81 FR 46144 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 952NY With Respect to Opening Trading in an Options Series
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 136 (July 15, 2016)
Federal Register Volume 81, Issue 136 (July 15, 2016)
| Page Range | 46144-46147 | |
| FR Document | 2016-16723 |
[Federal Register Volume 81, Number 136 (Friday, July 15, 2016)] [Notices] [Pages 46144-46147] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-16723] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78283; File No. SR-NYSEMKT-2016-42] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 952NY With Respect to Opening Trading in an Options Series July 11, 2016. I. Introduction On March 23, 2016, NYSE MKT LLC (``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange Rule 952NY regarding the process for opening trading in an options series. The proposed rule change was published for comment in the Federal Register on April 12, 2016.\3\ On May 25, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change to July 11, 2016.\4\ On July 8, 2016, the Exchange submitted Amendment No. 1 to the proposed rule change.\5\ The Commission received no comment letters on the proposed rule change. The Commission is publishing this notice to solicit comment on Amendment No. 1 to the proposed rule change from interested persons and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 77540 (April 6, 2016), 81 FR 21623 (``Notice''). \4\ See Securities Exchange Act Release No. 77911 (May 25, 2016), 81 FR 35115 (June 1, 2016). \5\ See Letter to Brent J. Fields, Secretary, Commission, from Martha Redding, Associate General Counsel, Assistant Secretary, NYSE MKT, LLC dated July 11, 2016. As more fully described below, in Amendment No. 1 the Exchange proposes additional modifications to Rule 952NY(c) to clarify and detail how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA. --------------------------------------------------------------------------- II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 Exchange Rule 952NY sets forth the Exchange System's automated opening process.\6\ Current Rule 952NY(b) [[Page 46145]] provides that, after the primary market for the underlying security disseminates an opening trade or an opening quote, the Exchange will open the related option series automatically based on the following principles and procedures: --------------------------------------------------------------------------- \6\ See Exchange Rule 952NY. The term ``System'' refers to the Exchange's electronic order delivery, execution and reporting system through which orders and quotes for listed options are consolidated for execution and/or display. See Exchange Rule 900.2NY(48) (defining ``Exchange System'' or ``System''). --------------------------------------------------------------------------- (A) The system will determine a single price at which a particular option series will be opened. (B) Orders and quotes in the system will be matched up with one another based on price-time priority; provided, however, that Orders will have priority over Market Maker quotes at the same price. (C) Orders in the System Book that were not executed during the Auction Process shall become eligible for the Core Trading Session immediately after the conclusion of the Auction Process. (D) The System will not conduct an Auction Process if the bid-ask differential for that series is not within an acceptable range. For the purposes of this rule, an acceptable range shall mean within the bid- ask differential guidelines established pursuant to Rule 952NY(b)(4). (E) If the System does not open a series with an Auction Process, the 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 952NY(b)(5).\7\ --------------------------------------------------------------------------- \7\ See Exchange Rule 952NY(b)(A)-(E). --------------------------------------------------------------------------- In addition, Rule 952NY(c) provides for how the System will determine the opening price of a series when an Auction Process is conducted.\8\ Specifically, current Rule 952NY(c) states, in part, that the ``opening price of a series will be the price, as determined by the System, 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 System Book.'' \9\ --------------------------------------------------------------------------- \8\ See Notice and current Exchange Rule 952NY(c). \9\ See current Exchange Rule 952NY(c). --------------------------------------------------------------------------- The Exchange proposes several changes to Exchange Rule 952NY and the System opening process. The proposed changes would also affect the process of re-opening an options series after a trading halt.\10\ --------------------------------------------------------------------------- \10\ See Exchange Rule 952NY(a), which provides that the Exchange will follow the same procedures in opening after a trading halt as the procedures followed for the opening of the trading day. --------------------------------------------------------------------------- First, the Exchange proposes to amend Exchange Rule 952NY(b) so that trading in an options series will be opened automatically once the primary market for the underlying security disseminates both a quote and a trade that is at or within the quote.