81 FR 93723 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending Its Program That Allows Transactions To Take Place at a Price That Is Below $1 Per Option Contract Until July 5, 2017

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 245 (December 21, 2016)

Page Range		93723-93725
FR Document		2016-30688
Federal Register, Volume 81 Issue 245 (Wednesday, December 21, 2016)
[Federal Register Volume 81, Number 245 (Wednesday, December 21, 2016)]
[Notices]
[Pages 93723-93725]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-30688]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79565; File No. SR-NYSEARCA-2016-163]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Extending Its 
Program That Allows Transactions To Take Place at a Price That Is Below 
$1 Per Option Contract Until July 5, 2017

December 15, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 93724]]

notice is hereby given that, on December 7, 2016, NYSE Arca, Inc. (the 
``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract until July 5, 2017. The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to extend the Pilot Program \4\ under 
Rule 6.80 to allow accommodation transactions (``Cabinet Trades'') to 
take place at a price that is below $1 per option contract for one 
additional year [sic]. The Exchange proposes to extend the program, 
which is due to expire on January 5, 2017 until July 5, 2017. The 
proposed extension of the Pilot Program will provide the Exchange 
additional time to submit a separate proposed rule change under Section 
19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'') to make 
the program permanent (``Permanent Filing''). In support of making the 
Pilot Program permanent, the Exchange represents that, in the Permanent 
Filing, it would provide statistics related to Cabinet Trades that were 
executed in calendar year 2016 and describe the manner in which Cabinet 
Trades are cleared and processed.
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    \4\ See Securities Exchange Act Release No. 63476 (December 8, 
2010), 75 FR 77930 (December 14, 2010) (SR-NYSE Arca-2010-109).
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    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with 
Exchange Rules, except as provided in Exchange Rule 6.80, Accommodation 
Transactions (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades. Rule 6.80 currently provides for cabinet 
transactions to occur via open outcry at a cabinet price of a $1 per 
option contract in any options series open for trading on the Exchange, 
except that the Rule is not applicable to trading in option classes 
participating in the Penny Pilot Program. Under the procedures, bids 
and offers (whether opening or closing a position) at a price of $1 per 
option contract may be represented in the trading crowd by a Floor 
Broker or by a Market Maker or provided in response to a request by a 
Trading Official, a Floor Broker or a Market Maker, but must yield 
priority to all resting orders in the Cabinet (those orders held by the 
Trading Official, and which resting cabinet orders may be closing 
only). Provided that both the buyer and the seller yield to orders 
resting in the cabinet book, opening cabinet bids can trade with 
opening cabinet offers at $1 per option contract.
    The Exchange has temporarily amended the procedures through January 
5, 2017 to allow transactions to take place in open outcry at a price 
of at least $0 but less than $1 per option contract. These lower-priced 
transactions are permitted to be traded pursuant to the same procedures 
applicable to $1 cabinet trades, except that (i) bids and offers for 
opening transactions are only permitted to accommodate closing 
transactions in order to limit use of the procedure to liquidations of 
existing positions, and (ii) the procedures are also made available for 
trading in option classes participating in the Penny Pilot Program.\5\ 
The Exchange believes that allowing a price of at least $0 but less 
than $1 better accommodates the closing of options positions in series 
that are worthless or not actively traded, particularly in the event 
where there has been a significant movement in the price of the 
underlying security that results in a large number of series being out-
of-the-money. For example, a market participant might have a long 
position in a put series with a strike price of $30 and the underlying 
stock might be trading at $100. In such an instance, there might not 
otherwise be a market for that person to close-out the position even at 
the $1 cabinet price (e.g., the series might be quoted no bid).
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    \5\ Currently, the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
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    As with other accommodation liquidations under Rule 6.80, 
transactions that occur for less than $1 will not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 6.80, the transactions will be 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 6.67 Order Format and System Entry 
Requirements. However, the Exchange will maintain quotation, order and 
transaction information for the transactions in the same format as the 
COATS data is maintained. In this regard, all transactions for less 
than $1 must be reported to the Exchange following the close of each 
business day.
2. Statutory Basis
    The Exchange believes that this proposed rule change is consistent 
with Section 6(b) of the Act, \6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \7\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, 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. The Exchange believes that allowing for liquidations at a 
price less than $1 per option contract will better facilitate the 
closing of options positions that are worthless or not actively 
trading, especially in Penny Pilot issues where Cabinet Trades are not 
otherwise permitted.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose

[[Page 93725]]

any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is to 
extend an established pilot program for an additional six months and 
continue to facilitate OTP Holders ability to close positions in 
worthless or not actively traded series.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\11\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the Pilot 
Program may continue without interruption. The Commission believes that 
the proposed rule change is consistent with the protection of investors 
and the public interest because it will allow the pilot to continue 
uninterrupted, thereby avoiding any potential investor confusion that 
could result from a temporary interruption in the pilot and allowing 
members to continue to benefit from the Pilot Program. Based on the 
foregoing, the Commission hereby waives the 30-day operative delay and 
designates the proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the operative delay of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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-2016-163 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEARCA-2016-163. 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-2016-163 and should 
be submitted on or before January 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-30688 Filed 12-20-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 245 / Wednesday, December 21, 2016 / Notices 93723

