81 FR 87094 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of a Proposed Rule Change Amending Rule 6.91NY
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 232 (December 2, 2016)
Federal Register Volume 81, Issue 232 (December 2, 2016)
| Page Range | 87094-87102 | |
| FR Document | 2016-28927 |
[Federal Register Volume 81, Number 232 (Friday, December 2, 2016)] [Notices] [Pages 87094-87102] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-28927] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79404; File No. SR-NYSEArca-2016-149] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of a Proposed Rule Change Amending Rule 6.91NY November 28, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on November 14, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.91NY (Electronic Complex Order Trading) to clarify the priority of Electronic Complex Orders and to modify aspects of its Complex Order Auction Process. 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 Exchange 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 these 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 aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 6.91 to clarify the priority of Electronic Complex Orders (``ECO'') \3\ and to modify aspects of its Complex Order Auction (``COA'') Process. --------------------------------------------------------------------------- \3\ Per Rule 6.91, ``an `Electronic Complex Order' means any Complex Order as defined in Rule 6.62(e) that is entered into the NYSE Arca System.'' Rule 6.62(e) defines Complex Order as ``any order involving the simultaneous purchase and/or sale of two or more different option series in the same underlying security, for the same account, in a ratio that is equal to or greater than one-to- three (.333) and less than or equal to three-to-one (3.00) and for the purpose of executing a particular investment strategy.'' --------------------------------------------------------------------------- Rule 6.91 sets forth how the Exchange conducts trading of ECOs in its Complex Matching Engine (``CME''). The Exchange proposes to streamline the rule text governing the execution of ECOs during Core Trading Hours \4\ to provide specificity and transparency regarding such order processing, without modifying the substance of such processing. The Exchange also proposes to amend the rules governing how ECOs that are eligible for a COA Process are executed and allocated to clarify the description of current functionality and to provide additional detail regarding order processing. The Exchange also proposes additional amendments to Rule 6.91 to clarify and add transparency to the COA Process, as described below. --------------------------------------------------------------------------- \4\ Core Trading Hours are the regular trading hours for business set forth in the rules of the primary markets underlying those option classes listed on the Exchange. See Rule 6.1A(a)(3). --------------------------------------------------------------------------- Execution of ECOs during Core Trading Hours The Exchange proposes to streamline its description of the priority of ECOs during Core Trading Hours, which the Exchange believes would add specificity and transparency to Exchange rules. Every ECO, upon entry to the System, is routed to the CME for possible execution against other ECOs or against individual quotes and orders residing in the Consolidated Book (``leg markets'').\5\ The Exchange ranks and allocates ECOs residing in the Consolidated Book according to price/ time priority based on the total or net debit or credit and the time of entry of the order.\6\ Paragraph (a)(2) to the Rule sets forth how ECOs are executed, including that ECOs submitted to the System may be executed without consideration of prices of the same complex order that might be available on other exchanges.\7\ The Exchange proposes to specify that ECOs may be executed without regard to prices of ``either single-legged or the same complex order strategy'' that might be available on other exchanges, which adds specificity and transparency to Exchange rules.\8\ The Exchange proposes to amend Rule 6.91(a)(2) by re- [[Page 87095]] numbering the rule text. As described in more detail below, proposed Rule 6.91(a)(2)(ii) would govern the execution of ECOs during Core Trading when marketable on arrival and proposed Rule 6.91(a)(2)(iii) would govern how ECOs would be ranked in the Consolidated Book and execute as resting interest on the Consolidated Book. --------------------------------------------------------------------------- \5\ See proposed Rule 6.91(a) (the Exchange proposes to define ``leg markets'' in reference to individual quotes and orders in the Consolidated Book as used throughout the rule text). The Exchange also proposes to define ``System'' as a shorthand reference to the term ``NYSE Arca System'' and replace uses of the term ``NYSE Arca System'' with the term ``System'' throughout the rule text. See, e.g., proposed Rule 6.91(preamble) and paragraph (a). \6\ See Rule 6.91(a)(1). \7\ See Rule 6.91(a)(2). The Rule also provides that ``[n]o leg of a [ECO] will be executed at a price outside the NYSE Arca best bid/offer for that leg.'' See id. \8\ Rule 6.91(a)(2)(i) governs the execution of ECOs at the Open. The Exchange proposes a non-substantive amendment to add the term ``Electronic'' so that the rule text would read, ``Execution of Electronic Complex orders at the Open.'' --------------------------------------------------------------------------- Rule 6.91(a)(2)(ii) governs executions of ECOs during Core Trading. Paragraph (A) to Rule 6.91(a)(2)(ii) currently provides that the CME will accept an incoming marketable ECO and will automatically execute the ECO giving first priority to ECOs in the Consolidated Book, ``provided, however, that if individual orders or quotes residing in the Consolidated Book can execute the incoming [ECO] in full (or in a permissible ratio) at the same total or net debit or credit as an [ECO] in the Consolidated Book, the individual orders or quotes will have priority.'' \9\ In other words, the rule currently provides that, at the same price, the leg markets have priority over same-priced resting ECOs. Paragraph (B) to Rule 6.91(a)(2)(ii) provides that if an ECO in the CME is not marketable against another ECO ``it will automatically execute against individual orders or quotes residing in the Consolidated Book, provided the [ECO] can be executed in full (or in a permissible ratio).'' \10\ In other words, if there are no better- priced ECOs in the Consolidated Book, an incoming ECO would trade with the resting leg markets. Further, the current rule provides that leg markets that execute against an ECO, per Rule 6.91(a)(2)(ii)(A) or (B), are allocated pursuant to Rule 6.76A.\11\ --------------------------------------------------------------------------- \9\ See Rule 6.91(a)(2)(ii)(A). \10\ See id. \11\ See Rule 6.91(a)(2)(ii)(A) and (B). --------------------------------------------------------------------------- The Exchange proposes to revise and streamline the rule text governing execution of ECOs during Core Trading Hours in a manner that the Exchange believes would promote transparency regarding the processing of ECOs. The proposed rule text is not intended to change how the Exchange currently processes ECOs during Core Trading, which is described in the current rule, but rather to specify the order processing in a more concise and logical manner. Thus, the Exchange proposes to delete the current rule text in paragraphs (a)(2)(ii)(A) and (B) to the Rule and replace it with revised text in proposed paragraph (a)(2)(ii). Proposed Rule 6.91(a)(2)(ii) (i.e., ``Core Trading Order Allocation'') would provide that the CME would accept incoming marketable ECO and automatically execute it against the best-priced contra-side interest resting in the Consolidated Book.\12\ This proposed rule text makes clear that an incoming marketable ECO would trade against the best-priced contra-side interest resting in the Consolidated Book, which is consistent with the Exchange's price-time priority model. For example, if the best-price contra-side interest is an ECO resting on the Consolidated Book, the incoming ECO would trade with such ECO on arrival. However, if the best-price contra-side interest that can execute with the incoming ECO in full (or in a permissible ratio) is in the leg markets, the incoming ECO would trade with individual quotes and orders in the leg markets. --------------------------------------------------------------------------- \12\ See proposed Rule 6.91(a)(2)(ii). --------------------------------------------------------------------------- The proposed rule text would further specify that if, at a price, the leg markets can execute against an incoming ECO in full (or in a permissible ratio), the leg markets would have first priority at that price to trade with the incoming ECO--to be followed by resting ECOs-- in price/time pursuant to Rule 6.76A.\13\ This proposed text, therefore, describes how an incoming marketable ECO would be allocated if resting ECOs and leg markets in the Consolidated Book are at the same price, i.e., the priority of same-priced interest in the Consolidated Book. --------------------------------------------------------------------------- \13\ See id. --------------------------------------------------------------------------- To distinguish the treatment of incoming marketable ECOs (that are immediately executed) from ECOs that are not marketable (and thus routed to the Consolidated Book) during Core Trading Hours, the Exchange proposes to renumber current Rule 6.91(a)(2)(ii)(C) and (D), as proposed Rule 6.91(a)(2)(iii)(A) and (B), under the new heading ``Electronic Complex Orders in the Consolidated Book.'' The Exchange also proposes to add language to Rule 6.91(a)(2)(iii)(A) to specify that an ECO, or portion of an ECO, that is not executed on arrival would be ranked in the Consolidated Book and that any new orders and quotes entered into the Consolidated Book that can execute against an ECO would be executed against such new orders or quotes ``according to paragraph (a)(2)(ii) above.'' \14\ The Exchange believes that the proposed additional heading and re-numbering of the rule text provides clarity regarding the treatment of non-marketable--as opposed to marketable--ECOs, which makes the rule text easier to navigate, without altering the functionality described in rule. --------------------------------------------------------------------------- \14\ The current rule text cross-references ``(ii) above'' but in light of the proposed addition of subsection (a)(2)(iii), the Exchange proposes to instead cross-reference ``paragraph (a)(2)(ii),'' which would add clarity to the proposed rule. Consistent with the proposed change to define ``leg markets'' in Rule 6.91(a), the Exchange proposes to replace ``bids and offers in the leg markets'' with ``leg markets'' in proposed Rule 6.91(a)(2)(iii)(A). --------------------------------------------------------------------------- Proposed Modifications to COA Process The Exchange proposes to modify its description of the COA Process and the execution of COA-eligible orders, which the Exchange believes would provide additional specificity and transparency to Exchange rules.\15\ Because of the number of modifications that the Exchange proposes to current paragraph (c), the Exchange proposes to delete paragraph (c) of the Rule in its entirety and replace it with new Rule 6.91(c), which the Exchange believes more clearly, accurately and logically describes the COA Process. Proposed Rules 6.91(c)(1)-(7) would describe the COA Process. --------------------------------------------------------------------------- \15\ To the extent that the proposed streamlined rule text mirrors existing language, the Exchange cites the relevant section of both the proposed and existing rule. --------------------------------------------------------------------------- Execution of COA-Eligible Orders, Initiation of COAs and RFR Responses Proposed Rule 6.91(c) would provide that, upon entry into the System, ECOs may be immediately executed, in full (or in a permissible ratio), or may be subject to a COA as described in the Rule. This rule text is based on current Rule 6.91(c), which provides that COA-eligible orders, upon entry into the System, ``may be subject to an automated request for responses (``RFR'') auction.'' \16\ As discussed below, the current rule text is silent as to the factors involved in whether and when an incoming COA-eligible order may trigger a COA, which would be addressed in proposed Rules 6.91(c)(2) and (c)(3). --------------------------------------------------------------------------- \16\ The Exchange describes the concept of the Request for Response or ``RFR'' in connection with a COA in new paragraph (c)(3) to Rule 6.91. --------------------------------------------------------------------------- Proposed Rule 6.91(c)(1) would define the term ``COA-eligible order'' to mean an ECO that is entered in a class designated by the Exchange and is: (i) Designated by the OTP Holder as COA-eligible; and (ii) received during Core Trading Hours.\17\ --------------------------------------------------------------------------- \17\ See proposed Rule 6.91(c)(1). --------------------------------------------------------------------------- The proposed definition is based, in part, on the current Rule, which provides that whether an order is COA-eligible ``would be determined by the Exchange on a class-by-class basis'' \18\ and that the OTP Holder must provide [[Page 87096]] direction that an auction be initiated.\19\ In addition, the Exchange believes that explicitly stating that an ECO would be COA-eligible only if submitted during Core Trading Hours would add clarity and transparency. The Exchange proposes to eliminate from the current definition (set forth in Rule 6.91(c)(1)) features of ECOs that are not determinative of COA eligibility on the Exchange, such as the ``size, number of series, and complex order origin types (i.e., Customers, broker-dealers that are not Market-Makers or specialists on an options exchange, and/or Market-Makers or specialists on an options exchange).'' The Exchange is also not including language from current Rule 6.91(c)(1) that provides that ECOs ``processed through the COA Process may be executed without consideration to prices of the same complex orders that might be available on other exchanges,'' as this requirement is already set forth in paragraph (a)(2) of the Rule. Finally, the Exchange proposes to remove consideration of an ECO's ``marketability (defined as a number of ticks away from the current market)'' as a requirement for COA-eligibility and to instead include this requirement in proposed paragraph (c)(3) regarding whether a COA- eligible order would actually trigger (as opposed to be eligible to trigger) a COA, as discussed below. --------------------------------------------------------------------------- \18\ See Rule 6.91(c)(1). \19\ See Rule 6.91(c)(2) (requiring that an OTP Holder mark an ECO for auction in order for a COA to be conducted). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(2) would add new rule text describing the ``Immediate Execution of COA-eligible orders.'' The proposed text would clearly state that, upon entry of a COA-eligible order into the System, it would trade immediately, in full (or in a permissible ratio), with any ECOs resting in the Consolidated Book that are priced better than the contra-side Complex BBO, pursuant to proposed Rule 6.91(a)(2)(ii).