81 FR 21639 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change to Rule 6.64 With Respect to Opening Trading in an Options Series
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 70 (April 12, 2016)
Federal Register Volume 81, Issue 70 (April 12, 2016)
| Page Range | 21639-21641 | |
| FR Document | 2016-08303 |
[Federal Register Volume 81, Number 70 (Tuesday, April 12, 2016)] [Notices] [Pages 21639-21641] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-08303] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77539; File No. SR-NYSEARCA-2016-49] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change to Rule 6.64 With Respect to Opening Trading in an Options Series 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 23, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and, II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes changes to Rule 6.64 (OX Opening Process) with respect to opening trading in an options series. 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 is proposing changes to Rule 6.64 with respect to opening trading in an option series as described below. Opening Process Rule 6.64 describes the process pursuant to which OX (``OX System'') \4\ opens an option series. Paragraphs (b) and (c) of Rule 6.64 provide that, after the primary market for the underlying security disseminates the opening trade or opening quote, the OX System then conducts an ``Auction Process'' to open a series whereby the OX System determines a single price at which a series may be opened by looking to: (i) The midpoint of the initial uncrossed NBBO disseminated by the Options Price Reporting Authority (``OPRA''), if any, or (ii) the midpoint of the best quotes or orders in the OX Book. If the bid-ask differential for a series is not within an acceptable range, the OX System will not conduct an Auction Process.\5\ For purposes of this rule, the acceptable range means the bid-ask differential guidelines specified in Rule 6.37(b)(1)(A)-(E).\6\ Assuming the bid-ask differential is within the acceptable range, the OX System matches up orders and quotes based on price-time priority \7\ and executes the orders that are matched at the midpoint pricing.\8\ --------------------------------------------------------------------------- \4\ The term ``OX'' refers to the Exchange's electronic order delivery, execution and reporting system for designated option issues through which orders and quotes of Users are consolidated for execution and/or display. See Rule 6.1A(a)(13) (defining ``OX''). \5\ The Auction bid-ask differentials are known in common parlance as ``legal-width quotes.'' \6\ Rule 6.37(b)(1). The bid-ask guidelines specified in Rule 6.37(b)(1)(A)-(E) that are required to open a series are narrower than the $5 wide bid-ask differential for options traded on OX during Core Trading Hours. \7\ Orders will have priority over Market Maker quotes at the same price. See Rule 6.64(b)(B). \8\ See Rule 6.64(b)(B). The Exchange notes that the word Order appears capitalized in this paragraph and, because it is not a defined term, the Exchange proposes the non-substantive change of eliminating the capitalization. --------------------------------------------------------------------------- Any orders in the OX System that are not executed in the Auction Process become eligible for the Core Trading Session immediately after the conclusion of the Auction Process. If the OX System does not open a series with an Auction Process, the OX System shall open the series for trading after receiving notification of an initial NBBO disseminated by OPRA for the series or on a Market Maker quote, provided that the bid- ask differential does not exceed the bid-ask differential specified under Rule 6.37A(b)(4).\9\ --------------------------------------------------------------------------- \9\ See Rule 6.37A(b)(4). See Rule 6.37(b)(5) [sic] provides that options traded on OX during Core Trading Hours may be quoted with a difference not to exceed $5 between the bid and offer regardless of the price of the bid. --------------------------------------------------------------------------- Proposed Modifications to the Opening Process First, the Exchange proposes to change Rule 6.64(b) regarding how the OX System determines when to start the Auction Process. Current paragraph (b) of the Rule provides that ``[a]fter the primary market for the underlying security disseminates the opening trade or the opening quote, the related option series will be opened automatically.'' However, because it is possible that either an opening quote or opening trade alone may not accurately reflect the state of the market, the Exchange proposes to specify that an option series will be opened automatically, ``once the primary market for the underlying security disseminates a quote and a trade that is at or within the quote.'' \10\ The Exchange believes the proposed change makes clear that the Exchange would only open a series automatically after it receives a quote in the underlying security and a trade in that security at or between the disseminated quote rather than simply upon receipt of [[Page 21640]] either an ``opening trade or opening quote.'' The Exchange believes that waiting to open trading in an option series until there has been both a disseminated quote and trade in the underlying security would help to augment the Auction Process by ensuring that an underlying security has been opened pursuant to a robust price discovery process before opening the overlying options for trading. The Exchange believes that the proposed change would provide market participants with greater certainty as to the true state of the market at the opening of the trading day and should lead to more accurate prices on the Exchange.