\11\ Further, the Exchange proposes to specify that the opening process will occur at or after 9:30 a.m. Eastern Time.\12\ --------------------------------------------------------------------------- \11\ See proposed Rule 952NY(b). \12\ See id. --------------------------------------------------------------------------- The Exchange also proposes to modify Exchange Rule 952NY(b)(E) so that if the System does not open a series with an Auction Process, trading in an options series could no longer open on a local Market Maker quote, but would instead require an initial uncrossed NBBO disseminated by OPRA.\13\ According to the Exchange, OPRA disseminates an NBBO based on information collected from the exchanges.\14\ Thus, the Exchange states, NYSE MKT's local Market Maker quotes would be disseminated back to the Exchange from OPRA and may or may not be at the same price as the NBBO.\15\ --------------------------------------------------------------------------- \13\ See proposed Rule 952NY(b)(E). \14\ See Notice, supra note 3, at 21624. \15\ See Notice, supra note 3, at 21624. --------------------------------------------------------------------------- In addition, the Exchange proposes to amend Rule 952NY(c). As noted, current Rule 952NY(c) provides that if there is no initial uncrossed NBBO disseminated by OPRA, the System instead determines an opening price that is ``at the midpoint of the best quotes and offers in the System Book.'' The Exchange originally proposed to modify Rule 952NY(c) by eliminating this language so that the rule would no longer provide that the opening price of a series could be determined by reference to the best quote bids and offers in the System Book.\16\ Thus, as originally proposed, the opening price of a series would be the price, as determined by the System, at which the greatest number of contracts will trade ``at or nearest to the midpoint of the initial uncrossed NBBO disseminated by OPRA.'' \17\ As more fully set forth in the Notice, the Exchange stated that the original proposed modification was a conforming change that was necessary because the Exchange would no longer open solely on a local Market Maker quote.\18\ --------------------------------------------------------------------------- \16\ Specifically, the Exchange proposed to delete from current 952NY(c) the words ``if any, or the midpoint of the best quotes and offers in the System Book.'' \17\ See Notice supra note 3 at 21624. \18\ See id. --------------------------------------------------------------------------- In Amendment No. 1, the Exchange proposes further modifications to Rule 952NY(c) to clarify and detail how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA. Under proposed 952NY(c), as modified by Amendment No. 1, ``[t]he opening price of a series will be the price, as determined by the System, at which the greatest number of contracts will trade at a price at or between the NBBO disseminated by OPRA.'' \19\ In addition, in Amendment No. 1 the Exchange proposes to specify further the circumstances under which the System would use midpoint pricing.\20\ In particular, proposed Rule 952NY(c), as modified by Amendment No. 1, would specify what would happen if there is a tie and the same number of contracts can trade at multiple prices. Specifically, proposed Rule 952NY(c), as modified by Amendment No. 1, would provide that if the same number of contracts can trade at multiple prices, the opening price is the price at which the greatest number of contracts can trade that is ``at or nearest to the midpoint'' of the NBBO disseminated by OPRA. The rule would further specify that (i) if one of such prices is equal to the price of any Limit Order(s) in the Consolidated Book, the opening price will be the same price as the Limit Order(s) with the greatest size and, if the same size, the highest price; and (ii) if there is a tie between price levels and no Limit Orders exist at either of the prices, the Exchange would use the higher price.\21\ In connection with these proposed modifications, the Exchange further proposes to delete language in current Rule 952NY(c) referring to pricing by reference to the best quotes bids and offers in the System. According to the Exchange, the language proposed to be deleted is superfluous, as the Exchange would no longer use Market Maker quotes to determine the opening price.\22\ --------------------------------------------------------------------------- \19\ See Amendment No. 1 and proposed Rule 952NY(c). \20\ See Amendment No. 1 and proposed Rule 952NY(c). \21\ See Amendment No. 1 and proposed Rule 952NY(c). \22\ See Amendment No. 1 and proposed Rule 952NY(c). --------------------------------------------------------------------------- Finally, the Exchange proposes a new provision to permit the Exchange to deviate from the standard manner of the Auction Process, including adjusting the timing of the Auction Process in any option class, when the Exchange believes it to be necessary in the interest of a fair and orderly market.