\20\ In such case, the arriving COA-eligible order would trade in a manner consistent with proposed Rule 6.91(a)(2)(ii) (i.e., ``Core Trading Order Allocation'') and seek an immediate execution with the best-priced contra-side interest. The proposed paragraph would further specify that any portion of the COA-eligible order that does not execute immediately upon entry may start a COA, subject to the conditions set forth in proposed paragraph (c)(3). --------------------------------------------------------------------------- \20\ See Rule 6.1A(2)(b) (defining Complex BBO as ``the BBO for a given complex order strategy as derived from the best bid on OX and best offer on OX for each individual component series of a Complex Order''). --------------------------------------------------------------------------- The Exchange believes that the proposed rule text promotes transparency regarding when, under current functionality, a COA- eligible order would receive an immediate execution (i.e., when it can receive price improvement from resting ECOs) versus being subject to a COA. The Exchange believes that the immediate price improvement opportunity for an incoming COA-eligible order from resting ECOs in the Consolidated Book obviates the need to start a COA, which is why incoming orders first trade against price-improving interest in the Consolidated Book before initiating a COA. Proposed Rule 6.91(c)(3) would specify the conditions required for the ``Initiation of a COA'' and, if those conditions are met, sets forth how a COA would be initiated. As proposed, and consistent with current functionality, for any portion of a COA-eligible order not executed immediately under proposed Rule 6.91(c)(2), the Exchange would initiate a COA based on the limit price of the COA-eligible order in relation to a number of factors.First, as set forth in proposed Rule 6.91(c)(3)(i), the limit price of the COA-eligible order to buy (sell) would have to be higher (lower) than the best-priced, same-side interest in both the leg markets and any ECOs resting in the Consolidated Book. In other words, the limit price of the COA-eligible order would have to improve the current same-side market. Second, as set forth in proposed Rule 6.91(c)(3)(ii), the COA-eligible order would have to be marketable, which, based on current Rule 6.91(c)(1), is defined as a number of ticks away from the current, contra-side market. Finally, as set forth in proposed Rule 6.91(c)(3)(iii), to initiate a COA, the limit price of the COA-eligible order to buy (sell) would have to be executable at a price at or within the NYSE Arca best bid/offer for each leg of the order, which is based on current Rule 6.91(a)(2) regarding the execution of ECOs in general. Proposed Rule 6.91(c)(3) further provides that the Exchange would initiate a COA by sending a Request for Response (``RFR'') message to all OTP Holders that subscribe to RFR messages.\21\ This requirement is based on the first sentence of current Rule 6.91(c)(2). Proposed Rule 6.91(c)(3) would further provide that RFR messages would identify the component series, the size and side of the market of the order and any contingencies, which is based on the second sentence of current Rule 6.91(c)(2) without any changes. In addition, proposed Rule 6.91(c)(3) would include new rule text to specify that only one COA may be conducted at a time in any given complex order strategy, which is not explicitly stated in the current rule.\22\ Finally, proposed Rule 6.91(c)(3) would specify that, at the time the COA is initiated, the Exchange would record the Complex BBO (the ``initial Complex BBO'') for purposes of determining whether the COA should end early pursuant to proposed paragraph (c)(6) of this Rule (discussed below). This is new rule text that is consistent with current functionality that ensures the COA respects the leg markets as well as principles of price/time priority.\23\ --------------------------------------------------------------------------- \21\ See proposed Rule 6.91(c)(3). \22\ The Exchange believes this can be inferred from the text describing the impact of COA-eligible orders that arrive during a COA in progress. See, e.g., Rule 6.91(c)(8). Proposed Rule 6.91(c)(6), described below, provides specificity of when a COA may terminate early and when a subsequent COA may be initiated. \23\ See proposed Rule 6.91(a)(2)(ii) (leg markets have priority at a price). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(4) would define the term Response Time Interval (``RTI'') as the period of time during which responses to the RFR may be entered. As further proposed, the Exchange would determine the length of the RTI; provided, however, that the duration would not be less than 500 milliseconds and would not exceed one (1) second. This rule text is based on current Rule 6.91(c)(3) insofar as it defines the RTI and the duration of the RTI, with the non-substantive modification to replace reference to ``shall'' with reference to ``will.'' Proposed Rule 6.91(c)(4) would also include new rule text providing that, at the end of the RTI, the COA-eligible order would be allocated pursuant to proposed Rule 6.91(c)(7), which describes the allocation of COA- eligible orders (hereinafter ``COA Order Allocation'') (described below). This proposed new rule text is based in part on current Rule 6.91(c)(5), which provides that at the expiration of the RTI, COA- eligible orders may be executed, in whole or in part, pursuant to Rule 6.91(c)(6) (Execution of COA-eligible orders). The proposed rule text refers instead to Rule 6.91(c)(7), which incorporates the order allocation concepts currently set forth in Rule 6.91(c)(6). The proposed change is intended to add clarity and transparency to the COA Process. Proposed Rule 6.91(c)(5) would provide that any OTP Holder may submit responses to the RFR message (``RFR Responses'') during the RTI. This rule text is based on the first sentence of current Rule 6.91(c)(4) without any changes. Proposed Rule 6.91(c)(5)(A)- [[Page 87097]] (C) would provide additional specificity regarding RFR Responses. Proposed Rule 6.91(c)(5)(A) would provide that RFR Responses are ECOs that have a time-in-force contingency for the duration of the COA (i.e., are designated as ``GTX''), must specify the price, size, and side of the market, and may be submitted in $0.01 increments. This rule text is based in part on the first sentence of Rule 6.91(c)(4), which provides that RFR Responses may be submitted in $.01 increments. Proposed Rule 6.91(c)(5)(A) is also based in part on the second to last sentence of current Rule 6.91(c)(7), which provides that RFR Responses expire at the end of the RTI, which is the same in substance as saying that an RFR Response has a time-in-force condition of GTX for the COA. The Exchange believes its proposed rule text is more accurate because it states that RFR Responses are valid for the duration of the COA, as opposed to the RTI, the latter being the period during which COA interest (including RFR Responses and incoming ECOs) is received and the former being the overall COA Process that allocates COA-eligible orders with the best-priced auction interest, including RFR Responses. Proposed Rule 6.91(c)(5)(B) would provide that RFR Responses must be on the opposite side of the COA-eligible order and any RFR Responses on the same side of the COA-eligible order would be rejected. This proposed rule text is based on the last sentence of current Rule 6.91(c)(4), which provides that RFR Responses must be on the opposite side of the COA-eligible order and any same-side RFR responses would be rejected by the Exchange, without any substantive changes. Proposed Rule 6.91(c)(5)(C) would provide that RFR Responses may be modified or cancelled during the RTI, would not be ranked or displayed in the Consolidated Book, and would expire at the end of the COA. The proposed text stating that RFR Responses may be modified or cancelled during the RTI is new rule text based in part on current Rule 6.91(c)(7), which provides that RFR Responses can be modified but may not be withdrawn at any time prior to the end of the RTI. The Exchange believes it is consistent with the current rule that states that an RFR Response may be modified to explicitly provide that an RFR Response may be cancelled, which is current functionality, and proposes to amend the rule to reflect that RFR Responses may also be cancelled. The proposed text stating that RFR Responses expire at the end of the COA make clear when RFR Responses are ``firm'' and thus obviate the need for current Rule 6.91(c)(7).\24\ The proposed text of Rule 6.91(c)(5)(C) stating that RFR Responses would not be ranked or displayed in the Consolidated Book is based on the last sentence of current Rule 6.91(c)(7) without any changes. --------------------------------------------------------------------------- \24\ Rule 6.91(c)(7) sets forth the Firm Quote Requirements for COA-eligible orders. --------------------------------------------------------------------------- The Exchange believes that the proposed Rules 6.91(c)(5)(A)-(C), which reorganizes information from existing rule text and add language to describe the requisite characteristics and behavior of an RFR Response, adds clarity and transparency to Exchange rules, including that, like all orders, an RFR Response may be modified or cancelled prior to the end of the RTI. The Exchange believes that specifying that RFR Reponses are GTX (i.e., good for the duration of the COA) and may trade with interest received during the COA before expiring would encourage participation in the COA and would maximize the number of contracts traded. Impact of ECOs, COA-Eligible Orders and Updated Leg Markets on COA in Progress Proposed Rule 6.91(c)(6) would govern the impact of ECOs, COA- eligible orders, and updates to the leg markets that arrived during an RTI of a COA. This proposed rule text would replace current Rule 6.91(c)(8), as described in greater detail below. The Exchange believes that, because proposed Rule 6.91(c)(6) would establish what happens to a COA (i.e., whether it will end early) before the COA-eligible order is allocated, it would be more logical to describe these processes before the rule describes how COA-eligible orders are allocated, which would be set forth in proposed Rule 6.91(c)(7). To streamline the rule and make the rule text more logical, the Exchange proposes to add headings (see proposed Rule 6.91(c)(6)(A)-(C)) to make clear which type of incoming interest is covered. Proposed Rule 6.91(c)(6)(A) would describe the impact of incoming ECOs or COA-eligible orders on the opposite-side of the market as the initiating COA-eligible order. The current rule addresses the impact of opposite-side, incoming ECOs on a COA,\25\ but because it does not address opposite-side COA-eligible orders, proposed paragraph (A) of Rule 6.91(c)(6) would be new rule text. The Exchange notes that the impact of an incoming COA-eligible order mirrors that of an incoming ECO in the scenarios covered in proposed Rules (c)(6)(A)(i)-(iii) (discussed below), which adds internal consistency and specificity to Exchange rules.\26\ --------------------------------------------------------------------------- \25\ See Rule 6.91(c)(8)(A) (providing that ``[i]ncoming Electronic Complex orders received during the Response Time Interval that are on the opposite side of the market and marketable against the limit price of the initiating COA-eligible order will be ranked and executed in price time with RFR Responses by account type (as described in (6) above). Any remaining balance of either the initiating COA-eligible order or the incoming Electronic Complex order will be placed in the Consolidated Book and ranked as described in (a)(1) above''). \26\ The differential treatment of the balance of the incoming order, depending on whether it is an ECO or a COA-eligible order is covered in proposed rules Rule 6.91(c)(6)(A)(iv) and (v), respectively. --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(A)(i) would provide that incoming ECOs or COA-eligible orders that lock or cross the initial Complex BBO would cause the COA to end early. The concept of the initial Complex BBO as a benchmark against which incoming opposite-side interest would be measured is new rule text, but is consistent with current functionality. As noted above (see supra note 21), the initial Complex BBO is the BBO for a given complex order strategy as derived from the Best Bid (``BB'') and Best Offer (``BO'') for each individual component series of a Complex Order as recorded at the start of the RTI. Proposed Rule 6.91(c)(6)(A)(i) would further provide that if such incoming ECO or COA-eligible order is also executable against the limit price of the initiating COA-eligible order, it would be ranked with RFR Responses to execute with the initiating COA-eligible order. The Exchange believes that addressing this scenario would better enable market participants to understand how their ECOs, including COA-eligible orders, may be treated, and the proposed change therefore is designed to add clarity and transparency to Exchange rules. The proposed rule text relating to how an incoming opposite-side ECO or COA-eligible order would be processed is based on current Rule 6.91(c)(8)(A), which provides that incoming ECOs received during the RTI ``that are on the opposite side of the market and marketable against the limit price of the initiating COA-eligible order will be ranked and executed in price time with RFR Responses.'' \27\ The proposed rule text would also include opposite-side COA-eligible orders and would not include any reference to Customer and non-Customer ``account type,'' which, as discussed below, is unnecessary.\28\ The proposed rule text also does not include reference to ``price time,'' as the COA-eligible order would interact with [[Page 87098]] the best-priced contra-side interest received during the RTI, per proposed paragraph (c)(7) of this Rule.\29\ --------------------------------------------------------------------------- \27\ See Rule 6.91(c)(8)(A), supra note 26. \28\ See proposed Rule 6.91(c)(6)(A)(i). See also discussion of ``COA Order Allocation'' below. \29\ See proposed Rule 6.91(c)(7). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(A)(ii) would provide that incoming ECOs or COA-eligible orders that are executable against the limit price of the initiating COA-eligible order, but do not lock or cross the initial Complex BBO, would not cause the COA to end early and would be ranked with RFR Responses to execute with the initiating COA- eligible order. This proposed paragraph specifies that the COA would continue uninterrupted by such incoming orders because such interest does not trigger priority concerns (because the incoming order isn't priced better than the leg markets at the start of the COA), but is eligible to participate in the COA. This proposed text would be new rule text, which reflects current functionality that is based on the principles set forth in Rule 6.91(c)(8)(A). Proposed Rule 6.91(c)(6)(A)(iii) would provide that incoming ECOs or COA-eligible orders that are either not executable on arrival against the limit price of the initiating COA-eligible order or do not lock or cross the initial Complex BBO would not cause the COA to end early. Per this proposed paragraph, the COA would proceed uninterrupted as the incoming interest does not trigger priority concerns (i.e., does not lock or cross the initial Complex BBO) nor can the interest participate in the COA (i.e., because it is not executable against the initiating COA-eligible order). This would be new rule text, which reflects current functionality. Proposed Rule 6.91(c)(6)(A)(iv) would provide that any incoming ECO(s), or the balance thereof, that was not executed with the initiating COA-eligible order or was not executable on arrival would trade pursuant to proposed paragraph (a)(2)(ii) of this Rule (i.e., Core Trading Allocation). This proposed rule text is based on the last sentence of current Rule 6.91(c)(8)(A), regarding ECOs, but provides additional detail regarding the ability for any balance on the incoming ECO to trade with the best-priced, resting contra-side interest before (or instead of) being ranked in the Consolidated Book, which is consistent with the Exchange's processing of incoming ECOs. Proposed Rule 6.91(c)(6)(A)(v) would provide that any incoming COA-eligible order(s), or the balance thereof, that was not executed with the initiating COA-eligible order or was not executable on arrival would initiate subsequent COA(s) in price-time priority. Because the treatment of opposite-side COA-eligible orders is not described in the current rule, this would be new rule text. Unlike the treatment of incoming opposite-side ECOs--where any remaining balance of the ECOs would be subject to Core Trading Allocation or would be posted to the Consolidated Book after trading with the initiating COA- eligible order--any balance of the incoming contra-side COA-eligible order that does not trade with the initiating COA-eligible order would initiate a new COA. The Exchange believes that proposed Rule 6.91(c)(6)(A)(i)-(v) would provide additional specificity regarding the impact of opposite-side ECOs or COA-eligible orders on the COA Process, which adds transparency to Exchange rules. Specifically, the Exchange believes that providing for a COA to terminate early when an incoming order locks or crosses the initial Complex BBO, as proposed, would allow an initiating COA- eligible order to execute (ahead of the incoming order) against any RFR Responses or ECOs received during the RTI up until that point, while preserving the priority of the incoming order to trade with the resting leg markets. The Exchange believes that early conclusion of the COA would avoid disturbing priority in the Consolidated Book and would allow the Exchange to appropriately handle incoming orders. The proposed rule text is consistent with the processing of ECOs during Core Trading and ensures that the leg markets respect the COA as well as principles of price/time priority.