\11\ --------------------------------------------------------------------------- \10\ See proposed Rule 6.64 (b). The Exchange also proposes to clarify that ``[a]t or after 9:30 a.m. Eastern Time,'' i.e., when the market opens, the Exchange would initiate the Opening Process for all series associated with the underlying security. See id. \11\ The Exchange notes that it would not open, for example if the first disseminated quote in the underlying security is $50.50 bid, $50.75 ask, and the first trade in the underlying had been executed for $50.00. The Exchange would, however open if the first trade in the underlying was $50.50. --------------------------------------------------------------------------- Next, the Exchange proposes to modify Rule 6.64(b)(E), which currently provides, in relevant part, that ``[i]f the OX System does not open a series with an Auction Process, the OX System shall open the series for trading after receiving notification of an initial NBBO disseminated by OPRA for the series or on a Market Maker quote.'' \12\ However, the Exchange has determined that it would no longer open on a local Market Maker quote but would require that Market Maker quotes, like the NBBO, come from OPRA. Thus, the Exchange proposes to open after receiving an ``initial uncrossed NBBO from ORRA'' and to delete rule text related to opening on a Market Maker quote.\13\ The Exchange notes that OPRA disseminates to each exchange the NBBO as well as the top of book for each exchange, such that the Exchange's market maker quote would be disseminated back to the Exchange as the BBO--and could be, but is not necessarily, the NBBO. Because OPRA disseminates this information to all exchanges at the same time, the Exchange believes the proposal to open only after receiving an uncrossed NBBO from OPRA would eliminate any ambiguity as to the source of the information used to open each series and should lead to more accurate prices on the Exchange. --------------------------------------------------------------------------- \12\ See Rule 6.64(b)(E). \13\ See proposed Rule 6.64(b)(E) (providing that ``[i]f the OX System does not open a series with an Auction Process, the OX System shall open the series for trading after receiving notification of an initial uncrossed NBBO disseminated by OPRA for the series, provided that the bid-ask differential does not exceed the bid-ask differential specified under Rule 6.37A(b)(4).'' --------------------------------------------------------------------------- In connection with the proposed changes to Rule 6.64(b), the Exchange likewise proposes to strike from Rule 6.64(c) reference to ``the midpoint of the best quote bids and quote offers in the OX Book'' as it relates to the Exchange determining the opening price for options issues designated for trading on the OX System.\14\ The Exchange believes this conforming change is necessary given that the Exchange would no longer open solely on a Market Maker quote and therefore this information would not form the basis of the opening price of a series. As proposed, the opening price of a series would be the price ``at which the greatest number of contracts will trade at or nearest to the midpoint of the initial uncrossed NBBO disseminated by OPRA.'' \15\ The Exchange believes this change adds transparency and internal consistency to the rule text. --------------------------------------------------------------------------- \14\ Current Rule 6.64(c) provides, in relevant part, that the opening price of a series will be the price ``at which the greatest number of contracts will trade at or nearest to the midpoint of the initial uncrossed NBBO disseminated by OPRA, if any, or the midpoint of the best quote bids and quote offers in the OX Book.'' \15\ See proposed Rule 6.64(c). --------------------------------------------------------------------------- Finally, the Exchange proposes new paragraph (F) to Rule 6.64(b) to provide the Exchange with discretion to deviate from the standard Opening Process where it is necessary in the interests of a fair and orderly market.\16\ This proposed rule change is based on the rules of other options exchanges.\17\ Similar to how other markets operate, the Exchange believes it may be appropriate, in the interest of a fair and orderly market, to open trading even if the conditions specified in Rule 6.64 are not met. For example, if the primary market is unable to open due to a systems or technical issue, but trading in the underlying security is otherwise unaffected, the Exchange believes it would be appropriate to open trading in any options series overlying such securities. Further, proposed Rule 6.64(b)(F) would provide the Exchange with discretion to manage the Opening Process in the event of unanticipated circumstances occurring around 9:30 a.m. Eastern Time or a halt being lifted. --------------------------------------------------------------------------- \16\ See proposed Rule 6.64(b)(F) (providing that ``[t]he Exchange may deviate from the standard manner of the Auction Process, including adjusting the timing of the Auction Process in any option class, when it believes it is necessary in the interests of a fair and orderly market''). \17\ See e.g., BATS Exchange, Inc. (``BATS'') Rule 21.7(c) (Market Opening Procedures) (``The Exchange may deviate from the standard manner of the Opening Process, including adjusting the timing of the Opening Process in any option class, when it believes it is necessary in the interests of a fair and orderly market''). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) \18\ of the Securities Exchange Act of 1934 (the ``Act''), in general, and furthers the objectives of Section 6(b)(5),\19\ in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78f(b). \19\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Specifically, the proposed change to Rule 6.64(b) would clarify that the Exchange would only open a series automatically after it receives a quote in the underlying security and a trade in that security at or between the disseminated quote--as opposed to automatically opening on either an opening quote or an opening trade alone per the current rule text, which may not always accurately reflect the state of the market. The Exchange believes this added transparency would promote just and equitable principles of trade and remove impediments to, and perfect the mechanism of, a free and open market and a national market system to the benefit of market participants. Further, the Exchange believes that waiting to open trading in an option series until there has been both a disseminated quote and trade in the underlying security would protect investors and the public interest because it would help to augment the Auction Process by ensuring that an underlying security has been opened pursuant to a robust price discovery process before opening the overlying options for trading. Moreover, this proposed change would promote just and equitable principles of trade to the benefit of investors and the public interest because it would provide market participants with greater certainty as to the true state of the market at the opening of the trading day and should lead to more accurate prices on the Exchange. The Exchange also believes that specifying that, to open a series, the Exchange would require an initial uncrossed NBBO disseminated by OPRA would promote just and equitable principles of trade as the change is designed to protect investors and the public interest. The Exchange notes that OPRA disseminates to each exchange the NBBO as well as the top of book for each exchange, such that the Exchange's market maker quote would be disseminated back to the Exchange as the BBO--and could be, but is not necessarily, the NBBO. Because OPRA disseminates this information to all [[Page 21641]] exchanges at the same time, the Exchange believes the proposal to open only after receiving an uncrossed NBBO from OPRA would eliminate any ambiguity as to the source of the information for each series and should lead to more accurate prices on the Exchange. Similarly, the Exchange believes the conforming change to Rule 6.64(c), which strikes reference to quote bids and quote offers in the OX Book for purposes of determining an opening price, likewise would promote just and equitable principles of trade as it would add transparency and internal consistency to Exchange rules, which would make them easier for market participants to navigate. Finally, the Exchange believes the proposal to permit the Exchange to open options trading when such opening is in the interests of a fair and orderly market (even if the conditions set forth in the rule are not met), is consistent with the protection of investors and the public interest because the proposed changes would allow the Exchange to open trading in options contracts in a fair and orderly manner. Specifically, the Exchange believes that the proposed changes would reduce potential delays in opening an option series that may prevent the Exchange from displaying and/or routing orders on its Consolidated Book and may also prevent the Exchange from disseminating a protected quote that draws trading interest from other options markets. Thus, the Exchange believes that the proposed changes would allow the Exchange to open options series faster and more efficiently, thereby reducing any delay in execution of orders on the Exchange that may be unnecessary and harmful to market participants. The Exchange also notes that this proposed rule change is based on the rules of other options exchanges.\20\ --------------------------------------------------------------------------- \20\ See supra n. 17. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not designed to address any competitive issue but rather to add specificity and transparency to Exchange rules, thereby reducing confusion and making the Exchange's rules easier to understand and navigate. The Exchange believes that the proposed rule change would serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. 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 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-NYSEARCA-2016-49 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEARCA-2016-49. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEARCA-2016-49 and should be submitted on or before May 3, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-08303 Filed 4-11-16; 8:45 am] BILLING CODE 8011-01-P
![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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![21640 Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices
either an ‘‘opening trade or opening 6.64(c) reference to ‘‘the midpoint of the 6(b) 18 of the Securities Exchange Act of
quote.’’ The Exchange believes that best quote bids and quote offers in the 1934 (the ‘‘Act’’), in general, and
waiting to open trading in an option OX Book’’ as it relates to the Exchange furthers the objectives of Section
series until there has been both a determining the opening price for 6(b)(5),19 in particular, in that it is
disseminated quote and trade in the options issues designated for trading on designed to promote just and equitable
underlying security would help to the OX System.14 The Exchange principles of trade, to foster cooperation
augment the Auction Process by believes this conforming change is and coordination with persons engaged
ensuring that an underlying security has necessary given that the Exchange in facilitating transactions in securities,
been opened pursuant to a robust price would no longer open solely on a and to remove impediments to and
discovery process before opening the Market Maker quote and therefore this perfect the mechanism of a free and
overlying options for trading. The information would not form the basis of open market and a national market
Exchange believes that the proposed the opening price of a series. As system.