\23\ --------------------------------------------------------------------------- \23\ See proposed Rule 952NY(b)(F); see also Notice, supra note 3, at 21624. For a more detailed description of the original proposed rule change, see Notice, supra note 3. --------------------------------------------------------------------------- [[Page 46146]] III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\24\ In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\25\ which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in 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. --------------------------------------------------------------------------- \24\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \25\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes the Exchange's proposal to require both a disseminated quote and a trade within the quote in an underlying security before opening trading in the related options series, instead of either one or the other, is reasonably designed ensure that the underlying security has been opened pursuant to a robust price discovery process before the overlying option begins trading.\26\ --------------------------------------------------------------------------- \26\ See Notice, supra note 3, at 21624. --------------------------------------------------------------------------- The Exchange proposes that if it does not open a series with an Auction Process, it will open the series for trading after receiving notification of an initial uncrossed NBBO disseminated by OPRA.\27\ The Exchange represents that opening an options series for trading after receiving an uncrossed NBBO from OPRA, rather than based on a local Market Maker quote, will eliminate ambiguity as to the source of the information for each options series and should lead to more accurate prices on the Exchange.\28\ --------------------------------------------------------------------------- \27\ See supra note 13 and accompanying text. \28\ See Notice, supra note 3, at 21624. --------------------------------------------------------------------------- Further, the Exchange proposes that if it does open a series with an Auction Process, the opening price of a series will be the price, as determined by the System, at which the greatest number of contracts will trade at a price at or between the NBBO disseminated by OPRA. The Exchange further proposes to specify how the System will determine an opening price if the same number of contracts can trade at multiple prices.\29\ The Commission believes the proposed process for how the System will determine an opening price for an option series at or between the NBBO disseminated by OPRA, and the circumstances under which System would use midpoint pricing, should result in an opening price that is related to the current market for an option and is therefore reasonably designed to protect investors and the public interest. --------------------------------------------------------------------------- \29\ See supra note 20 and accompanying text. --------------------------------------------------------------------------- In addition, the Commission believes it is appropriate to allow the Exchange the discretion to deviate from the standard manner of the Auction Process, as the proposal provides, when it believes it is necessary in the interests of a fair and orderly market. The Commission believes that the ability to exercise such discretion can be important in situations when, for example, the primary market for an options class is unable to open due to a systems or technical issue or if some other unanticipated circumstance arises. The Commission notes that it has previously approved provisions of this kind as consistent with the Act.\30\ --------------------------------------------------------------------------- \30\ See, e.g., Securities Exchange Act Release No. 71651 (March 5, 2014), 79 FR 13693 (March 11, 2014) (SR-BATS-2014-003). --------------------------------------------------------------------------- The Commission further believes that the proposed rule change will provide transparency and enhance investors' understanding of the operation of the Exchange's opening process. For these reasons, the Commission believes that the proposed rule change, as modified by Amendment No. 1, is consistent with the Act. IV. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 to the proposed rule change is consistent with the Exchange 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-2016-42 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-2016-42. 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-NYSEMKT-2016-42 and should be submitted by August 5, 2016. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the 30th day after the date of publication of notice of Amendment No. 1 in the Federal Register. As discussed above, Amendment No. 1 clarifies how the Exchange would determine the opening price upon dissemination of an NBBO from OPRA, an in particular specifies the circumstances in which ``at or nearest to the midpoint'' pricing is utilized during the Auction Process. Furthermore, the Commission believes it is appropriate to have these changes incorporated into the rules of the Exchange concurrently with the changes discussed in the original filing. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,\31\ to approve the proposed rule change, as modified by [[Page 46147]] Amendment No. 1 on an accelerated basis. --------------------------------------------------------------------------- \31\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VI. Conclusion IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Exchange Act,\32\ that the proposed rule change (SR-NYSEMKT-2016-42), as modified by Amendment No. 1 thereto, be, and it hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \32\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\33\ Robert W. Errett, Deputy Secretary. --------------------------------------------------------------------------- \33\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2016-16723 Filed 7-14-16; 8:45 am] BILLING CODE 8011-01-P