\30\ Moreover, the Exchange believes that the proposed impact of incoming COA-eligible orders aligns with the treatment of incoming ECOs, which adds internal consistency to Exchange rules, and affords additional opportunities for price improvement to the initiating COA-eligible order, which may trade with the opposite-side order(s). --------------------------------------------------------------------------- \30\ See proposed Rule 6.91(a)(2)(ii) (leg markets have priority at a price). --------------------------------------------------------------------------- The Exchange proposes to process any remaining balance of such orders differently from any balance of the incoming ECO because an ECO would either execute against resting interest or be ranked with ECOs in the Consolidate Book, whereas any balance of an incoming COA-eligible order would initiate a new COA, affording that order additional opportunities for price improvement. The Exchange believes that this proposed rule text, which is consistent with current functionality, maximizes the execution opportunities to the incoming order(s), with potential price improvement, as these orders may trade with interest received in the (initiating) COA; and, for the incoming COA-eligible order, the potential for additional price improvement in a subsequent COA. Proposed Rule 6.91(c)(6)(B) would describe the impact of incoming ECOs or COA-eligible orders on the same side of the market as the initiating COA-eligible order on a COA. The current rule addresses the impact of same-side, incoming COA-eligible orders on a COA,\31\ but because it does not address same-side ECOs, this aspect of the proposed rule would be new. The impact of an incoming ECO mirrors that of an incoming COA-eligible order in the scenarios covered in proposed Rule (c)(6)(B)(i)-(iv) (discussed below), which adds internal consistency and specificity to Exchange rules.\32\ --------------------------------------------------------------------------- \31\ See Rule 6.91(c)(8)(B)-(C) (addressing the impact of same- side incoming COA-eligible orders on a COA). \32\ The Exchange notes that the differential treatment of the balance of the incoming order, depending on whether it is an ECO or a COA-eligible order is covered in proposed rules Rule 6.91(c)(6)(B)(v) and (vi), respectively. --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(B)(i) would provide that incoming ECOs or COA-eligible orders that are priced better than the initiating COA-eligible order would cause the COA to end.\33\ This proposed rule text is based in part on current Rule 6.91(c)(8)(D), which provides that better-priced incoming COA-eligible orders that arrive during the RTI will cause a COA to end.\34\ --------------------------------------------------------------------------- \33\ An incoming ECO or COA-eligible order priced ``better than'' the COA-eligible order means it is priced higher (lower) than the initiating COA-eligible order to buy (sell). See proposed Rule 6.91(c)(6)(B)(ii). \34\ See Rule 6.91(c)(8)(D) (providing, in part, that ``[i]ncoming COA-eligible orders received during the Response Time Interval for the original COA-eligible order that are on the same side of the market and that are priced better than the initiating order will cause the auction to end''). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(B)(ii) would provide that an incoming ECO or COA-eligible order that is priced equal to or worse than the initiating COA-eligible order,\35\ and also locks or crosses the contra-side initial Complex BBO, would cause the COA to end early. The proposed rule is based in part on current Rules 6.91(c)(8)(B) and (C), which describe how the Exchange processes COA-eligible orders that are received during a COA that are on the same side of the market of the initiating COA and priced equal to or worse than [[Page 87099]] the initiating COA.\36\ However, the current rule does not specify that a COA would terminate early when an incoming ECO locks or crosses the contra-side initial Complex BBO, therefore this would be new rule text. --------------------------------------------------------------------------- \35\ An incoming ECO or COA-eligible order priced ``worse than'' the COA-eligible order means it is priced lower (higher) than the initiating COA-eligible order to buy (sell). See proposed Rule 6.91(c)(6)(B)(ii). \36\ See Rule 6.91(c)(8)(B)-(C), supra note 32. --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(B)(iii) would provide that incoming ECOs or COA-eligible orders that are priced equal to or worse than the initiating COA-eligible order,\37\ but do not lock or cross the contra-side Complex BBO, would not cause the COA to end early. Proposed Rule 6.91(c)(6)(B)(i) is based on current Rules 6.91(c)(8)(B) and (C), which describe how the Exchange processes COA-eligible orders that are received during a COA that are on the same side of the market of the initiating COA-eligible order and priced equal to or worse than the initiating COA-eligible order. However, the current rule does not address whether the incoming orders lock or cross the contra-side initial Complex BBO. The Exchange believes that this additional detail promotes internal consistency regarding how the COA process and how it intersects with the price/time priority of the initial Complex BBO. --------------------------------------------------------------------------- \37\ An incoming ECO or COA-eligible order priced ``worse than'' the COA-eligible order means it is priced lower (higher) than the initiating COA-eligible order to buy (sell). See proposed Rule 6.91(c)(6)(B)(iii). --------------------------------------------------------------------------- The Exchange notes that current Rules 6.91(c)(8)(B) and (C) state that an incoming same-side COA-eligible order (priced equal to or worse than the initiating order) joins a COA in progress and is executed in price/time with the COA-eligible order, with any balance placed in the Consolidated Book pursuant to (a)(1).\38\ The proposed rule text would clarify how such incoming COA-eligible orders would be processed. Specifically, the Exchange proposes to clarify how such incoming COA-eligible orders (as well as ECOs) would be processed, including any remaining balance thereof, in proposed paragraphs (c)(6)(iv)-(vi) of the Rule, discussed below.\39\ --------------------------------------------------------------------------- \38\ See Rule 6.91(c)(8)(B) and (C) (providing, in part, that ``[i]ncoming COA-eligible orders received during the [RTI] for the original COA-eligible order that are on the same side of the market, that are priced [equal to or worse] than the initiating order, will join the COA''). \39\ See, e.g., proposed Rule 6.91(c)(6)(B)(iv),(vi) (providing that, rather than joining the COA, these incoming COA-eligible orders may trade with RFR Responses or ECOs that don't execute in the COA and, if any balance remains still, would initiate a new COA--but would not execute during the COA in progress as the current rule suggests). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(B)(iv) would provide that any incoming ECO or COA-eligible order that caused a COA to end early, if executable, would trade against any RFR Responses and/or ECOs that did not trade with the initiating COA-eligible order. This proposed paragraph reflects current functionality and is based on current Rule 6.91(c)(8)(D) inasmuch as it addresses incoming same-side COA-eligible orders that cause the COA to end early. Proposed Rule 6.91(c)(6)(B)(v) would provide that any remaining balance of incoming ECOs that do not trade against any remaining RFR Responses or ECOs received during the RTI would trade pursuant to Core Trading Allocation, pursuant to paragraph (a)(2)(ii) of this Rule. This proposed rule text is consistent with the treatment of the balance of incoming same-side ECOs set forth in current Rule 6.91(8)(A)-(C), with the added detail that the ECO would first be subject to Core Trading Allocation pursuant to proposed Rule 6.91(a)(2)(ii) before being ranked in the Consolidated Book. Proposed Rule 6.91(c)(6)(B)(vi) would provide that the remaining balance of any incoming COA-eligible order(s) that does not trade against any remaining RFR Responses or ECOs received during the RTI would initiate new COA(s) in price-time priority. This proposed rule text is based in part on current Rule 6.91(c)(8)(D), which provides that any unexecuted portion of the incoming COA-eligible would initiate a new COA.\40\ --------------------------------------------------------------------------- \40\ See Rule 6.91(c)(8)(D) (providing, in part, that ``[t]he COA-eligible order that caused the auction to end will ``if marketable, initiate another COA''). See supra note 35 (noting inaccuracy in current rule, which provides that incoming COA- eligible orders would execute during the COA in progress). --------------------------------------------------------------------------- The Exchange believes that proposed Rules 6.91(c)(6)(B)(i)-(vi) would provide greater specificity regarding the impact of arriving same-side COA-eligible orders and ECOs on a COA, which adds internal consistency, clarity and transparency to Exchange rules. Specifically, the Exchange believes that providing for a COA to terminate early under the circumstances specified in proposed Rules 6.91(c)(6)(B)(i) and (ii) would allow a COA-eligible order to execute (ahead of the incoming order) against any RFR Responses or ECOs received during the RTI up until that point, while preserving the priority of the incoming order to trade with the resting leg markets. The Exchange believes that early conclusion in this circumstance would ensure that the COA interacts seamlessly with the Consolidated Book so as not to disturb the priority of orders on the Book. The proposed rule text is consistent with the processing of ECOs during Core Trading and ensures that the COA respects the leg markets as well as principles of price/time priority.\41\ In addition, the proposed rule would also provide greater specificity that the incoming COA-eligible order or ECO would, if executable, trade against any remaining RFR Responses and/or ECOs received during the RTI, which allows the incoming orders opportunities for price improvement. The proposed rule would also make clear that any remaining balance of the incoming COA-eligible order would then initiate a new COA. The Exchange believes that these proposed changes maximize the execution opportunities to the incoming order(s), with potential price improvement, as these orders may trade with interest received in the (original) COA; and, for the incoming COA-eligible order, the potential for additional price improvement in a subsequent COA. --------------------------------------------------------------------------- \41\ See proposed Rule 6.91(a)(2)(ii) (leg markets have priority at a price). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(C): would describe the impact of new individual quotes or orders (i.e., updates to the leg markets) during the RTI on the same or opposite side of the COA-eligible order. In each event described below, regardless of whether the COA ends early, the COA-eligible order would execute pursuant to proposed Rule 6.91(c)(7) (described below); and, consistent with Core Trading Allocation, the updated leg markets would execute pursuant to proposed paragraph (a)(2)(ii) of this Rule.\42\ --------------------------------------------------------------------------- \42\ See proposed Rule 6.91(c)(6)(C). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(C)(i) would provide that updates to the leg markets that would cause the same-side Complex BBO to lock or cross any RFR Response(s) and/or ECO(s) would cause the COA to end early. The Exchange believes that providing for a COA to terminate early when the leg markets update in this manner would allow a COA- eligible order to execute against any RFR Responses or ECOs received during the RTI up until that point, while preserving the priority of the updated leg markets. Proposed Rule 6.91(c)(6)(C)(ii) would provide that updates to the leg markets that would cause the same-side Complex BBO to be priced better than the COA-eligible order,\43\ but do not lock or cross any RFR Responses and/or ECOs received would not cause the COA to end early. --------------------------------------------------------------------------- \43\ Individual orders and quotes cause the same-side Complex BBO to be ``better'' than the COA-eligible order if they cause the Complex BBO to be higher (lower) than the COA-eligible order to buy (sell). See proposed Rule 6.91(c)(6)(C)(i). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(6)(C)(iii) would provide that updates to the leg markets that would cause the contra- [[Page 87100]] side Complex BBO to lock or cross the same-side initial Complex BBO would cause the COA to end early. Proposed Rule 6.91(c)(6)(C)(iv) would provide that updates to the leg markets that would cause the contra-side Complex BB (BO) to improve (i.e., become higher (lower)), but not lock or cross the same- side initial Complex BBO, would not cause the COA to end early. The believes that proposed Rule 6.91(c)(6)(C)(i)-(iv) respect the COA process, while at the same time ensuring a fair and orderly market by maintaining the priority of quotes and orders on the Consolidated Book as they update. The proposed rule is based in part on Rule 6.91(c)(9)(A) \44\ and (B),\45\ which address the impact of updates to the leg markets on a COA. However, the current rule text does not specify on which side of the market the leg markets have updated. The Exchange proposes to include this detail in the new rule text for additional clarity and transparency. In addition, the current rule text uses the term ``derived Complex BBO,'' which is not a defined term. In the proposed rule, the Exchange proposes to use the term Complex BBO, which is a defined term.\46\ The Exchange further believes this proposed rule text promotes transparency and clarity to Exchange rules. --------------------------------------------------------------------------- \44\ See Rule 6.91(c)(9)(A) (providing that ``[i]ndividual orders and quotes that are entered into the leg markets that cause the derived Complex Best Bid/Offer to be better than the COA- eligible order and to cross the best priced RFR Response will cause the auction to terminate, and individual orders and quotes in the leg markets will be allocated pursuant to (a)(2)(i) above and matched against Electronic Complex Orders and RFR Responses in price time priority pursuant to (6) above. The initiating COA-eligible order will be matched and executed against any remaining unexecuted Electronic Complex Orders and RFR Responses pursuant to (6) above''). The Exchange also notes that proposed Rule 6.91(c)(6)(C)(i) clarifies that the Complex BBO in question is the same-side Complex BBO, as the current rule text is silent in this regard, which adds clarity and transparency to Exchange rules. \45\ See Rule 6.91(c)(9)(B) (providing that ``[i]ndividual orders and quotes that are entered into the leg markets that cause the derived Complex Best Bid/Offer to cross the price of the COA- eligible order will cause the auction to terminate, and individual orders and quotes in the leg markets will be allocated pursuant to (a)(2)(i) above and matched against Electronic Complex Orders and RFR Responses in price time priority pursuant to (6) above.''). The Exchange also notes that proposed paragraph (c)(6)(C)(ii) clarifies that the Complex BBO in question is the contra-side Complex BBO, as the current rule text is silent in this regard, which adds clarity and transparency to Exchange rules. \46\ See supra 21. The Exchange notes that the word ``derived'' is no longer needed as it is encompassed in the definition of Complex BBO. See id. --------------------------------------------------------------------------- COA Order Allocation Current Rules 6.91(c)(6)(A)-(D) set forth how a COA-eligible order executes against same-priced contra-side interest (i.e., at the same net price) after executing against any better-priced contra-side interest. However, the current rule text does not reflect priority and order allocation, including that current paragraphs (c)(6)(B) and (C) refer to affording priority to Customer ECOs which is not consistent with the Exchange's price/time priority model. In short, current Rule 6.91(c)(6) provides that COA-eligible orders will be executed against the best priced contra-side interest. The rule further provides that at the same net price, the order will be allocated as provided for in Rules 6.91(c)(6)(A)-(D). Current Rule 6.91(c)(6)(A) provides that individual orders and quotes in the leg markets resting in the Consolidated Book prior to the initiation of a COA have first priority to trade against a COA-eligible order, provided the COA-eligible order can be executed in full (or in a permissible ratio), on a price/time basis pursuant to Rule 6.76A.