81 FR 64247 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Deadline for Implementing Rule 6.61(a)(2) and (3) Until September 30, 2016

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 181 (September 19, 2016)

[Federal Register Volume 81, Number 181 (Monday, September 19, 2016)]
[Notices]
[Pages 64247-64248]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22424]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78831; File No. SR-NYSEARCA-2016-126]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the 
Deadline for Implementing Rule 6.61(a)(2) and (3) Until September 30, 
2016

September 13, 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 September 6, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the deadline for implementing Rule 
6.61(a)(2) and (3) until September 30, 2016. 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 to extend the deadline for implementing 
Rule 6.61 (a)(2) and (3) until September 30, 2016. The Exchange has not 
met the current implementation deadline of July 31, 2016.
    In March 2015, the Commission approved Rule 6.61, which provides a 
price protection risk mechanism for Market Maker quotes.\4\ Rule 6.61 
provides two layers of price protection to incoming Market Maker 
quotes, rejecting those Market Maker quotes that exceed certain 
parameters, as a risk mitigation tool.\5\ The Exchange has implemented 
the first layer of price protection (the NBBO Reasonability Check) and 
had until one year from the date of the Approval Order to implement the 
second layer of protection (the Underlying Stock Price/Strike Price 
Check) pursuant to Commentary .01 to Rule 6.61, which was March 4, 
2016.\6\
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    \4\ See Securities Exchange Act Release No. 74441 (March 4, 
2015), 80 FR 12664 (March 10, 2015) (SR-NYSEArca-2014-150) (Approval 
Order); see also Securities Exchange Act Release No. 74018 (January 
8, 2015), 80 FR 1982 (January 14, 2015) (SR-NYSEArca-2014-150) 
(Notice).
    \5\ The first layer of price protection assesses incoming sell 
quotes against the NBB and incoming buy quotes against the NBO (the 
``NBBO Price Reasonability Check''). Specifically, Rule 6.61(a)(1) 
provided that when an NBBO is available, a Market Maker quote would 
be rejected if it is priced a specified dollar amount or percentage 
through the contra-side NBBO. The second layer of price protection 
assesses the price of call or put bids against a specified benchmark 
(the ``Underlying Stock Price/Strike Price Check''), per Rule 
6.61(a)(2) and (3). This second layer of protection applies to bids 
in call options or put options when (1) there is no NBBO available, 
for example, during pre-opening or prior to conducting a re-opening 
after a trading halt, or (2) if the NBBO is so wide as to not 
reflect an appropriate price for the respective options series.
    \6\ See Securities Exchange Act Release No. 75156 (June 11, 
2015), 80 FR 34756 (June 17, 2015) (SR-NYSEArca-2015-45).
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    In March 2016, because the Exchange had not yet implemented the 
Underlying Stock Price/Strike Price Check, the Exchange extended the 
deadline to implement Rule 6.61(a)(2) and (3) until July 31, 2016 (the 
``July 31st Deadline'').\7\ Subsequent to this extension, the Exchange 
modified Commentary .01 to Rule 6.61 to exclude from the Underlying 
Stock Price/Strike Price Check certain securities for which there was 
no reliable (or in some cases any) last sale data.\8\ Although the 
Exchange had finalized the technology related to the Underlying Stock 
Price/Strike Price Check, because this technology was packaged in a 
larger technology release that is currently being rolled out, the 
Exchange was not able to implement the technology by the July 31st 
Deadline. The Exchange is in the process of implementing the technology 
release that includes the Underlying Stock Price/Strike Price Check and 
plans to complete this implementation no later than the end of 
September 2016. The Exchange believes the proposed extension of the 
July 31st Deadline until September 30, 2016 would provide the Exchange 
with sufficient time to implement the functionality related to the 
rule. Moreover, the proposed change would update the rule to reflect 
the extended deadline, thus making clear to investors and the public 
that the Underlying Stock Price/Strike Price Check is not yet 
implemented.\9\
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    \7\ See Securities Exchange Act Release No. 77357 (March 14, 
2016), 81 FR 14912 (March 18, 2016) (SR-NYSEARCA-2016-41).
    \8\ See Securities Exchange Act Release No. 77748 (April 29, 
2016), 81 FR 27178 (May 5, 2016) (SR-NYSEARCA-2016-57).
    \9\ The Exchange has issued Trader Updates informing its market 
participants that the functionality related to the Underlying Stock 
Price/Strike Price Check is not yet available but is currently being 
implemented (together with the other technology updates with which 
it was packaged). See, e.g., Trader Updates regarding Enhancements 
to Risk Control Functionality in Enhanced Certification Environment, 
dated 6/6/16, available here, https://www.nyse.com/publicdocs/nyse/notifications/trader-update/NYSE%20Amex%20and%20Arca%20-%20Enhanced%20Risk%20Controls%20in%20Enhanced%20Cert.pdf and 
regarding Risk Controls/Series Lookup Table Enhancements, dated 8/4/
16, available here, https://www.nyse.com/publicdocs/nyse/notifications/trader-update/NYSE%20Arca%20Options%20-%20Risk%20Controls%20Release.pdf.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the

[[Page 64248]]

Act,\10\ in general, and furthers the objectives of Section 
6(b)(5),\11\ in particular, in that it is designed to promote just and 
equitable principles of trade, 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes the proposal promotes just and 
equitable principles of trade and removes impediments to, and perfects 
the mechanism of, a free and open market and a national market system 
because an extension of the July 31st Deadline would enable the 
Exchange to complete its implementation of the technology related to 
the Underlying Stock Price/Strike Price Check, which is currently being 
implemented as part of a larger technology release. Moreover, the 
proposed extension would update the rule to reflect the extended 
deadline for implementation.

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 Act. The proposed rule change is 
not designed to address any competitive issues, but rather, to extend 
the July 31st Deadline for implementing the functionality related to 
the Underlying Stock Price/Strike Price Check, which is currently being 
implemented as part of a larger technology release.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \12\ of the Act and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
Exchange to immediately extend the implementation deadline for the 
Underlying Stock Price/Strike Price Check without delay and provide the 
Exchange additional time to implement the technology associated with 
such price protection. Accordingly, the Commission hereby waives the 
30-day operative delay requirement and designates the proposed rule 
change as operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use 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-2016-126 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-2016-126. 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-2016-126, and 
should be submitted on or before October 11, 2016.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-22424 Filed 9-16-16; 8:45 am]
 BILLING CODE 8011-01-P