change would provide market proposed, the opening price of a series Specifically, the proposed change to
participants with greater certainty as to would be the price ‘‘at which the Rule 6.64(b) would clarify that the
the true state of the market at the greatest number of contracts will trade Exchange would only open a series
opening of the trading day and should at or nearest to the midpoint of the automatically after it receives a quote in
lead to more accurate prices on the initial uncrossed NBBO disseminated by the underlying security and a trade in
Exchange.11 OPRA.’’ 15 The Exchange believes this that security at or between the
Next, the Exchange proposes to change adds transparency and internal disseminated quote—as opposed to
modify Rule 6.64(b)(E), which currently consistency to the rule text. automatically opening on either an
provides, in relevant part, that ‘‘[i]f the Finally, the Exchange proposes new opening quote or an opening trade alone
OX System does not open a series with paragraph (F) to Rule 6.64(b) to provide per the current rule text, which may not
an Auction Process, the OX System the Exchange with discretion to deviate always accurately reflect the state of the
shall open the series for trading after from the standard Opening Process market. The Exchange believes this
receiving notification of an initial NBBO where it is necessary in the interests of added transparency would promote just
disseminated by OPRA for the series or a fair and orderly market.16 This and equitable principles of trade and
on a Market Maker quote.’’ 12 However, proposed rule change is based on the remove impediments to, and perfect the
the Exchange has determined that it rules of other options exchanges.17 mechanism of, a free and open market
would no longer open on a local Market Similar to how other markets operate, and a national market system to the
Maker quote but would require that the Exchange believes it may be benefit of market participants. Further,
Market Maker quotes, like the NBBO, appropriate, in the interest of a fair and the Exchange believes that waiting to
come from OPRA. Thus, the Exchange orderly market, to open trading even if open trading in an option series until
proposes to open after receiving an the conditions specified in Rule 6.64 are there has been both a disseminated
‘‘initial uncrossed NBBO from ORRA’’ not met. For example, if the primary quote and trade in the underlying
and to delete rule text related to opening market is unable to open due to a security would protect investors and the
on a Market Maker quote.13 The systems or technical issue, but trading public interest because it would help to
Exchange notes that OPRA disseminates in the underlying security is otherwise augment the Auction Process by
to each exchange the NBBO as well as unaffected, the Exchange believes it ensuring that an underlying security has
the top of book for each exchange, such would be appropriate to open trading in been opened pursuant to a robust price
that the Exchange’s market maker quote discovery process before opening the
any options series overlying such
would be disseminated back to the overlying options for trading. Moreover,
securities. Further, proposed Rule
Exchange as the BBO—and could be, this proposed change would promote
6.64(b)(F) would provide the Exchange
but is not necessarily, the NBBO. just and equitable principles of trade to
with discretion to manage the Opening
Because OPRA disseminates this the benefit of investors and the public
Process in the event of unanticipated
information to all exchanges at the same interest because it would provide
circumstances occurring around 9:30
time, the Exchange believes the market participants with greater
a.m. Eastern Time or a halt being lifted.
proposal to open only after receiving an certainty as to the true state of the
2. Statutory Basis market at the opening of the trading day
uncrossed NBBO from OPRA would
The Exchange believes the proposed and should lead to more accurate prices
eliminate any ambiguity as to the source
on the Exchange.