![46144 Federal Register / Vol. 81, No. 136 / Friday, July 15, 2016 / Notices
concerning the Proposed Rules. Both The Board does not anticipate that the SECURITIES AND EXCHANGE
commenters expressed support for the Proposed Rules would impact the audit COMMISSION
Proposed Rules.12 quality for audits of EGCs by altering
[Release No. 34–78283; File No. SR–
auditors’ perception regarding
IV. The PCAOB’s EGC Request NYSEMKT–2016–42]
inspection likelihood. Specifically, the
Section 103(a)(3)(C) of the Sarbanes- Board does not believe that the Self-Regulatory Organizations; NYSE
Oxley Act requires that any rules of the Proposed Rules will affect an auditor’s MKT LLC; Notice of Filing of
Board ‘‘requiring mandatory audit firm perception, during an audit of an EGC, Amendment No. 1 and Order Granting
rotation or a supplement to the auditor’s of the possibility of such audit being Accelerated Approval of a Proposed
report in which the auditor would be inspected or the nature of any Rule Change, as Modified by
required to provide additional inspection or review, if conducted. Amendment No. 1, To Amend Rule
information about the audit and the Based on the PCAOB’s EGC analysis, 952NY With Respect to Opening
financial statements (auditor discussion we believe the information in the record Trading in an Options Series
and analysis)’’ shall not apply to an is sufficient for the Commission to make
audit of an EGC.13 The Proposed Rules the requested EGC determination in July 11, 2016.
do not fall into this category of rules.
relation to the Proposed Rules. The I. Introduction
Section 103(a)(3)(C) further provides
Commission notes that because only a On March 23, 2016, NYSE MKT LLC
that ‘‘[a]ny additional rules’’ adopted by
small number of firms fall within the (‘‘Exchange’’) filed with the Securities
the PCAOB after April 5, 2012 shall not
categories of the Proposed Rules, the and Exchange Commission
apply to the audits of EGCs ‘‘unless the
impact on the inspection frequency of (‘‘Commission’’), pursuant to Section
Commission determines that the
the audits of EGCs is likely limited. 19(b)(1) of the Securities Exchange Act
application of such additional
Further, as to the ‘‘substantial role only’’ of 1934 (‘‘Act’’) 1 and Rule 19b–4
requirements is necessary or appropriate
firms, the PCAOB is merely codifying its thereunder,2 a proposed rule change to
in the public interest, after considering
current practice. amend Exchange Rule 952NY regarding
the protection of investors and whether
the action will promote efficiency, V. Conclusion the process for opening trading in an
competition, and capital formation.’’ options series. The proposed rule
The Proposed Rules fall within this The Commission has carefully change was published for comment in
category of additional rules and thus the reviewed and considered the Proposed the Federal Register on April 12, 2016.3
Commission must make a determination Rules and the information submitted On May 25, 2016, the Commission
under the statute about the applicability therewith by the PCAOB, including the extended the time period within which
of the Proposed Rules to audits of EGCs. PCAOB’s EGC analysis, and the to approve the proposed rule change,
Having considered those statutory comment letters received. In connection disapprove the proposed rule change, or
factors, and as explained further herein, with the PCAOB’s filing and the institute proceedings to determine
the Commission finds that applying the Commission’s review, whether to disapprove the proposed
Proposed Rules to audits of EGCs is A. The Commission finds that the rule change to July 11, 2016.4 On July
necessary or appropriate in the public Proposed Rules are consistent with the 8, 2016, the Exchange submitted
interest. requirements of the Sarbanes-Oxley Act Amendment No. 1 to the proposed rule
In proposing application of the and the securities laws and are change.5 The Commission received no
Proposed Rules to audits of all issuers, necessary or appropriate in the public comment letters on the proposed rule
including EGCs, the Board requested interest or for the protection of change. The Commission is publishing
that the Commission make the investors; and this notice to solicit comment on
determination required by Section B. Separately, the Commission finds Amendment No. 1 to the proposed rule
103(a)(3)(C). To assist the Commission that the application of the Proposed change from interested persons and is
in making its determination under Rules to EGC audits is necessary or approving the proposed rule change, as
Section 103(a)(3)(C), the PCAOB appropriate in the public interest, after modified by Amendment No. 1, on an
prepared and submitted to the considering the protection of investors accelerated basis.
