
security disseminates a quote and a
Rule 6.64 describes the process trade that is at or within the quote.’’ 10
Self-Regulatory Organizations; NYSE pursuant to which OX (‘‘OX System’’) 4
Arca, Inc.; Notice of Filing of Proposed The Exchange believes the proposed
opens an option series. Paragraphs (b) change makes clear that the Exchange
Rule Change to Rule 6.64 With Respect and (c) of Rule 6.64 provide that, after would only open a series automatically
to Opening Trading in an Options the primary market for the underlying after it receives a quote in the
Series security disseminates the opening trade underlying security and a trade in that
or opening quote, the OX System then security at or between the disseminated
April 6, 2016. conducts an ‘‘Auction Process’’ to open quote rather than simply upon receipt of
Pursuant to Section 19(b)(1) 1 of the a series whereby the OX System
Securities Exchange Act of 1934 (the determines a single price at which a 6 Rule 6.37(b)(1). The bid-ask guidelines specified
‘‘Act’’) 2 and Rule 19b-4 thereunder,3 series may be opened by looking to: (i) in Rule 6.37(b)(1)(A)–(E) that are required to open
notice is hereby given that, on March The midpoint of the initial uncrossed a series are narrower than the $5 wide bid-ask
NBBO disseminated by the Options differential for options traded on OX during Core
23, 2016, NYSE Arca, Inc. (the Trading Hours.
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with Price Reporting Authority (‘‘OPRA’’), if 7 Orders will have priority over Market Maker
the Securities and Exchange any, or (ii) the midpoint of the best quotes at the same price. See Rule 6.64(b)(B).
Commission (the ‘‘Commission’’) the quotes or orders in the OX Book. If the 8 See Rule 6.64(b)(B). The Exchange notes that the
bid-ask differential for a series is not word Order appears capitalized in this paragraph
proposed rule change as described in
within an acceptable range, the OX and, because it is not a defined term, the Exchange
Items I and, II below, which Items have proposes the non-substantive change of eliminating
System will not conduct an Auction
been prepared by the self-regulatory Process.5 For purposes of this rule, the
the capitalization.
9 See Rule 6.37A(b)(4). See Rule 6.37(b)(5) [sic]
asabaliauskas on DSK3SPTVN1PROD with NOTICES
organization. The Commission is acceptable range means the bid-ask provides that options traded on OX during Core
publishing this notice to solicit Trading Hours may be quoted with a difference not
comments on the proposed rule change 4 The term ‘‘OX’’ refers to the Exchange’s to exceed $5 between the bid and offer regardless
from interested persons. electronic order delivery, execution and reporting of the price of the bid.
system for designated option issues through which 10 See proposed Rule 6.64 (b). The Exchange also
19 17
orders and quotes of Users are consolidated for proposes to clarify that ‘‘[a]t or after 9:30 a.m.
CFR 200.30–3(a)(12). execution and/or display. See Rule 6.1A(a)(13) Eastern Time,’’ i.e., when the market opens, the
1 15 U.S.C. 78s(b)(1). (defining ‘‘OX’’). Exchange would initiate the Opening Process for all
2 15 U.S.C. 78a. 5 The Auction bid-ask differentials are known in series associated with the underlying security. See
3 17 CFR 240.19b–4. common parlance as ‘‘legal-width quotes.’’ id.
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Document Created: 2016-04-12 00:46:32
Document Modified: 2016-04-12 00:46:32
| 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 21636 |
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