of the information used to open each rule change is consistent with Section
The Exchange also believes that
series and should lead to more accurate specifying that, to open a series, the
prices on the Exchange. 14 Current Rule 6.64(c) provides, in relevant part,
Exchange would require an initial
In connection with the proposed that the opening price of a series will be the price
‘‘at which the greatest number of contracts will uncrossed NBBO disseminated by
changes to Rule 6.64(b), the Exchange trade at or nearest to the midpoint of the initial OPRA would promote just and equitable
likewise proposes to strike from Rule uncrossed NBBO disseminated by OPRA, if any, or principles of trade as the change is
the midpoint of the best quote bids and quote offers
11 The Exchange notes that it would not open, for in the OX Book.’’ designed to protect investors and the
example if the first disseminated quote in the 15 See proposed Rule 6.64(c). public interest. The Exchange notes that
underlying security is $50.50 bid, $50.75 ask, and 16 See proposed Rule 6.64(b)(F) (providing that OPRA disseminates to each exchange
the first trade in the underlying had been executed ‘‘[t]he Exchange may deviate from the standard the NBBO as well as the top of book for
for $50.00. The Exchange would, however open if manner of the Auction Process, including adjusting
asabaliauskas on DSK3SPTVN1PROD with NOTICES
the first trade in the underlying was $50.50.
each exchange, such that the Exchange’s
the timing of the Auction Process in any option
12 See Rule 6.64(b)(E). class, when it believes it is necessary in the market maker quote would be
13 See proposed Rule 6.64(b)(E) (providing that interests of a fair and orderly market’’). disseminated back to the Exchange as
‘‘[i]f the OX System does not open a series with an 17 See e.g., BATS Exchange, Inc. (‘‘BATS’’) Rule the BBO—and could be, but is not
Auction Process, the OX System shall open the 21.7(c) (Market Opening Procedures) (‘‘The necessarily, the NBBO. Because OPRA
series for trading after receiving notification of an Exchange may deviate from the standard manner of
initial uncrossed NBBO disseminated by OPRA for the Opening Process, including adjusting the timing
disseminates this information to all
the series, provided that the bid-ask differential of the Opening Process in any option class, when
18 15 U.S.C. 78f(b).
does not exceed the bid-ask differential specified it believes it is necessary in the interests of a fair
under Rule 6.37A(b)(4).’’ and orderly market’’). 19 15 U.S.C. 78f(b)(5).
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![Federal Register / Vol. 81, No. 70 / Tuesday, April 12, 2016 / Notices 21641
exchanges at the same time, the consistency, thereby reducing burdens proposed rule change between the
Exchange believes the proposal to open on the marketplace and facilitating Commission and any person, other than
only after receiving an uncrossed NBBO investor protection. those that may be withheld from the
from OPRA would eliminate any public in accordance with the
C. Self-Regulatory Organization’s
ambiguity as to the source of the provisions of 5 U.S.C. 552, will be
Statement on Comments on the
information for each series and should available for Web site viewing and
lead to more accurate prices on the Proposed Rule Change Received From
printing in the Commission’s Public
Exchange. Members, Participants, or Others
Reference Room, 100 F Street NE.,
Similarly, the Exchange believes the No written comments were solicited Washington, DC 20549, on official
conforming change to Rule 6.64(c), or received with respect to the proposed business days between the hours of
which strikes reference to quote bids rule change. 10:00 a.m. and 3:00 p.m. Copies of the
and quote offers in the OX Book for filing also will be available for
III. Date of Effectiveness of the
purposes of determining an opening inspection and copying at the principal
Proposed Rule Change and Timing for
price, likewise would promote just and office of the Exchange. All comments
Commission Action
equitable principles of trade as it would received will be posted without change;
add transparency and internal Within 45 days of the date of the Commission does not edit personal
consistency to Exchange rules, which publication of this notice in the Federal identifying information from
would make them easier for market Register or within such longer period submissions. You should submit only
participants to navigate. up to 90 days (i) as the Commission may information that you wish to make
Finally, the Exchange believes the designate if it finds such longer period available publicly. All submissions
proposal to permit the Exchange to open to be appropriate and publishes its should refer to File Number SR–
options trading when such opening is in reasons for so finding or (ii) as to which NYSEARCA–2016–49 and should be
the interests of a fair and orderly market the self-regulatory organization submitted on or before May 3, 2016.