Commission its own EGC analysis, and whether the action will promote II. Description of the Proposed Rule
which was included in the efficiency, competition, and capital Change, as Modified by Amendment
Commission’s public notice soliciting formation. No. 1
comment on the Proposed Rules. In its IT IS THEREFORE ORDERED,
analysis, the Board states that the Exchange Rule 952NY sets forth the
pursuant to Section 107 of the Sarbanes- Exchange System’s automated opening
Proposed Rules do not change or add to Oxley Act and Section 19(b)(2) of the
the requirements that apply to the process.6 Current Rule 952NY(b)
Exchange Act, that the Proposed Rules
audits of any issuers, including EGCs. (File No. PCAOB–2007–04) be and 1 15 U.S.C. 78s(b)(1).
Any inspection of an audit of an EGC hereby are approved. 2 17 CFR 240.19b–4.
would be conducted in the same 3 See Securities Exchange Act Release No. 77540
manner as it would have under existing By the Commission.
(April 6, 2016), 81 FR 21623 (‘‘Notice’’).
PCAOB rules. The Proposed Rules only Jill M. Peterson, 4 See Securities Exchange Act Release No. 77911
impact the frequency with which the Assistant Secretary. (May 25, 2016), 81 FR 35115 (June 1, 2016).
5 See Letter to Brent J. Fields, Secretary,
PCAOB may inspect a small number of [FR Doc. 2016–16727 Filed 7–14–16; 8:45 am]
Commission, from Martha Redding, Associate
sradovich on DSK3GMQ082PROD with NOTICES
firms.14 BILLING CODE 8011–01–P
General Counsel, Assistant Secretary, NYSE MKT,
LLC dated July 11, 2016. As more fully described
12 See Deloitte letter and anonymous letter. there were 12 firms in 2015 that had previously below, in Amendment No. 1 the Exchange proposes
13 15 U.S.C. 7213(a)(3)(C). additional modifications to Rule 952NY(c) to clarify
issued an audit report in one year but none in the
14 Specifically, out of the proposed amendments, following two consecutive years. For the firms that and detail how the Exchange would determine the
only Proposed Rule 4003(e) would potentially would be covered by Proposed Rule 4003(h), the opening price upon dissemination of an NBBO from
change inspection frequency. However, the number practice of the PCAOB has been to inspect five OPRA.
of firms that would be covered by Proposed Rule percent of those firms on an annual basis since 6 See Exchange Rule 952NY. The term ‘‘System’’
4003(e) appear to be small. The Board notes that 2009. refers to the Exchange’s electronic order delivery,
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provides that, after the primary market First, the Exchange proposes to price upon dissemination of an NBBO
for the underlying security disseminates amend Exchange Rule 952NY(b) so that from OPRA. Under proposed 952NY(c),
an opening trade or an opening quote, trading in an options series will be as modified by Amendment No. 1,
the Exchange will open the related opened automatically once the primary ‘‘[t]he opening price of a series will be
option series automatically based on the market for the underlying security the price, as determined by the System,
following principles and procedures: disseminates both a quote and a trade at which the greatest number of
(A) The system will determine a that is at or within the quote.11 Further, contracts will trade at a price at or
single price at which a particular option the Exchange proposes to specify that between the NBBO disseminated by
series will be opened. the opening process will occur at or
(B) Orders and quotes in the system OPRA.’’ 19 In addition, in Amendment
after 9:30 a.m. Eastern Time.12
will be matched up with one another No. 1 the Exchange proposes to specify
The Exchange also proposes to modify
based on price-time priority; provided, Exchange Rule 952NY(b)(E) so that if further the circumstances under which
however, that Orders will have priority the System does not open a series with the System would use midpoint
over Market Maker quotes at the same an Auction Process, trading in an pricing.20 In particular, proposed Rule
price. options series could no longer open on 952NY(c), as modified by Amendment
(C) Orders in the System Book that a local Market Maker quote, but would No. 1, would specify what would
were not executed during the Auction instead require an initial uncrossed happen if there is a tie and the same
Process shall become eligible for the NBBO disseminated by OPRA.13 number of contracts can trade at