\47\ Current Rules 6.91(c)(6)(B) and (C) provide that Customer ECOs resting in the Consolidated Book before, or that are received during, the RTI, and Customer RFR Responses shall, collectively have second priority to trade against a COA-eligible order followed by resting non-Customer ECOs, those received during the RTI, and non-Customer RFR Responses, which would have third priority.\48\ Pursuant to the current Rule, the allocation of a COA-eligible order against these Customer and non- Customer ECOs and RFR Responses shall be on a Size Pro Rata basis as defined in Rule 6.75(f)(6).\49\ Finally, current Rule 6.91(c)(6)(D) provides that individual orders and quotes in the leg markets that cause the derived Complex BBO to be improved during the COA and match the best RFR Response and/or ECOs received during the RTI will be filled after ECOs and RFR Responses at the same net price pursuant to Rule 6.76A.\50\ --------------------------------------------------------------------------- \47\ See Rule 6.91(c)(6)(A). \48\ See Rule 6.91(c)(6)(B) and (C). \49\ See id. \50\ See Rule 6.91(c)(6)(D). --------------------------------------------------------------------------- The Exchange proposes to clarify and update the rule text describing the priority and allocation of COA-eligible orders during the COA process in proposed Rule 6.91(c)(7), under the heading ``Allocation of COA-Eligible Orders,'' which would replace current paragraph (c)(6) in its entirety. Proposed Rule 6.91(c)(7) would provide that at the end of the RTI, a COA-eligible order would be executed against contra-side interest as provided for in proposed Rules 6.91(c)(7)(A) and (B), and any unexecuted portion of the COA-eligible order would be ranked in the Consolidated Book pursuant to proposed Rule 6.91(a)(1). Proposed Rule 6.91(c)(7)(A) would provide that RFR Responses and ECO priced better than \51\ the initial Complex BBO would be eligible to trade first with the COA-eligible order, beginning with the highest (lowest), at each price point, on a Size Pro Rata basis as defined in Rule 6.75(f)(6). This proposed rule text is based in part on current Rule 6.91(c)(6), which provides that COA-eligible orders would be executed against the best priced contra side interest (which in this case, would be ECOs and RFR Responses) and current Rule 6.91(c)(6)(C), which provides that ECOs and RFR Responses are allocated on a Size Pro Rata basis. The Exchange believes this proposed change streamlines how the allocation process works, and clarifies that if ECOs and RFR Responses are the best-priced interest, they would trade with the incoming COA-eligible order on a Size Pro Rata basis. --------------------------------------------------------------------------- \51\ To qualify as ``better than,'' RFR Responses and ECOs to buy (sell) would need to be priced higher (lower) than the initial Complex BBO. See proposed Rule 6.91(c)(7)(A). --------------------------------------------------------------------------- Proposed Rule 6.91(c)(7)(B) provides that after COA allocations pursuant to paragraph (c)(7)(A) of this Rule, the COA- eligible order would trade with the best-priced contra-side interest pursuant to paragraph (a)(2)(ii) above. In other words, once the COA- eligible order has traded with any ECOs or RFR Responses priced better than the initial Complex BBO (i.e., any price-improving interest to arrive during the RTI), the initiating COA-eligible order would follow regular allocation rules for an incoming marketable ECO. This rule text is based in part on current Rule 6.91(c)(6)(A), which provides that if the COA-eligible order can be executed in full (or a permissible ratio) by the orders and quotes in the Consolidated Book, they will be allocated pursuant to Rule 6.76A. Because this allocation is identical to how a regular marketable ECO would be allocated, the Exchange believes it would streamline the rule and provide greater transparency to provide a cross reference to proposed Rule 6.91(a)(2)(ii) instead of Rule 6.76. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b)(5) of the Securities Exchange Act of 1934 (the ``Act''),\52\ which requires the [[Page 87101]] rules of an exchange 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. --------------------------------------------------------------------------- \52\ 15 U.S.C. 78f(b). --------------------------------------------------------------------------- Overall, the Exchange is proposing various changes that would promote just and equitable principles of trade, because ECOs, including COA-eligible orders, would be handled in a fair and orderly manner, as described above. The various modifications and clarifications, many of which are consistent with current functionality are intended to improve the rule overall by adding more specificity and transparency. The Exchange believes that the proposed rule changes would promote just and equitable principles of trade as well as protect investors and the public interest by making more clear how ECOs and COA-eligible orders are handled on the Exchange, both during Core Trading Hours and when there is a COA in progress. In particular, the proposed changes are intended to help ensure a fair and orderly market by maintaining price/ priority of incoming ECOs (including COA-eligible orders) and updated leg markets. Similarly, the proposed changes are designed to promote just and equitable principles by seeking to execute as much interest as possible at the best possible price(s). Execution of ECOs During Core Trading Hours The Exchange believes that the proposed rule changes regarding Core Trading Order Allocation, which do not alter the substance of the rule but instead condense and streamline the rule text, would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed changes are designed to protect investors and the public interest by making the Exchange's rules more clear, concise, transparent and internally consistent, which enhances the overall comprehensibility to investors without altering the operation of the rule. Specifically, the Exchange believes that, although it does not alter the substance of the rule, the proposed rule text regarding Core Trading Order Allocation provides additional specificity regarding processing of ECOs against same-priced contra- side interest and, in particular, under what circumstances the leg markets would have first priority to execute against an incoming marketable ECO. The Exchange believes this additional transparency, which makes the rule clearer and more complete for market participants, would encourage additional ECOs to be directed to the Exchange. Proposed Modifications to COA Process Overall, the Exchange believes that the proposed changes to the COA Process maximize execution opportunities for the initiating COA- eligible Order, RFR Responses and ECOs entered during the COA, and the leg markets at the best possible price consistent with the principles of price/time priority, which would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed changes are designed to protect investors and the public interest. Execution of COA-Eligible Orders, Initiation of COAs and RFR Responses In particular, the proposed rule text promotes transparency regarding the definition of what constitutes a COA-eligible order and the circumstances under which an arriving COA-eligible order would receive an immediate execution (i.e., when it can receive price improvement from resting ECOs) versus being subject to a COA. The proposed rule text is not intended to change how the Exchange currently processes ECOs, but rather to provide clarity regarding the processing of COA-eligible orders and whether such orders are subject to a COA. Specifically, the proposed changes would help ensure a fair and orderly market because this information adds clarity and transparency to the COA process and would allow market participants to be more informed about the COA process. Moreover, the proposed change maximizes the opportunities for price improvement for the entire COA-eligible order as it would first trade against any price-improving interest in the Consolidated Book, and, if any residual interest remains, the order would be subject to a COA. Further, the Exchange believes that the proposed rule text regarding the requisite characteristics and behavior of an RFR Response adds clarity and transparency to Exchange rules, including that, like all orders, an RFR Response may be modified or cancelled prior to the end of the RTI, which promotes just and equitable principles of trade. In addition, the Exchange believes that specifying that RFR Reponses are valid for the duration of the COA would encourage participation in the COA and would maximize the number of contracts traded, which benefits all market participants and protects investors and the investing public. Impact of ECOs, COA-Eligible Orders and Individual Order/Quotes on COA in Progress Regarding interest that arrives during a COA in progress, the Exchange believes that the proposed rule text provides clarity regarding the impact of opposite- and same-side ECOs or COA-eligible orders on the COA Process, which promotes transparency and adds clarity to Exchange rules. Moreover, the Exchange notes that because the COA is intended to operate seamlessly with the Consolidated Book, the proposed changes would promote just and equitable principles of trade by providing price-improvement opportunities for COA-eligible orders while at the same time providing an opportunity for such orders to interact with orders or quotes received during the RTI, including incoming ECOs. In addition, the Exchange believes that this practice of honoring the updated leg markets would help ensure a fair and orderly market by maintaining the priority of quotes and orders on the Consolidated Book as they update. The Exchange believes that the proposed changes to the COA would increase the number of options orders that are provided with the opportunity to receive price improvement. The Exchange also believes that the proposed modification regarding when the balance of an initiating (or incoming) COA-eligible order would initiate a new COA (as opposed to being posted to the Consolidated Book) is likewise consistent with the Act because it would remove impediments to and perfect the mechanism of a free and open market and a national market system clarifying the rule text to the benefit of market participants, particularly those interested in submitting COA-eligible orders. In addition, the proposed changes also promote additional transparency and internal consistency in Exchange rules. The Exchange believes that, as proposed, COA Order Allocation maximizes price discovery and liquidity while employing price priority, which benefits all market participants. COA Order Allocation The Exchange believes that the proposed rule changes, which clarify the priority and order allocation and processing of COA-eligible orders would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed changes are designed to protect investors and the public interest by making the Exchange's rules more clear, concise, transparent and [[Page 87102]] internally consistent, which enhances the overall comprehensibility to investors without altering the operation of the rule. For example, the Exchange believes that the revised rule text governing the execution of COA-Eligible orders provides clarity regarding the circumstances under which the leg markets would have first priority to execute against an incoming COA-eligible or ECO. The Exchange also believes that the proposed changes would conform to the Exchange's price/time priority model and reduce the potential for investor confusion. Non-Substantive Changes The Exchange believes that the proposed non-substantive, technical changes, including updated cross references that conform rule text to proposed changes, promotes just and equitable principles of trade, fosters cooperation and coordination among persons engaged in facilitating securities transactions, and removes impediments to and perfects the mechanism of a free and open market by ensuring that members, regulators and the public can more easily navigate the Exchange's rulebook and better understand the defined terms used by the Exchange. 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. To the contrary, the Exchange believes that the proposed changes would encourage increased submission of ECOs, as well as increased participation in COAs, which will add liquidity to the Exchange to the benefit all market participants and is therefore pro-competitive. The proposal does not impose an intra-market burden on competition, because these changes make the rule clearer and more complete for all participants. Nor does the proposal impose a burden on competition among the options exchanges, because of the vigorous competition for order flow among the options exchanges. To the extent that market participants disagree with the particular approach taken by the Exchange herein, market participants can easily and readily direct complex order flow to competing venues. 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 Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic 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-2016-149 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-2016-149. 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-2016-149 and should be submitted on or before December 23, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\53\ --------------------------------------------------------------------------- \53\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-28927 Filed 12-1-16; 8:45 am] BILLING CODE 8011-01-P
![87094 Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices
and Exchange Commission, 100 F Street notice is hereby given that on November ECOs during Core Trading Hours 4 to
NE., Washington, DC 20549–1090. 14, 2016, NYSE Arca, Inc. (‘‘Exchange’’ provide specificity and transparency
All submissions should refer to File or ‘‘NYSE Arca’’) filed with the regarding such order processing,
Number SR–BX–2016–061. This file Securities and Exchange Commission without modifying the substance of
number should be included on the (the ‘‘Commission’’) the proposed rule such processing. The Exchange also
subject line if email is used. To help the change as described in Items I, II, and proposes to amend the rules governing
Commission process and review your III below, which Items have been how ECOs that are eligible for a COA
comments more efficiently, please use prepared by the Exchange. The Process are executed and allocated to
only one method. The Commission will Commission is publishing this notice to clarify the description of current
post all comments on the Commission’s solicit comments on the proposed rule functionality and to provide additional
Internet Web site (http://www.sec.gov/ change from interested persons. detail regarding order processing. The
rules/sro.shtml). Exchange also proposes additional
Copies of the submission, all I. Self-Regulatory Organization’s
amendments to Rule 6.91 to clarify and
subsequent amendments, all written Statement of the Terms of Substance of
add transparency to the COA Process, as
statements with respect to the proposed the Proposed Rule Change
described below.
