82 FR 11674 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rules 6.62, 6.73 and Make a Conforming Change to Rule 6.47A

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 36 (February 24, 2017)

[Federal Register Volume 82, Number 36 (Friday, February 24, 2017)]
[Notices]
[Pages 11674-11676]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-03572]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80059; File No. SR-NYSEArca-2017-16]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rules 
6.62, 6.73 and Make a Conforming Change to Rule 6.47A

February 17, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on February 10, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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 amend Rule 6.62 to eliminate Price 
Improving Orders and Quotes, and amend Rule 6.73 to eliminate the 
electronic and open outcry bidding and offering requirements associated 
with a Price Improving Order or Quote, and make a conforming change to 
Rule 6.47A. The proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 6.62 to eliminate Price 
Improving Orders and Quotes, and amend Rule 6.73 to eliminate the 
electronic and open outcry bidding and offering requirements associated 
with a Price Improving Order or Quote, and make a conforming change to 
Rule 6.47A. The Exchange proposes to eliminate these order types in 
order to streamline its rules and reduce complexity among its order 
type offerings.\4\
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    \4\ See e.g., Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw) 
(``I am asking the exchanges to conduct a comprehensive review of 
their order types and how they operate in practice. As part of this 
review, I expect that the exchanges will consider appropriate rule 
changes to help clarify the nature of their order types and how they 
interact with each other, and how they support fair, orderly, and 
efficient markets.'' Id.)
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Elimination of Price Improving Orders and Quotes
    The Exchange proposes to eliminate, and thus delete from its rules, 
Price Improving Orders and Quotes, as defined in Rule 6.62(s).
    A Price Improving Order or Price Improving Quote is an order or 
quote to buy or sell an option at a specified price at an increment 
smaller than the minimum price variation in the security. Price 
Improving Orders and Quotes may be entered in increments as small as 
one cent. Because the Exchange has not implemented this functionality, 
the Exchange believes it is appropriate to delete the functionality 
from its rules.\5\
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    \5\ Though originally adopted as a competitive response to 
another options market introducing price improving orders, the 
Exchange never implemented this functionality for a variety of 
reasons, including technology and because most options volume was 
concentrated in Penny Pilot issues where price improving orders 
would be of little or no value.
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    To reflect this elimination, the Exchange proposes to delete all 
references to Price Improving Orders and Quotes in Rule 6.62(s), and to 
the electronic and open outcry bidding and offering requirements 
associated with a Price Improving Order or Quote in the second 
introductory paragraph of Rule 6.73 and Rules 6.73(a), 6.73(b) and 
6.73(c), and to delete in the Commentary to Rule 6.47A references to 
Rule 6.62(s) and 6.73, as follows: \6\
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    \6\ See Securities Exchange Act Release No. 58079 (July 2, 
2008), 73 FR 39365 (July 9, 2009) (SR-NYSEArca-2008-69) (notice of 
filing and immediate effectiveness of proposed rule change to permit 
use of a new order type known as Price Improving Orders and Quotes).

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[[Page 11675]]

     Delete Rule 6.62(s), which defines Price Improving Orders 
and Quotes;
     delete the second introductory paragraph of Rule 6.73, 
which describes which options may be designated for penny price 
improvement;
     delete Rule 6.73(a), which describes the electronic 
submission process in connection with a Price Improving Order or Quote;
     delete Rule 6.73(b), which describes the open outcry 
submission process in connection with a Price Improving Order or Quote;
     delete Rule 6.73(c), which describes the requirement to 
electronically ``sweep'' any penny pricing interest in the Exchange's 
System; and
     delete in the Commentary to Rule 6.47A references to Rules 
6.62(s) and 6.73.\7\
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    \7\ An affiliated Exchange recently eliminated Price Improving 
Orders and Quotes. See Securities Exchange Act Release No. 34-79875 
(January 30, 2017), 82 FR 9256 (February 3, 2017) (SR-NYSEMKT-2017-
03) (notice of filing and immediate effectiveness of proposed rule 
change amending rules).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5),\9\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that eliminating Price 
Improving Orders and Quotes would remove impediments to and perfect a 
national market system by simplifying the functionality and complexity 
of its order types. The Exchange believes that eliminating these order 
types would be consistent with the public interest and the protection 
of investors because investors will not be harmed and in fact would 
benefit from the removal of complex functionality. The Exchange also 
believes that eliminating Price Improving Orders and Quotes would 
benefit investors and add transparency and clarity to the Exchange's 
rules because the functionality of those order types was not 
implemented and therefore is not available. The Exchange further 
believes that deleting a corresponding reference in Exchange rules to 
deleted order types, and the associated bidding and offering process in 
connection with a deleted order type, also 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 order types available for 
trading on the Exchange. Removing an obsolete cross reference also 
furthers the goal of transparency and adds clarity to the Exchange's 
rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but would rather eliminate 
complex functionality and references to functionality that is not 
available, thereby reducing confusion and making the Exchange's rules 
easier to understand and navigate.

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 \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-2017-16 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-2017-16. 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

[[Page 11676]]

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-2017-16 and should be submitted on or before 
March 17, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03572 Filed 2-23-17; 8:45 am]
 BILLING CODE 8011-01-P