Core Trading Session immediately after According to the Exchange, OPRA multiple prices. Specifically, proposed
the conclusion of the Auction Process. disseminates an NBBO based on Rule 952NY(c), as modified by
(D) The System will not conduct an information collected from the Amendment No. 1, would provide that
Auction Process if the bid-ask exchanges.14 Thus, the Exchange states, if the same number of contracts can
differential for that series is not within NYSE MKT’s local Market Maker quotes trade at multiple prices, the opening
an acceptable range. For the purposes of would be disseminated back to the price is the price at which the greatest
this rule, an acceptable range shall mean Exchange from OPRA and may or may number of contracts can trade that is ‘‘at
within the bid-ask differential not be at the same price as the NBBO.15 or nearest to the midpoint’’ of the NBBO
guidelines established pursuant to Rule In addition, the Exchange proposes to disseminated by OPRA. The rule would
952NY(b)(4). amend Rule 952NY(c). As noted, current
(E) If the System does not open a further specify that (i) if one of such
Rule 952NY(c) provides that if there is
series with an Auction Process, the prices is equal to the price of any Limit
no initial uncrossed NBBO
System shall open the series for trading Order(s) in the Consolidated Book, the
disseminated by OPRA, the System
after receiving notification of an initial opening price will be the same price as
instead determines an opening price
NBBO disseminated by OPRA for the that is ‘‘at the midpoint of the best the Limit Order(s) with the greatest size
series or on a Market Maker quote, quotes and offers in the System Book.’’ and, if the same size, the highest price;
provided that the bid-ask differential The Exchange originally proposed to and (ii) if there is a tie between price
does not exceed the bid-ask differential modify Rule 952NY(c) by eliminating levels and no Limit Orders exist at
specified under Rule 952NY(b)(5).7 this language so that the rule would no either of the prices, the Exchange would
In addition, Rule 952NY(c) provides longer provide that the opening price of use the higher price.21 In connection
for how the System will determine the a series could be determined by with these proposed modifications, the
opening price of a series when an reference to the best quote bids and Exchange further proposes to delete
Auction Process is conducted.8 offers in the System Book.16 Thus, as language in current Rule 952NY(c)
Specifically, current Rule 952NY(c) originally proposed, the opening price referring to pricing by reference to the
states, in part, that the ‘‘opening price of a series would be the price, as best quotes bids and offers in the
of a series will be the price, as determined by the System, at which the System. According to the Exchange, the
determined by the System, at which the greatest number of contracts will trade language proposed to be deleted is
greatest number of contracts will trade ‘‘at or nearest to the midpoint of the superfluous, as the Exchange would no
at or nearest to the midpoint of the initial uncrossed NBBO disseminated by longer use Market Maker quotes to
initial uncrossed NBBO disseminated by OPRA.’’ 17 As more fully set forth in the determine the opening price.22
OPRA, if any, or the midpoint of the Notice, the Exchange stated that the
best quote bids and quote offers in the Finally, the Exchange proposes a new
original proposed modification was a
System Book.’’ 9 provision to permit the Exchange to
conforming change that was necessary
The Exchange proposes several because the Exchange would no longer deviate from the standard manner of the
changes to Exchange Rule 952NY and open solely on a local Market Maker Auction Process, including adjusting the
the System opening process. The quote.18 timing of the Auction Process in any
proposed changes would also affect the In Amendment No. 1, the Exchange option class, when the Exchange
process of re-opening an options series proposes further modifications to Rule believes it to be necessary in the interest
after a trading halt.10 952NY(c) to clarify and detail how the of a fair and orderly market.23
Exchange would determine the opening
execution and reporting system through which 19 See Amendment No. 1 and proposed Rule
orders and quotes for listed options are 11 See 952NY(c).
consolidated for execution and/or display. See proposed Rule 952NY(b).