rule change that are filed with the The Exchange proposes to amend
Commission, and all written Rule 6.91NY (Electronic Complex Order Execution of ECOs during Core Trading
communications relating to the Trading) to clarify the priority of Hours
proposed rule change between the Electronic Complex Orders and to The Exchange proposes to streamline
Commission and any person, other than modify aspects of its Complex Order its description of the priority of ECOs
those that may be withheld from the Auction Process. The proposed rule during Core Trading Hours, which the
public in accordance with the change is available on the Exchange’s Exchange believes would add specificity
provisions of 5 U.S.C. 552, will be Web site at www.nyse.com, at the and transparency to Exchange rules.
available for Web site viewing and principal office of the Exchange, and at Every ECO, upon entry to the System, is
printing in the Commission’s Public the Commission’s Public Reference routed to the CME for possible
Reference Room, 100 F Street NE., Room. execution against other ECOs or against
Washington, DC 20549, on official II. Self-Regulatory Organization’s individual quotes and orders residing in
business days between the hours of Statement of the Purpose of, and the Consolidated Book (‘‘leg markets’’).5
10:00 a.m. and 3:00 p.m. Copies of the Statutory Basis for, the Proposed Rule The Exchange ranks and allocates ECOs
filing also will be available for Change residing in the Consolidated Book
inspection and copying at the principal according to price/time priority based
office of the Exchange. All comments In its filing with the Commission, the on the total or net debit or credit and the
received will be posted without change; Exchange included statements time of entry of the order.6 Paragraph
the Commission does not edit personal concerning the purpose of and basis for (a)(2) to the Rule sets forth how ECOs
identifying information from the proposed rule change and discussed are executed, including that ECOs
submissions. You should submit only any comments it received on the submitted to the System may be
information that you wish to make proposed rule change. The text of these executed without consideration of
available publicly. statements may be examined at the prices of the same complex order that
All submissions should refer to File places specified in Item IV below. The might be available on other exchanges.7
Number SR–BX–2016–061 and should Exchange has prepared summaries, set The Exchange proposes to specify that
be submitted on or before December 23, forth in sections A, B, and C below, of ECOs may be executed without regard to
2016. the most significant aspects of such prices of ‘‘either single-legged or the
statements. same complex order strategy’’ that might
For the Commission, by the Division of
Trading and Markets, pursuant to delegated A. Self-Regulatory Organization’s be available on other exchanges, which
authority.15 Statement of the Purpose of, and adds specificity and transparency to
Robert W. Errett, Statutory Basis for, the Proposed Rule Exchange rules.8 The Exchange
Deputy Secretary. Change proposes to amend Rule 6.91(a)(2) by re-
[FR Doc. 2016–28932 Filed 12–1–16; 8:45 am] 1. Purpose 4 Core Trading Hours are the regular trading hours
BILLING CODE 8011–01–P
The Exchange proposes to amend for business set forth in the rules of the primary
Rule 6.91 to clarify the priority of markets underlying those option classes listed on
the Exchange. See Rule 6.1A(a)(3).
SECURITIES AND EXCHANGE Electronic Complex Orders (‘‘ECO’’) 3 5 See proposed Rule 6.91(a) (the Exchange
COMMISSION and to modify aspects of its Complex proposes to define ‘‘leg markets’’ in reference to
Order Auction (‘‘COA’’) Process. individual quotes and orders in the Consolidated
[Release No. 34–79404; File No. SR– Rule 6.91 sets forth how the Exchange Book as used throughout the rule text). The
NYSEArca–2016–149] conducts trading of ECOs in its Complex Exchange also proposes to define ‘‘System’’ as a
shorthand reference to the term ‘‘NYSE Arca
Matching Engine (‘‘CME’’). The System’’ and replace uses of the term ‘‘NYSE Arca
Self-Regulatory Organizations; NYSE
Exchange proposes to streamline the System’’ with the term ‘‘System’’ throughout the
Arca, Inc.; Notice of Filing of a
rule text governing the execution of rule text. See, e.g., proposed Rule 6.91(preamble)
Proposed Rule Change Amending Rule and paragraph (a).
6.91NY 6 See Rule 6.91(a)(1).
asabaliauskas on DSK3SPTVN1PROD with NOTICES
3 Per Rule 6.91, ‘‘an ‘Electronic Complex Order’
7 See Rule 6.91(a)(2). The Rule also provides that
means any Complex Order as defined in Rule
November 28, 2016. ‘‘[n]o leg of a [ECO] will be executed at a price
6.62(e) that is entered into the NYSE Arca System.’’
Pursuant to Section 19(b)(1) of the Rule 6.62(e) defines Complex Order as ‘‘any order outside the NYSE Arca best bid/offer for that leg.’’
Securities Exchange Act of 1934 (the involving the simultaneous purchase and/or sale of See id.
two or more different option series in the same 8 Rule 6.91(a)(2)(i) governs the execution of ECOs
‘‘Act’’),1 and Rule 19b–4 thereunder,2
underlying security, for the same account, in a ratio at the Open. The Exchange proposes a non-
that is equal to or greater than one-to-three (.333) substantive amendment to add the term
15 17 CFR 200.30–3(a)(12). and less than or equal to three-to-one (3.00) and for ‘‘Electronic’’ so that the rule text would read,
1 15 U.S.C. 78s(b)(1). the purpose of executing a particular investment ‘‘Execution of Electronic Complex orders at the
2 17 CFR 240.19b–4. strategy.’’ Open.’’
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numbering the rule text. As described in accept incoming marketable ECO and clarity regarding the treatment of non-
more detail below, proposed Rule automatically execute it against the best- marketable—as opposed to marketable—
6.91(a)(2)(ii) would govern the priced contra-side interest resting in the ECOs, which makes the rule text easier
execution of ECOs during Core Trading Consolidated Book.12 This proposed to navigate, without altering the
when marketable on arrival and rule text makes clear that an incoming functionality described in rule.
proposed Rule 6.91(a)(2)(iii) would marketable ECO would trade against the
govern how ECOs would be ranked in best-priced contra-side interest resting Proposed Modifications to COA Process
the Consolidated Book and execute as in the Consolidated Book, which is The Exchange proposes to modify its
resting interest on the Consolidated consistent with the Exchange’s price-
description of the COA Process and the
Book. time priority model. For example, if the
Rule 6.91(a)(2)(ii) governs executions execution of COA-eligible orders, which
best-price contra-side interest is an ECO
of ECOs during Core Trading. Paragraph the Exchange believes would provide
resting on the Consolidated Book, the
(A) to Rule 6.91(a)(2)(ii) currently incoming ECO would trade with such additional specificity and transparency
provides that the CME will accept an ECO on arrival. However, if the best- to Exchange rules.15 Because of the
incoming marketable ECO and will price contra-side interest that can number of modifications that the
automatically execute the ECO giving execute with the incoming ECO in full Exchange proposes to current paragraph
first priority to ECOs in the (or in a permissible ratio) is in the leg (c), the Exchange proposes to delete
Consolidated Book, ‘‘provided, markets, the incoming ECO would trade paragraph (c) of the Rule in its entirety
however, that if individual orders or with individual quotes and orders in the and replace it with new Rule 6.91(c),
quotes residing in the Consolidated leg markets. which the Exchange believes more
Book can execute the incoming [ECO] in The proposed rule text would further clearly, accurately and logically
full (or in a permissible ratio) at the specify that if, at a price, the leg markets describes the COA Process. Proposed
same total or net debit or credit as an can execute against an incoming ECO in Rules 6.91(c)(1)–(7) would describe the
[ECO] in the Consolidated Book, the full (or in a permissible ratio), the leg COA Process.
individual orders or quotes will have markets would have first priority at that Execution of COA-Eligible Orders,
priority.’’ 9 In other words, the rule price to trade with the incoming ECO—
Initiation of COAs and RFR Responses
currently provides that, at the same to be followed by resting ECOs—in
price, the leg markets have priority over price/time pursuant to Rule 6.76A.13 Proposed Rule 6.91(c) would provide
same-priced resting ECOs. Paragraph (B) This proposed text, therefore, describes that, upon entry into the System, ECOs
to Rule 6.91(a)(2)(ii) provides that if an how an incoming marketable ECO may be immediately executed, in full (or
ECO in the CME is not marketable would be allocated if resting ECOs and in a permissible ratio), or may be subject
against another ECO ‘‘it will leg markets in the Consolidated Book to a COA as described in the Rule. This
automatically execute against individual are at the same price, i.e., the priority of rule text is based on current Rule
orders or quotes residing in the same-priced interest in the Consolidated 6.91(c), which provides that COA-
Consolidated Book, provided the [ECO] Book. eligible orders, upon entry into the
can be executed in full (or in a To distinguish the treatment of System, ‘‘may be subject to an
permissible ratio).’’ 10 In other words, if incoming marketable ECOs (that are automated request for responses
there are no better-priced ECOs in the immediately executed) from ECOs that
(‘‘RFR’’) auction.’’ 16 As discussed
Consolidated Book, an incoming ECO are not marketable (and thus routed to
below, the current rule text is silent as
would trade with the resting leg the Consolidated Book) during Core
to the factors involved in whether and
markets. Further, the current rule Trading Hours, the Exchange proposes
when an incoming COA-eligible order
provides that leg markets that execute to renumber current Rule
6.91(a)(2)(ii)(C) and (D), as proposed may trigger a COA, which would be
against an ECO, per Rule addressed in proposed Rules 6.91(c)(2)
6.91(a)(2)(ii)(A) or (B), are allocated Rule 6.91(a)(2)(iii)(A) and (B), under the
new heading ‘‘Electronic Complex and (c)(3).