The Exchange believes that its filing with the Commission, the file number should be included on the
proposal to remove the fees for market Exchange requests that the Commission subject line if email is used. To help the
data products from the direct debit waive the 30-day operative delay. The Commission process and review your
process is reasonable because it will not Exchange proposes that the new billing comments more efficiently, please use
place any administrative burden on its process become operative on December only one method. The Commission will
members who are already subject to the 1, 2016. Starting December 1, 2016, the post all comments on the Commission’s
same billing process on all other Nasdaq Exchange will bill the market data fees Internet Web site (http://www.sec.gov/
exchanges.12 separately and will continue to direct rules/sro.shtml). Copies of the
The Exchange believes that its debit its members for all of the other submission, all subsequent
proposal to remove the market data fees fees that are covered under Rule 213, in amendments, all written statements
as described above from the direct debit each case for the previous month’s with respect to the proposed rule
process is equitable and not unfairly billing. The Exchange represents that change that are filed with the
discriminatory because it will apply to waiver of the 30-day operative delay Commission, and all written
all members in a uniform manner. would allow it to conform its billing communications relating to the
B. Self-Regulatory Organization’s process similar to the process in place proposed rule change between the
Statement on Burden on Competition at the Nasdaq exchanges.16 The Commission and any person, other than
Commission believes that waiving the those that may be withheld from the
The Exchange does not believe that 30-day operative delay is consistent public in accordance with the
the proposed rule change will impose with the protection of investors and the provisions of 5 U.S.C. 552, will be
any burden on competition that is not public interest. Therefore, the available for Web site viewing and
necessary or appropriate in furtherance Commission designates the proposed printing in the Commission’s Public
of the purposes of the Act. With this rule change operative upon filing.17 Reference Room, 100 F Street NE.,
proposal, the amended debit process At any time within 60 days of the Washington, DC 20549, on official
would apply uniformly to all ISE filing of the proposed rule change, the business days between the hours of
Gemini members. Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the
C. Self-Regulatory Organization’s temporarily suspend such rule change if filing also will be available for
Statement on Comments on the it appears to the Commission that such inspection and copying at the principal
Proposed Rule Change Received From action is necessary or appropriate in the office of the Exchange. All comments
Members, Participants, or Others public interest, for the protection of received will be posted without change;
investors, or otherwise in furtherance of the Commission does not edit personal
No written comments were either the purposes of the Act. If the
solicited or received. identifying information from
Commission takes such action, the submissions. You should submit only
III. Date of Effectiveness of the Commission shall institute proceedings information that you wish to make
Proposed Rule Change and Timing for to determine whether the proposed rule available publicly. All submissions
Commission Action should be approved or disapproved. should refer to File Number SR–
Because the foregoing proposed rule IV. Solicitation of Comments ISEGemini–2016–20 and should be
change does not: (i) Significantly affect Interested persons are invited to submitted on or before January 11, 2017.
the protection of investors or the public submit written data, views, and For the Commission, by the Division of
interest; (ii) impose any significant arguments concerning the foregoing, Trading and Markets, pursuant to delegated
burden on competition; and (iii) become including whether the proposed rule authority.18
operative for 30 days from the date on change is consistent with the Act. Eduardo A. Aleman,
which it was filed, or such shorter time Comments may be submitted by any of Assistant Secretary.
as the Commission may designate, it has the following methods: [FR Doc. 2016–30695 Filed 12–20–16; 8:45 am]
become effective pursuant to Section
BILLING CODE 8011–01–P
19(b)(3)(A)(iii) of the Act 13 and Electronic Comments
subparagraph (f)(6) of Rule 19b–4 • Use the Commission’s Internet
thereunder.14 comment form (http://www.sec.gov/ SECURITIES AND EXCHANGE
A proposed rule change filed under rules/sro.shtml); or COMMISSION
Rule 19b–4(f)(6) normally does not • Send an email to rule-
become operative for 30 days after the comments@sec.gov. Please include File [Release No. 34–79565; File No. SR–
date of filing. However, Rule 19b– Number SR–ISEGemini–2016–20 on the NYSEARCA–2016–163]
4(f)(6)(iii) 15 permits the Commission to subject line.
designate a shorter time if such action Self-Regulatory Organizations; NYSE
is consistent with the protection of Paper Comments Arca, Inc.; Notice of Filing and
investors and the public interest. In its • Send paper comments in triplicate Immediate Effectiveness of Proposed
to Secretary, Securities and Exchange Rule Change Extending Its Program
12 See NASDAQ Phlx LLC Rule 909, The Commission, 100 F Street NE., That Allows Transactions To Take
NASDAQ Stock Market LLC Rule 7007, NASDAQ Washington, DC 20549–1090. Place at a Price That Is Below $1 Per
Options Market LLC Rules at Chapter XV, Section
1, NASDAQ BX, Inc. Rule 7011 and BX Option All submissions should refer to File Option Contract Until July 5, 2017
Rules at Chapter XV, Section 1. Number SR–ISEGemini–2016–20. This
asabaliauskas on DSK3SPTVN1PROD with NOTICES

13 15 U.S.C. 78s(b)(3)(A)(iii).
December 15, 2016.
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 16 See NASDAQ Phlx LLC Rule 909, The
Pursuant to Section 19(b)(1) 1 of the
4(f)(6) requires a self-regulatory organization to give NASDAQ Stock Market LLC Rule 7007, NASDAQ Securities Exchange Act of 1934 (the
the Commission written notice of its intent to file Options Market LLC Rules at Chapter XV, Section ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
the proposed rule change at least five business days 1, NASDAQ BX, Inc. Rule 7011 and BX Option
prior to the date of filing of the proposed rule Rules at Chapter XV, Section 1.
18 17 CFR 200.30–3(a)(12).
change, or such shorter time as designated by the 17 For purposes only of waiving the 30-day
1 15 U.S.C.78s(b)(1).
Commission. The Commission deems this operative delay, the Commission has considered the
requirement to have been met. proposed rule’s impact on efficiency, competition, 2 15 U.S.C. 78a.
15 17 CFR 240.19b–4(f)(6)(iii). and capital formation. See 15 U.S.C. 78c(f). 3 17 CFR 240.19b–4.

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Document Created: 2018-02-14 09:11:53
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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 93723