12 See id. 20 See Amendment No. 1 and proposed Rule
Exchange Rule 900.2NY(48) (defining ‘‘Exchange
sradovich on DSK3GMQ082PROD with NOTICES
System’’ or ‘‘System’’). 13 See proposed Rule 952NY(b)(E). 952NY(c).
7 See Exchange Rule 952NY(b)(A)–(E). 14 See Notice, supra note 3, at 21624. 21 See Amendment No. 1 and proposed Rule
8 See Notice and current Exchange Rule 15 See Notice, supra note 3, at 21624. 952NY(c).
22 See Amendment No. 1 and proposed Rule
952NY(c). 16 Specifically, the Exchange proposed to delete
9 See current Exchange Rule 952NY(c). from current 952NY(c) the words ‘‘if any, or the 952NY(c).
10 See Exchange Rule 952NY(a), which provides midpoint of the best quotes and offers in the System 23 See proposed Rule 952NY(b)(F); see also
that the Exchange will follow the same procedures Book.’’ Notice, supra note 3, at 21624. For a more detailed
17 See Notice supra note 3 at 21624.
in opening after a trading halt as the procedures description of the original proposed rule change,
followed for the opening of the trading day. 18 See id. see Notice, supra note 3.
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Amendment No. 1 on an accelerated II. Self-Regulatory Organization’s specified time period not to exceed 15
basis. Statement of the Purpose of, and seconds (‘‘Percentage-Based Specified
Statutory Basis for, the Proposed Rule Time Period.’’).5
VI. Conclusion For each series in an option, the
Change
IT IS THEREFORE ORDERED, In its filing with the Commission, the System determines: (i) The percentage
pursuant to Section 19(b)(2) of the Exchange included statements that the number of contracts executed in
Exchange Act,32 that the proposed rule concerning the purpose of and basis for that series represents relative to the
change (SR–NYSEMKT–2016–42), as the proposed rule change and discussed NOM Market Maker’s disseminated size
modified by Amendment No. 1 thereto, any comments it received on the of each side in that series (‘‘Series
be, and it hereby is, approved on an proposed rule change. The text of these Percentage’’); and (ii) the sum of the
accelerated basis. statements may be examined at the Series Percentage in the option issue
For the Commission, by the Division of places specified in Item IV below. The (‘‘Issue Percentage’’). The Exchange
Trading and Markets, pursuant to delegated Exchange has prepared summaries, set proposes herein to replace the term
authority.33 forth in sections A, B, and C below, of ‘‘disseminated size’’ with the more
Robert W. Errett, the most significant aspects of such precise phrase ‘‘number of contracts
Deputy Secretary. statements. available at the time of execution plus
the number of contracts executed in
[FR Doc. 2016–16723 Filed 7–14–16; 8:45 am] A. Self-Regulatory Organization’s unexpired prior executions.’’
BILLING CODE 8011–01–P Statement of the Purpose of, and The System tracks and calculates the