pursuant to Rule 6.76A.11
The Exchange proposes to revise and Orders in the Consolidated Book.’’ The Proposed Rule 6.91(c)(1) would define
streamline the rule text governing Exchange also proposes to add language the term ‘‘COA-eligible order’’ to mean
execution of ECOs during Core Trading to Rule 6.91(a)(2)(iii)(A) to specify that an ECO that is entered in a class
Hours in a manner that the Exchange an ECO, or portion of an ECO, that is not designated by the Exchange and is:
believes would promote transparency executed on arrival would be ranked in (i) Designated by the OTP Holder as
regarding the processing of ECOs. The the Consolidated Book and that any new COA-eligible; and
proposed rule text is not intended to orders and quotes entered into the
Consolidated Book that can execute (ii) received during Core Trading
change how the Exchange currently
against an ECO would be executed Hours.17
processes ECOs during Core Trading,
which is described in the current rule, against such new orders or quotes The proposed definition is based, in
but rather to specify the order ‘‘according to paragraph (a)(2)(ii) part, on the current Rule, which
processing in a more concise and logical above.’’ 14 The Exchange believes that provides that whether an order is COA-
manner. Thus, the Exchange proposes to the proposed additional heading and re- eligible ‘‘would be determined by the
delete the current rule text in numbering of the rule text provides Exchange on a class-by-class basis’’ 18
paragraphs (a)(2)(ii)(A) and (B) to the and that the OTP Holder must provide
asabaliauskas on DSK3SPTVN1PROD with NOTICES
12 See proposed Rule 6.91(a)(2)(ii).
Rule and replace it with revised text in 13 See id.
proposed paragraph (a)(2)(ii). 14 The current rule text cross-references ‘‘(ii)
15 To the extent that the proposed streamlined
Proposed Rule 6.91(a)(2)(ii) (i.e., rule text mirrors existing language, the Exchange
above’’ but in light of the proposed addition of
cites the relevant section of both the proposed and
‘‘Core Trading Order Allocation’’) subsection (a)(2)(iii), the Exchange proposes to
existing rule.
would provide that the CME would instead cross-reference ‘‘paragraph (a)(2)(ii),’’ which 16 The Exchange describes the concept of the
would add clarity to the proposed rule. Consistent
with the proposed change to define ‘‘leg markets’’ Request for Response or ‘‘RFR’’ in connection with
9 See Rule 6.91(a)(2)(ii)(A). a COA in new paragraph (c)(3) to Rule 6.91.
in Rule 6.91(a), the Exchange proposes to replace
10 See id. 17 See proposed Rule 6.91(c)(1).
‘‘bids and offers in the leg markets’’ with ‘‘leg
11 See Rule 6.91(a)(2)(ii)(A) and (B). markets’’ in proposed Rule 6.91(a)(2)(iii)(A). 18 See Rule 6.91(c)(1).
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(C) would provide additional specificity current Rule 6.91(c)(7).24 The proposed it does not address opposite-side COA-
regarding RFR Responses. text of Rule 6.91(c)(5)(C) stating that eligible orders, proposed paragraph (A)
• Proposed Rule 6.91(c)(5)(A) would RFR Responses would not be ranked or of Rule 6.91(c)(6) would be new rule
provide that RFR Responses are ECOs displayed in the Consolidated Book is text. The Exchange notes that the impact
that have a time-in-force contingency for based on the last sentence of current of an incoming COA-eligible order
the duration of the COA (i.e., are Rule 6.91(c)(7) without any changes. mirrors that of an incoming ECO in the
designated as ‘‘GTX’’), must specify the The Exchange believes that the scenarios covered in proposed Rules
price, size, and side of the market, and proposed Rules 6.91(c)(5)(A)–(C), which (c)(6)(A)(i)–(iii) (discussed below),
may be submitted in $0.01 increments. reorganizes information from existing which adds internal consistency and
This rule text is based in part on the first rule text and add language to describe specificity to Exchange rules.26
sentence of Rule 6.91(c)(4), which the requisite characteristics and • Proposed Rule 6.91(c)(6)(A)(i)
provides that RFR Responses may be behavior of an RFR Response, adds would provide that incoming ECOs or
submitted in $.01 increments. Proposed clarity and transparency to Exchange COA-eligible orders that lock or cross
Rule 6.91(c)(5)(A) is also based in part rules, including that, like all orders, an the initial Complex BBO would cause
on the second to last sentence of current RFR Response may be modified or the COA to end early. The concept of
Rule 6.91(c)(7), which provides that cancelled prior to the end of the RTI. the initial Complex BBO as a benchmark
RFR Responses expire at the end of the The Exchange believes that specifying against which incoming opposite-side
RTI, which is the same in substance as that RFR Reponses are GTX (i.e., good interest would be measured is new rule
saying that an RFR Response has a time- for the duration of the COA) and may text, but is consistent with current
in-force condition of GTX for the COA. trade with interest received during the functionality. As noted above (see supra
The Exchange believes its proposed rule COA before expiring would encourage note 21), the initial Complex BBO is the
text is more accurate because it states participation in the COA and would BBO for a given complex order strategy
that RFR Responses are valid for the as derived from the Best Bid (‘‘BB’’) and
maximize the number of contracts
duration of the COA, as opposed to the Best Offer (‘‘BO’’) for each individual
traded.
RTI, the latter being the period during component series of a Complex Order as
which COA interest (including RFR Impact of ECOs, COA-Eligible Orders recorded at the start of the RTI.
Responses and incoming ECOs) is and Updated Leg Markets on COA in Proposed Rule 6.91(c)(6)(A)(i) would
received and the former being the Progress further provide that if such incoming
overall COA Process that allocates COA- ECO or COA-eligible order is also
eligible orders with the best-priced Proposed Rule 6.91(c)(6) would executable against the limit price of the
auction interest, including RFR govern the impact of ECOs, COA- initiating COA-eligible order, it would
Responses. eligible orders, and updates to the leg be ranked with RFR Responses to
• Proposed Rule 6.91(c)(5)(B) would markets that arrived during an RTI of a execute with the initiating COA-eligible
provide that RFR Responses must be on COA. This proposed rule text would order. The Exchange believes that
the opposite side of the COA-eligible replace current Rule 6.91(c)(8), as addressing this scenario would better
order and any RFR Responses on the described in greater detail below. The enable market participants to
same side of the COA-eligible order Exchange believes that, because understand how their ECOs, including
would be rejected. This proposed rule proposed Rule 6.91(c)(6) would COA-eligible orders, may be treated, and
text is based on the last sentence of establish what happens to a COA (i.e., the proposed change therefore is
current Rule 6.91(c)(4), which provides whether it will end early) before the designed to add clarity and
that RFR Responses must be on the COA-eligible order is allocated, it would transparency to Exchange rules.
opposite side of the COA-eligible order be more logical to describe these • The proposed rule text relating to
and any same-side RFR responses processes before the rule describes how how an incoming opposite-side ECO or
would be rejected by the Exchange, COA-eligible orders are allocated, which COA-eligible order would be processed
without any substantive changes. would be set forth in proposed Rule is based on current Rule 6.91(c)(8)(A),
• Proposed Rule 6.91(c)(5)(C) would 6.91(c)(7). To streamline the rule and which provides that incoming ECOs
provide that RFR Responses may be make the rule text more logical, the received during the RTI ‘‘that are on the
modified or cancelled during the RTI, Exchange proposes to add headings (see opposite side of the market and
would not be ranked or displayed in the proposed Rule 6.91(c)(6)(A)–(C)) to marketable against the limit price of the
Consolidated Book, and would expire at make clear which type of incoming initiating COA-eligible order will be
the end of the COA. The proposed text interest is covered. ranked and executed in price time with
stating that RFR Responses may be Proposed Rule 6.91(c)(6)(A) would RFR Responses.’’ 27 The proposed rule
modified or cancelled during the RTI is describe the impact of incoming ECOs text would also include opposite-side
new rule text based in part on current or COA-eligible orders on the opposite- COA-eligible orders and would not
Rule 6.91(c)(7), which provides that side of the market as the initiating COA- include any reference to Customer and
RFR Responses can be modified but may eligible order. The current rule non-Customer ‘‘account type,’’ which,
not be withdrawn at any time prior to addresses the impact of opposite-side, as discussed below, is unnecessary.28
the end of the RTI. The Exchange incoming ECOs on a COA,25 but because The proposed rule text also does not
believes it is consistent with the current include reference to ‘‘price time,’’ as the
rule that states that an RFR Response 24 Rule 6.91(c)(7) sets forth the Firm Quote
COA-eligible order would interact with
may be modified to explicitly provide Requirements for COA-eligible orders.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
25 See Rule 6.91(c)(8)(A) (providing that
that an RFR Response may be cancelled, Consolidated Book and ranked as described in (a)(1)
‘‘[i]ncoming Electronic Complex orders received
which is current functionality, and during the Response Time Interval that are on the above’’).
proposes to amend the rule to reflect opposite side of the market and marketable against
26 The differential treatment of the balance of the
that RFR Responses may also be the limit price of the initiating COA-eligible order incoming order, depending on whether it is an ECO
will be ranked and executed in price time with RFR or a COA-eligible order is covered in proposed rules
cancelled. The proposed text stating that Rule 6.91(c)(6)(A)(iv) and (v), respectively.
Responses by account type (as described in (6)
RFR Responses expire at the end of the above). Any remaining balance of either the 27 See Rule 6.91(c)(8)(A), supra note 26.
COA make clear when RFR Responses initiating COA-eligible order or the incoming 28 See proposed Rule 6.91(c)(6)(A)(i). See also
are ‘‘firm’’ and thus obviate the need for Electronic Complex order will be placed in the discussion of ‘‘COA Order Allocation’’ below.
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the best-priced contra-side interest subsequent COA(s) in price-time to the incoming order(s), with potential
received during the RTI, per proposed priority. Because the treatment of price improvement, as these orders may
paragraph (c)(7) of this Rule.29 opposite-side COA-eligible orders is not trade with interest received in the
• Proposed Rule 6.91(c)(6)(A)(ii) described in the current rule, this would (initiating) COA; and, for the incoming
would provide that incoming ECOs or be new rule text. Unlike the treatment COA-eligible order, the potential for
COA-eligible orders that are executable of incoming opposite-side ECOs—where additional price improvement in a
against the limit price of the initiating any remaining balance of the ECOs subsequent COA.