(even if the conditions set forth in the consents, the Commission will:
rule are not met), is consistent with the (A) By order approve or disapprove For the Commission, by the Division of
Trading and Markets, pursuant to delegated
protection of investors and the public the proposed rule change, or
authority.21
interest because the proposed changes (B) Institute proceedings to determine
would allow the Exchange to open whether the proposed rule change Robert W. Errett,
trading in options contracts in a fair and should be disapproved. Deputy Secretary.
orderly manner. Specifically, the [FR Doc. 2016–08303 Filed 4–11–16; 8:45 am]
IV. Solicitation of Comments
Exchange believes that the proposed BILLING CODE 8011–01–P
changes would reduce potential delays Interested persons are invited to
in opening an option series that may submit written data, views, and
prevent the Exchange from displaying arguments concerning the foregoing, SMALL BUSINESS ADMINISTRATION
and/or routing orders on its including whether the proposed rule
change is consistent with the Act. [Disaster Declaration #14675 and #14676]
Consolidated Book and may also
prevent the Exchange from Comments may be submitted by any of Texas Disaster Number TX–00465
disseminating a protected quote that the following methods:
draws trading interest from other AGENCY: U.S. Small Business
Electronic Comments
options markets. Thus, the Exchange Administration.
believes that the proposed changes • Use the Commission’s Internet ACTION: Amendment 2.
would allow the Exchange to open comment form (http://www.sec.gov/
options series faster and more rules/sro.shtml); or SUMMARY: This is an amendment of the
efficiently, thereby reducing any delay • Send an email to rule-comments@ Presidential declaration of a major
in execution of orders on the Exchange sec.gov. Please include File Number SR– disaster for the State of Texas (FEMA–
that may be unnecessary and harmful to NYSEARCA–2016–49 on the subject 4266–DR), dated 03/19/2016.
market participants. The Exchange also line. Incident: Severe storms, tornadoes,
notes that this proposed rule change is and flooding.
Paper Comments Incident Period: 03/07/2016 and
based on the rules of other options
exchanges.20 • Send paper comments in triplicate continuing through 03/29/2016.
to Secretary, Securities and Exchange Effective Date: 03/29/2016.
B. Self-Regulatory Organization’s Commission, 100 F Street NE., Physical Loan Application Deadline
Statement on Burden on Competition Washington, DC 20549–1090. Date: 05/18/2016.
The Exchange does not believe that All submissions should refer to File Eidl Loan Application Deadline Date:
the proposed rule change would impose Number SR–NYSEARCA–2016–49. This 12/19/2016.
any burden on competition that is not file number should be included on the ADDRESSES: Submit completed loan
necessary or appropriate in furtherance subject line if email is used. To help the applications to: U.S. Small Business
of the purposes of the Act. The Commission process and review your Administration, Processing and
proposed change is not designed to comments more efficiently, please use Disbursement Center, 14925 Kingsport
address any competitive issue but rather only one method. The Commission will Road, Fort Worth, TX 76155.
to add specificity and transparency to post all comments on the Commission’s FOR FURTHER INFORMATION CONTACT: A.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Exchange rules, thereby reducing Internet Web site (http://www.sec.gov/ Escobar, Office of Disaster Assistance,
confusion and making the Exchange’s rules/sro.shtml). Copies of the U.S. Small Business Administration,
rules easier to understand and navigate. submission, all subsequent 409 3rd Street SW., Suite 6050,
The Exchange believes that the amendments, all written statements Washington, DC 20416.
proposed rule change would serve to with respect to the proposed rule SUPPLEMENTARY INFORMATION: The notice
promote regulatory clarity and change that are filed with the of the President’s major disaster
Commission, and all written
20 See supra n. 17. communications relating to the 21 17 CFR 200.30–3(a)(12).
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Document Created: 2016-04-12 00:46:44
Document Modified: 2016-04-12 00:46:44
| 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 21639 |
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