Statutory Basis for, the Proposed Rule net impact of positions in the same
Change option issue during the Percentage-
SECURITIES AND EXCHANGE
1. Purpose Based Specified Time Period.
COMMISSION
Specifically, the System tracks
The Exchange proposes to amend a transactions, i.e., the sum of buy-side
[Release No. 34–78285; File No. SR– NOM Rule at Chapter VII, Section 6(f), put percentages, the sum of sell-side put
NASDAQ–2016–087] entitled ‘‘Automated Removal of Orders
percentages, the sum of buy-side call
and Quotes’’ to modify the minimum
percentages, and the sum of sell-side
Self-Regulatory Organizations; The Specified Percentage (as described
call percentages. The System then
NASDAQ Stock Market LLC; Notice of below). A NOM Market Maker 3 sets the
calculates the absolute value of the
Filing and Immediate Effectiveness of Specified Percentage to enhance its risk
difference between the buy-side puts
Proposed Rule Change Relating to management for an underlying security
and the sell-side puts plus the absolute
Automated Removal of Orders and as market conditions warrant, based on
value of the difference between the buy-
Quotes its own risk tolerance level and quoting
side calls and the sell-side calls. If the
behavior. The Exchange proposes to
July 11, 2016. Issue Percentage, rounded to the nearest
permit the NOM Market Maker to set the
Pursuant to Section 19(b)(1) of the Specified Percentage more broadly, no integer, equals or exceeds a percentage
Securities Exchange Act of 1934 less than 1% with this rule change. The established by the NOM Market Maker,
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Exchange also proposes to replace the not less than 100% (‘‘Specified
notice is hereby given that on June 30, term ‘‘disseminated size’’ 4 with a Percentage’’), the System automatically
2016, The NASDAQ Stock Market LLC quantitative description to add removes a NOM Market Maker’s quotes
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the transparency with respect to the and orders in all series of an underlying
Securities and Exchange Commission calculation of Series Percentage. security submitted through designated
(‘‘SEC’’ or ‘‘Commission’’) the proposed NOM protocols, as specified by the
Background Exchange, during the Percentage-Based
rule change as described in Items I and
II below, which Items have been Today, Chapter VII, Section 6(f) Specified Time.
prepared by the Exchange. The permits NOM Market Makers to monitor The Percentage-Based Specified Time
Commission is publishing this notice to risk arising from multiple executions Period commences for an option every
solicit comments on the proposed rule across multiple options series of a single time an execution occurs in any series
change from interested persons. underlying security. A NOM Market in such option and continues until the
Maker may provide a specified time System removes quotes and orders as
I. Self-Regulatory Organization’s period and a specified percentage by described in Chapter VII, Section 6(f)(iv)
Statement of the Terms of Substance of which the Exchange’s System will or (v) or the Percentage-Based Specified
the Proposed Rule Change automatically remove a NOM Market Time Period expires. The Percentage-
The Exchange proposes to amend the Maker’s quotes and orders in all series Based Specified Time Period operates
rules of the NASDAQ Options Market of an underlying security submitted on a rolling basis among all series in an
LLC (‘‘NOM’’) at Chapter VII, Section through designated NOM protocols, as option in that there may be multiple
6(f), entitled ‘‘Automated Removal of specified by the Exchange, during a Percentage-Based Specified Time
Orders and Quotes.’’ Periods occurring simultaneously and
3 The term ‘‘Nasdaq Options Market Maker’’ or such Percentage-Based Specified Time
The text of the proposed rule change ‘‘Options Market Maker’’ (herein ‘‘NOM Market periods may overlap.
is available on the Exchange’s Web site Maker’’) means an Options Participant registered
at http://nasdaq.cchwallstreet.com, at with the Exchange for the purpose of making Proposal
markets in options contracts traded on the
sradovich on DSK3GMQ082PROD with NOTICES
the principal office of the Exchange, and Exchange and that is vested with the rights and The Exchange proposes to lower the
at the Commission’s Public Reference responsibilities specified in Chapter VII of these minimum Specified Percentage, which
Room. Rules. See NOM Rules at Chapter I, Section 1(a)(26). is set by the NOM Market Maker, from
4 See Securities Exchange Act Release No 76316
(October 30, 2015), 80 FR 68595 at 68597
100% to 1%. The proposal would
32 15 U.S.C. 78s(b)(2). (November 5, 2015) (SR–NASDAQ–2015–122). The
33 17 CFR 200.30–3(a)(12). 5 A specified time period commences for an
Exchange defined disseminated size in this rule
1 15 U.S.C. 78s(b)(1).
change in footnote 13, as the original size quoted option when a transaction occurs in any series in
2 17 CFR 240.19b–4. by the Participant. such option.
VerDate Sep<11>2014 19:03 Jul 14, 2016 Jkt 238001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 E:\FR\FM\15JYN1.SGM 15JYN1](https://thefederalregister.org/doc/81_FR_46280/page/4.svg)
Document Created: 2016-07-15 02:53:03
Document Modified: 2016-07-15 02:53:03
| 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 46144 |
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