COA-eligible order, but do not lock or would be subject to Core Trading Proposed Rule 6.91(c)(6)(B) would
cross the initial Complex BBO, would Allocation or would be posted to the describe the impact of incoming ECOs
not cause the COA to end early and Consolidated Book after trading with the or COA-eligible orders on the same side
would be ranked with RFR Responses to initiating COA-eligible order—any of the market as the initiating COA-
execute with the initiating COA-eligible balance of the incoming contra-side eligible order on a COA. The current
order. This proposed paragraph COA-eligible order that does not trade rule addresses the impact of same-side,
specifies that the COA would continue with the initiating COA-eligible order incoming COA-eligible orders on a
uninterrupted by such incoming orders would initiate a new COA. COA,31 but because it does not address
because such interest does not trigger The Exchange believes that proposed same-side ECOs, this aspect of the
priority concerns (because the incoming Rule 6.91(c)(6)(A)(i)–(v) would provide proposed rule would be new. The
order isn’t priced better than the leg additional specificity regarding the impact of an incoming ECO mirrors that
markets at the start of the COA), but is impact of opposite-side ECOs or COA- of an incoming COA-eligible order in
eligible to participate in the COA. This eligible orders on the COA Process, the scenarios covered in proposed Rule
proposed text would be new rule text, which adds transparency to Exchange (c)(6)(B)(i)–(iv) (discussed below),
which reflects current functionality that rules. Specifically, the Exchange which adds internal consistency and
is based on the principles set forth in believes that providing for a COA to specificity to Exchange rules.32
Rule 6.91(c)(8)(A). terminate early when an incoming order
• Proposed Rule 6.91(c)(6)(A)(iii) • Proposed Rule 6.91(c)(6)(B)(i)
locks or crosses the initial Complex
would provide that incoming ECOs or would provide that incoming ECOs or
BBO, as proposed, would allow an
COA-eligible orders that are either not COA-eligible orders that are priced
initiating COA-eligible order to execute
executable on arrival against the limit better than the initiating COA-eligible
(ahead of the incoming order) against
price of the initiating COA-eligible order any RFR Responses or ECOs received order would cause the COA to end.33
or do not lock or cross the initial during the RTI up until that point, while This proposed rule text is based in part
Complex BBO would not cause the COA preserving the priority of the incoming on current Rule 6.91(c)(8)(D), which
to end early. Per this proposed order to trade with the resting leg provides that better-priced incoming
paragraph, the COA would proceed markets. The Exchange believes that COA-eligible orders that arrive during
uninterrupted as the incoming interest early conclusion of the COA would the RTI will cause a COA to end.34
does not trigger priority concerns (i.e., avoid disturbing priority in the • Proposed Rule 6.91(c)(6)(B)(ii)
does not lock or cross the initial Consolidated Book and would allow the would provide that an incoming ECO or
Complex BBO) nor can the interest Exchange to appropriately handle COA-eligible order that is priced equal
participate in the COA (i.e., because it incoming orders. The proposed rule text to or worse than the initiating COA-
is not executable against the initiating is consistent with the processing of eligible order,35 and also locks or
COA-eligible order). This would be new ECOs during Core Trading and ensures crosses the contra-side initial Complex
rule text, which reflects current that the leg markets respect the COA as BBO, would cause the COA to end early.
functionality. well as principles of price/time The proposed rule is based in part on
• Proposed Rule 6.91(c)(6)(A)(iv) priority.30 Moreover, the Exchange current Rules 6.91(c)(8)(B) and (C),
would provide that any incoming believes that the proposed impact of which describe how the Exchange
ECO(s), or the balance thereof, that was incoming COA-eligible orders aligns processes COA-eligible orders that are
not executed with the initiating COA- with the treatment of incoming ECOs, received during a COA that are on the
eligible order or was not executable on which adds internal consistency to same side of the market of the initiating
arrival would trade pursuant to Exchange rules, and affords additional COA and priced equal to or worse than
proposed paragraph (a)(2)(ii) of this opportunities for price improvement to
Rule (i.e., Core Trading Allocation). the initiating COA-eligible order, which 31 See Rule 6.91(c)(8)(B)–(C) (addressing the
This proposed rule text is based on the may trade with the opposite-side impact of same-side incoming COA-eligible orders
last sentence of current Rule on a COA).
order(s). 32 The Exchange notes that the differential
6.91(c)(8)(A), regarding ECOs, but The Exchange proposes to process any treatment of the balance of the incoming order,
provides additional detail regarding the remaining balance of such orders depending on whether it is an ECO or a COA-
ability for any balance on the incoming differently from any balance of the eligible order is covered in proposed rules Rule
ECO to trade with the best-priced, 6.91(c)(6)(B)(v) and (vi), respectively.
incoming ECO because an ECO would 33 An incoming ECO or COA-eligible order priced
resting contra-side interest before (or either execute against resting interest or ‘‘better than’’ the COA-eligible order means it is
instead of) being ranked in the be ranked with ECOs in the Consolidate priced higher (lower) than the initiating COA-
Consolidated Book, which is consistent Book, whereas any balance of an eligible order to buy (sell). See proposed Rule
with the Exchange’s processing of incoming COA-eligible order would 6.91(c)(6)(B)(ii).
34 See Rule 6.91(c)(8)(D) (providing, in part, that
asabaliauskas on DSK3SPTVN1PROD with NOTICES
incoming ECOs. initiate a new COA, affording that order ‘‘[i]ncoming COA-eligible orders received during
• Proposed Rule 6.91(c)(6)(A)(v) additional opportunities for price the Response Time Interval for the original COA-
would provide that any incoming COA- improvement. The Exchange believes eligible order that are on the same side of the
eligible order(s), or the balance thereof, that this proposed rule text, which is market and that are priced better than the initiating
that was not executed with the initiating order will cause the auction to end’’).
consistent with current functionality, 35 An incoming ECO or COA-eligible order priced
COA-eligible order or was not maximizes the execution opportunities ‘‘worse than’’ the COA-eligible order means it is
executable on arrival would initiate priced lower (higher) than the initiating COA-
30 See proposed Rule 6.91(a)(2)(ii) (leg markets eligible order to buy (sell). See proposed Rule
29 See proposed Rule 6.91(c)(7). have priority at a price). 6.91(c)(6)(B)(ii).
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the initiating COA.36 However, the against any RFR Responses and/or ECOs principles of price/time priority.41 In
current rule does not specify that a COA that did not trade with the initiating addition, the proposed rule would also
would terminate early when an COA-eligible order. This proposed provide greater specificity that the
incoming ECO locks or crosses the paragraph reflects current functionality incoming COA-eligible order or ECO
contra-side initial Complex BBO, and is based on current Rule would, if executable, trade against any
therefore this would be new rule text. 6.91(c)(8)(D) inasmuch as it addresses remaining RFR Responses and/or ECOs
• Proposed Rule 6.91(c)(6)(B)(iii) incoming same-side COA-eligible orders received during the RTI, which allows
would provide that incoming ECOs or that cause the COA to end early. the incoming orders opportunities for
COA-eligible orders that are priced • Proposed Rule 6.91(c)(6)(B)(v) price improvement. The proposed rule
equal to or worse than the initiating would provide that any remaining would also make clear that any
COA-eligible order,37 but do not lock or balance of incoming ECOs that do not remaining balance of the incoming
cross the contra-side Complex BBO, trade against any remaining RFR COA-eligible order would then initiate a
would not cause the COA to end early. Responses or ECOs received during the new COA. The Exchange believes that
Proposed Rule 6.91(c)(6)(B)(i) is based RTI would trade pursuant to Core these proposed changes maximize the
on current Rules 6.91(c)(8)(B) and (C), Trading Allocation, pursuant to execution opportunities to the incoming
which describe how the Exchange paragraph (a)(2)(ii) of this Rule. This order(s), with potential price
processes COA-eligible orders that are proposed rule text is consistent with the improvement, as these orders may trade
received during a COA that are on the treatment of the balance of incoming with interest received in the (original)
same side of the market of the initiating same-side ECOs set forth in current Rule COA; and, for the incoming COA-
COA-eligible order and priced equal to 6.91(8)(A)–(C), with the added detail eligible order, the potential for
or worse than the initiating COA- that the ECO would first be subject to additional price improvement in a
eligible order. However, the current rule Core Trading Allocation pursuant to subsequent COA.
does not address whether the incoming proposed Rule 6.91(a)(2)(ii) before being Proposed Rule 6.91(c)(6)(C): would
orders lock or cross the contra-side ranked in the Consolidated Book. describe the impact of new individual
initial Complex BBO. The Exchange • Proposed Rule 6.91(c)(6)(B)(vi) quotes or orders (i.e., updates to the leg
believes that this additional detail would provide that the remaining markets) during the RTI on the same or
promotes internal consistency regarding balance of any incoming COA-eligible opposite side of the COA-eligible order.
how the COA process and how it order(s) that does not trade against any In each event described below,
intersects with the price/time priority of remaining RFR Responses or ECOs regardless of whether the COA ends
the initial Complex BBO. received during the RTI would initiate early, the COA-eligible order would
• The Exchange notes that current new COA(s) in price-time priority. This execute pursuant to proposed Rule
Rules 6.91(c)(8)(B) and (C) state that an proposed rule text is based in part on 6.91(c)(7) (described below); and,
incoming same-side COA-eligible order current Rule 6.91(c)(8)(D), which consistent with Core Trading
(priced equal to or worse than the provides that any unexecuted portion of Allocation, the updated leg markets
initiating order) joins a COA in progress the incoming COA-eligible would would execute pursuant to proposed
and is executed in price/time with the initiate a new COA.40 paragraph (a)(2)(ii) of this Rule.42
COA-eligible order, with any balance The Exchange believes that proposed • Proposed Rule 6.91(c)(6)(C)(i)
placed in the Consolidated Book Rules 6.91(c)(6)(B)(i)–(vi) would provide would provide that updates to the leg
pursuant to (a)(1).38 The proposed rule greater specificity regarding the impact markets that would cause the same-side
text would clarify how such incoming of arriving same-side COA-eligible Complex BBO to lock or cross any RFR
COA-eligible orders would be orders and ECOs on a COA, which adds Response(s) and/or ECO(s) would cause
processed. Specifically, the Exchange internal consistency, clarity and the COA to end early. The Exchange
proposes to clarify how such incoming transparency to Exchange rules. believes that providing for a COA to
COA-eligible orders (as well as ECOs) Specifically, the Exchange believes that terminate early when the leg markets
would be processed, including any providing for a COA to terminate early update in this manner would allow a
remaining balance thereof, in proposed under the circumstances specified in COA-eligible order to execute against
paragraphs (c)(6)(iv)–(vi) of the Rule, proposed Rules 6.91(c)(6)(B)(i) and (ii) any RFR Responses or ECOs received
discussed below.39 would allow a COA-eligible order to during the RTI up until that point, while
• Proposed Rule 6.91(c)(6)(B)(iv) execute (ahead of the incoming order) preserving the priority of the updated
would provide that any incoming ECO against any RFR Responses or ECOs leg markets.
or COA-eligible order that caused a COA received during the RTI up until that • Proposed Rule 6.91(c)(6)(C)(ii)
to end early, if executable, would trade point, while preserving the priority of would provide that updates to the leg
the incoming order to trade with the markets that would cause the same-side
36 See Rule 6.91(c)(8)(B)–(C), supra note 32. resting leg markets. The Exchange Complex BBO to be priced better than
37 An incoming ECO or COA-eligible order priced believes that early conclusion in this the COA-eligible order,43 but do not
‘‘worse than’’ the COA-eligible order means it is circumstance would ensure that the lock or cross any RFR Responses and/
priced lower (higher) than the initiating COA- COA interacts seamlessly with the
eligible order to buy (sell). See proposed Rule or ECOs received would not cause the
6.91(c)(6)(B)(iii). Consolidated Book so as not to disturb COA to end early.
38 See Rule 6.91(c)(8)(B) and (C) (providing, in the priority of orders on the Book. • Proposed Rule 6.91(c)(6)(C)(iii)
part, that ‘‘[i]ncoming COA-eligible orders received The proposed rule text is consistent would provide that updates to the leg
during the [RTI] for the original COA-eligible order with the processing of ECOs during Core
asabaliauskas on DSK3SPTVN1PROD with NOTICES
that are on the same side of the market, that are
markets that would cause the contra-
priced [equal to or worse] than the initiating order,
Trading and ensures that the COA
will join the COA’’). respects the leg markets as well as 41 See proposed Rule 6.91(a)(2)(ii) (leg markets
39 See, e.g., proposed Rule 6.91(c)(6)(B)(iv),(vi) have priority at a price).
42 See proposed Rule 6.91(c)(6)(C).
(providing that, rather than joining the COA, these 40 See Rule 6.91(c)(8)(D) (providing, in part, that
incoming COA-eligible orders may trade with RFR ‘‘[t]he COA-eligible order that caused the auction to 43 Individual orders and quotes cause the same-
Responses or ECOs that don’t execute in the COA end will ‘‘if marketable, initiate another COA’’). See side Complex BBO to be ‘‘better’’ than the COA-
and, if any balance remains still, would initiate a supra note 35 (noting inaccuracy in current rule, eligible order if they cause the Complex BBO to be
new COA—but would not execute during the COA which provides that incoming COA-eligible orders higher (lower) than the COA-eligible order to buy
in progress as the current rule suggests). would execute during the COA in progress). (sell). See proposed Rule 6.91(c)(6)(C)(i).
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![87100 Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices
side Complex BBO to lock or cross the COA Order Allocation would be executed against contra-side
same-side initial Complex BBO would Current Rules 6.91(c)(6)(A)–(D) set interest as provided for in proposed
cause the COA to end early. forth how a COA-eligible order executes Rules 6.91(c)(7)(A) and (B), and any
• Proposed Rule 6.91(c)(6)(C)(iv) against same-priced contra-side interest unexecuted portion of the COA-eligible
would provide that updates to the leg (i.e., at the same net price) after order would be ranked in the
executing against any better-priced Consolidated Book pursuant to
markets that would cause the contra-
contra-side interest. However, the proposed Rule 6.91(a)(1).
side Complex BB (BO) to improve (i.e., • Proposed Rule 6.91(c)(7)(A) would
become higher (lower)), but not lock or current rule text does not reflect priority
and order allocation, including that provide that RFR Responses and ECO
cross the same-side initial Complex priced better than 51 the initial Complex
BBO, would not cause the COA to end current paragraphs (c)(6)(B) and (C) refer
to affording priority to Customer ECOs BBO would be eligible to trade first with
early. the COA-eligible order, beginning with
which is not consistent with the
The believes that proposed Rule Exchange’s price/time priority model. the highest (lowest), at each price point,
6.91(c)(6)(C)(i)–(iv) respect the COA In short, current Rule 6.91(c)(6) on a Size Pro Rata basis as defined in
process, while at the same time ensuring provides that COA-eligible orders will Rule 6.75(f)(6). This proposed rule text
a fair and orderly market by maintaining be executed against the best priced is based in part on current Rule
the priority of quotes and orders on the contra-side interest. The rule further 6.91(c)(6), which provides that COA-
Consolidated Book as they update. The provides that at the same net price, the eligible orders would be executed
proposed rule is based in part on Rule order will be allocated as provided for against the best priced contra side
6.91(c)(9)(A) 44 and (B),45 which address in Rules 6.91(c)(6)(A)–(D). Current Rule interest (which in this case, would be
the impact of updates to the leg markets 6.91(c)(6)(A) provides that individual ECOs and RFR Responses) and current
on a COA. However, the current rule orders and quotes in the leg markets Rule 6.91(c)(6)(C), which provides that
text does not specify on which side of resting in the Consolidated Book prior ECOs and RFR Responses are allocated
the market the leg markets have to the initiation of a COA have first on a Size Pro Rata basis. The Exchange
updated. The Exchange proposes to priority to trade against a COA-eligible believes this proposed change
include this detail in the new rule text order, provided the COA-eligible order streamlines how the allocation process
for additional clarity and transparency. can be executed in full (or in a works, and clarifies that if ECOs and
permissible ratio), on a price/time basis RFR Responses are the best-priced
In addition, the current rule text uses
pursuant to Rule 6.76A.47 Current Rules interest, they would trade with the
the term ‘‘derived Complex BBO,’’
6.91(c)(6)(B) and (C) provide that incoming COA-eligible order on a Size
which is not a defined term. In the
Customer ECOs resting in the Pro Rata basis.
proposed rule, the Exchange proposes to • Proposed Rule 6.91(c)(7)(B)
use the term Complex BBO, which is a Consolidated Book before, or that are
received during, the RTI, and Customer provides that after COA allocations
defined term.46 The Exchange further pursuant to paragraph (c)(7)(A) of this
believes this proposed rule text RFR Responses shall, collectively have
second priority to trade against a COA- Rule, the COA-eligible order would
promotes transparency and clarity to trade with the best-priced contra-side
Exchange rules. eligible order followed by resting non-
Customer ECOs, those received during interest pursuant to paragraph (a)(2)(ii)
the RTI, and non-Customer RFR above. In other words, once the COA-
44 See Rule 6.91(c)(9)(A) (providing that
Responses, which would have third eligible order has traded with any ECOs
‘‘[i]ndividual orders and quotes that are entered or RFR Responses priced better than the
into the leg markets that cause the derived Complex priority.48 Pursuant to the current Rule,
Best Bid/Offer to be better than the COA-eligible the allocation of a COA-eligible order initial Complex BBO (i.e., any price-
order and to cross the best priced RFR Response against these Customer and non- improving interest to arrive during the
will cause the auction to terminate, and individual
Customer ECOs and RFR Responses RTI), the initiating COA-eligible order
orders and quotes in the leg markets will be would follow regular allocation rules for
allocated pursuant to (a)(2)(i) above and matched shall be on a Size Pro Rata basis as
against Electronic Complex Orders and RFR defined in Rule 6.75(f)(6).49 Finally, an incoming marketable ECO. This rule
Responses in price time priority pursuant to (6) current Rule 6.91(c)(6)(D) provides that text is based in part on current Rule
above. The initiating COA-eligible order will be
individual orders and quotes in the leg 6.91(c)(6)(A), which provides that if the
matched and executed against any remaining COA-eligible order can be executed in
unexecuted Electronic Complex Orders and RFR markets that cause the derived Complex
Responses pursuant to (6) above’’). The Exchange BBO to be improved during the COA full (or a permissible ratio) by the orders
also notes that proposed Rule 6.91(c)(6)(C)(i) and match the best RFR Response and/ and quotes in the Consolidated Book,
clarifies that the Complex BBO in question is the
or ECOs received during the RTI will be they will be allocated pursuant to Rule
same-side Complex BBO, as the current rule text is 6.76A. Because this allocation is
silent in this regard, which adds clarity and filled after ECOs and RFR Responses at
the same net price pursuant to Rule identical to how a regular marketable
transparency to Exchange rules.
45 See Rule 6.91(c)(9)(B) (providing that 6.76A.50 ECO would be allocated, the Exchange
‘‘[i]ndividual orders and quotes that are entered The Exchange proposes to clarify and believes it would streamline the rule
into the leg markets that cause the derived Complex update the rule text describing the and provide greater transparency to
Best Bid/Offer to cross the price of the COA-eligible provide a cross reference to proposed
order will cause the auction to terminate, and priority and allocation of COA-eligible
individual orders and quotes in the leg markets will orders during the COA process in Rule 6.91(a)(2)(ii) instead of Rule 6.76.
be allocated pursuant to (a)(2)(i) above and matched proposed Rule 6.91(c)(7), under the 2. Statutory Basis
against Electronic Complex Orders and RFR heading ‘‘Allocation of COA-Eligible
Responses in price time priority pursuant to (6) The Exchange believes that its
asabaliauskas on DSK3SPTVN1PROD with NOTICES
above.’’). The Exchange also notes that proposed Orders,’’ which would replace current
proposal is consistent with Section
paragraph (c)(6)(C)(ii) clarifies that the Complex paragraph (c)(6) in its entirety. Proposed
6(b)(5) of the Securities Exchange Act of
BBO in question is the contra-side Complex BBO, Rule 6.91(c)(7) would provide that at the
as the current rule text is silent in this regard, 1934 (the ‘‘Act’’),52 which requires the
end of the RTI, a COA-eligible order
which adds clarity and transparency to Exchange
rules. 51 To qualify as ‘‘better than,’’ RFR Responses and
47 See Rule 6.91(c)(6)(A).
46 See supra 21. The Exchange notes that the ECOs to buy (sell) would need to be priced higher
48 See Rule 6.91(c)(6)(B) and (C).
word ‘‘derived’’ is no longer needed as it is (lower) than the initial Complex BBO. See proposed
49 See id. Rule 6.91(c)(7)(A).
encompassed in the definition of Complex BBO.
See id. 50 See Rule 6.91(c)(6)(D). 52 15 U.S.C. 78f(b).
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![87102 Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices
internally consistent, which enhances C. Self-Regulatory Organization’s public in accordance with the
the overall comprehensibility to Statement on Comments on the provisions of 5 U.S.C. 552, will be
investors without altering the operation Proposed Rule Change Received From available for Web site viewing and
of the rule. For example, the Exchange Members, Participants, or Others printing in the Commission’s Public
believes that the revised rule text No written comments were solicited Reference Room, 100 F Street NE.,
governing the execution of COA-Eligible or received with respect to the proposed Washington, DC 20549 on official
orders provides clarity regarding the rule change. business days between the hours of
circumstances under which the leg 10:00 a.m. and 3:00 p.m. Copies of the
markets would have first priority to III. Date of Effectiveness of the filing also will be available for
Proposed Rule Change and Timing for inspection and copying at the principal
execute against an incoming COA-
Commission Action office of the Exchange. All comments
eligible or ECO. The Exchange also
believes that the proposed changes Within 45 days of the date of received will be posted without change;
publication of this notice in the Federal the Commission does not edit personal
would conform to the Exchange’s price/
Register or within such longer period identifying information from
time priority model and reduce the
up to 90 days (i) as the Commission may submissions. You should submit only
potential for investor confusion. information that you wish to make
designate if it finds such longer period
Non-Substantive Changes to be appropriate and publishes its available publicly. All submissions
reasons for so finding or (ii) as to which should refer to File Number SR–
The Exchange believes that the the Exchange consents, the Commission NYSEArca–2016–149 and should be
proposed non-substantive, technical will: submitted on or before December 23,
changes, including updated cross A. By order approve or disapprove 2016.
references that conform rule text to such proposed rule change, or For the Commission, by the Division of
proposed changes, promotes just and B. institute proceedings to determine Trading and Markets, pursuant to delegated
equitable principles of trade, fosters whether the proposed rule change authority.53
cooperation and coordination among should be disapproved. Robert W. Errett,
persons engaged in facilitating securities Deputy Secretary.
transactions, and removes impediments IV. Solicitation of Comments
[FR Doc. 2016–28927 Filed 12–1–16; 8:45 am]
to and perfects the mechanism of a free Interested persons are invited to BILLING CODE 8011–01–P
and open market by ensuring that submit written data, views, and
members, regulators and the public can arguments concerning the foregoing,
more easily navigate the Exchange’s including whether the proposed rule SECURITIES AND EXCHANGE
rulebook and better understand the change is consistent with the Act. COMMISSION
defined terms used by the Exchange. Comments may be submitted by any of
the following methods: [Release No. 34–79406; File No. SR–CBOE–
B. Self-Regulatory Organization’s 2016–080]
Statement on Burden on Competition Electronic Comments
• Use the Commission’s Internet Self-Regulatory Organizations;
The Exchange does not believe that comment form (http://www.sec.gov/ Chicago Board Options Exchange,
the proposed rule change will impose rules/sro.shtml); or Incorporated; Notice of Filing of a
any burden on competition that is not • Send an email to rule-comments@ Proposed Rule Change To Amend Rule
necessary or appropriate in furtherance sec.gov. Please include File Number SR– 6.53C
of the purposes of the Act. To the NYSEArca–2016–149 on the subject November 28, 2016.
contrary, the Exchange believes that the line. Pursuant to Section 19(b)(1) of the
proposed changes would encourage Securities Exchange Act of 1934 (the
increased submission of ECOs, as well Paper Comments
‘‘Act’’),1 and Rule 19b–4 thereunder,2
as increased participation in COAs, • Send paper comments in triplicate notice is hereby given that on November
which will add liquidity to the to Secretary, Securities and Exchange 17, 2016, Chicago Board Options
Exchange to the benefit all market Commission, 100 F Street NE., Exchange, Incorporated (the ‘‘Exchange’’
participants and is therefore pro- Washington, DC 20549–1090. or ‘‘CBOE’’) filed with the Securities
competitive. The proposal does not All submissions should refer to File and Exchange Commission (the
impose an intra-market burden on Number SR–NYSEArca–2016–149. This ‘‘Commission’’) the proposed rule
competition, because these changes file number should be included on the change as described in Items I, II, and
make the rule clearer and more subject line if email is used. To help the III below, which Items have been
complete for all participants. Nor does Commission process and review your prepared by the Exchange. The
the proposal impose a burden on comments more efficiently, please use Commission is publishing this notice to
competition among the options only one method. The Commission will solicit comments on the proposed rule
exchanges, because of the vigorous post all comments on the Commission’s change from interested persons.
competition for order flow among the Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s
options exchanges. To the extent that Statement of the Terms of Substance of
submission, all subsequent
asabaliauskas on DSK3SPTVN1PROD with NOTICES
market participants disagree with the the Proposed Rule Change
amendments, all written statements
particular approach taken by the
with respect to the proposed rule The Exchange seeks to amend Rule
Exchange herein, market participants
change that are filed with the 6.53C. The text of the proposed rule
can easily and readily direct complex Commission, and all written change is provided below.
order flow to competing venues. communications relating to the
proposed rule change between the 53 17 CFR 200.30–3(a)(12).
Commission and any person, other than 1 15 U.S.C. 78s(b)(1).
those that may be withheld from the 2 17 CFR 240.19b–4.
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Document Created: 2018-02-14 09:01:51
Document Modified: 2018-02-14 09:01:51
| 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 87094 |
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