82 FR 14934 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Amending Rule 6.80 To Make Permanent a Program That Allows Transactions To Take Place at a Price That Is Below $1 per Option Contract
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 55 (March 23, 2017)
Federal Register Volume 82, Issue 55 (March 23, 2017)
| Page Range | 14934-14936 | |
| FR Document | 2017-05742 |
[Federal Register Volume 82, Number 55 (Thursday, March 23, 2017)] [Notices] [Pages 14934-14936] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-05742] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80271; File No. SR-NYSEARCA-2017-24] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Amending Rule 6.80 To Make Permanent a Program That Allows Transactions To Take Place at a Price That Is Below $1 per Option Contract March 17, 2017. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on March 2, 2017, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C.78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 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 6.80 to make permanent a program that allows transactions to take place at a price that is below $1 per option contract. 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. [[Page 14935]] 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 6.80 to make permanent a program that allows transactions to take place at a price that is below $1 per option contract.\4\ The program is currently subject to a pilot that is scheduled to expire on July 5, 2017.\5\ --------------------------------------------------------------------------- \4\ See Commentary .01 to Rule 6.80. \5\ See Securities Exchange Act Release No. 79565 (December 15, 2016), 81 FR 93723 (December 21, 2016) (SR-NYSE Arca-2016-163). The Exchange initially adopted the program in 2010. See Securities Exchange Act Release No. 63476 (December 8, 2010), 75 FR 77930 (December 14, 2010) (SR-NYSE Arca-2010-109). --------------------------------------------------------------------------- An ``accommodation'' or ``cabinet'' trade refers to trades in listed options on the Exchange that are worthless or not actively traded. 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 that cabinet transactions at a price of $1 per option contract to occur via open outcry in any options series open for trading on the Exchange, except option classes participating in the Penny Pilot Program.\6\ Rule 6.80 provides that 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 be 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). If the buyer and the seller yield to resting cabinet orders, opening cabinet bids can trade with opening cabinet offers at $1 per option contract. --------------------------------------------------------------------------- \6\ 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). --------------------------------------------------------------------------- The Exchange amended the cabinet procedures to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract. This amendment expires on July 5, 2017. 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 permitted only to accommodate closing transactions, and (ii) transactions in option classes participating in the Penny Pilot Program are permitted. 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 when there has been a significant move in the price of the underlying security, resulting 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 is likely no market to close-out the position, even at the $1 cabinet price. As with other accommodation liquidations under Rule 6.80, transactions at prices less than $1 are not disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 6.80, the transactions are exempt from the Consolidated Options Audit Trail (``COATS'') requirements of Exchange Rule 6.67, Order Format and System Entry Requirements. However, the Exchange maintains quotation, order and transaction information for such 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. The Exchange notes that while the level of liquidation trades is not meaningful, such trades serve an essential purpose in that they allow market participants to close out options positions that are worthless or not actively trading. To illustrate, in 2016, there were a total of 558 Cabinet trades. Of these, 50 trades comprising 47,106 contracts were executed at a price of $0.01, while the remaining 508 trades comprising 208,078 contracts were executed for a premium of less than $0.01. The Exchange believes this level of trading demonstrates the benefit of the current program to market participants. In support of making the program permanent, the Exchange represents that there are no operational issues in processing and clearing Cabinet trades in penny and sub-penny increments. Each Cabinet trade is input manually into the clearing system, and is then submitted for settlement at the Options Clearing Corporation. Additionally, OTP Holders and OTP Firms have not raised any concerns with the processing of Cabinet trades. 2. Statutory Basis The Exchange believes that this proposed rule change is consistent with Section 6(b) \7\ of the Securities Exchange Act of 1934 (the ``Act''), in general, and furthers the objectives of Section 6(b)(5) \8\ of the Act in particular, in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that liquidation trades promote competition and afford market participants the opportunity to close out their options positions. The Exchange believes that permanently approving the rules that allow for liquidations at a price less than $1 per option contract would 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. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f(b). \8\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that approving the program on a permanent basis is also consistent with the Act. With respect to the level of liquidation trades transacted on the Exchange, the Exchange believes that the data gathered provides meaningful support to make the program permanent. 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 Exchange believes that approving the program on a permanent basis will not impact competition, as it will 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 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 [[Page 14936]] to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEARCA-2017-24 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-2017-24. 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-2017-24 and should be submitted on or before April 13, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\9\ --------------------------------------------------------------------------- \9\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-05742 Filed 3-22-17; 8:45 am] BILLING CODE 8011-01-P
![14934 Federal Register / Vol. 82, No. 55 / Thursday, March 23, 2017 / Notices
B. Self-Regulatory Organization’s Comments may be submitted by any of SECURITIES AND EXCHANGE
Statement on Burden on Competition the following methods: COMMISSION
The Exchange does not believe that Electronic Comments
the proposed rule change will impose [Release No. 34–80271; File No. SR–
any burden on competition not • Use the Commission’s Internet NYSEARCA–2017–24]
necessary or appropriate in furtherance comment form (http://www.sec.gov/
of the purposes of the Act. The rules/sro.shtml); or Self-Regulatory Organizations; NYSE
proposed rule change is not designed to Arca, Inc.; Notice of Filing of Proposed
• Send an email to rule-comments@
have any competitive impact but rather Rule Change Amending Rule 6.80 To
sec.gov. Please include File Number SR–
request the decommission of a rarely- Make Permanent a Program That
ISE–2017–27 on the subject line.
used functionality on the Exchange and Allows Transactions To Take Place at
relatedly, to remove the rule text that Paper Comments a Price That Is Below $1 per Option
this functionality supports from the Contract
Exchange’s rulebook, thereby reducing • Send paper comments in triplicate
investor confusion and making the to Secretary, Securities and Exchange March 17, 2017.
Exchange’s rules easier to understand Commission, 100 F Street NE., Pursuant to Section 19(b)(1) 1 of the
and navigate. Washington, DC 20549–1090. Securities Exchange Act of 1934 (the
C. Self-Regulatory Organization’s All submissions should refer to File ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
Statement on Comments on the Number SR–ISE–2017–27. This file notice is hereby given that, on March 2,
Proposed Rule Change Received From number should be included on the 2017, NYSE Arca, Inc. (the ‘‘Exchange’’
Members, Participants, or Others subject line if email is used. To help the or ‘‘NYSE Arca’’) filed with the
No written comments were either Commission process and review your Securities and Exchange Commission
solicited or received. comments more efficiently, please use (the ‘‘Commission’’) the proposed rule
only one method. The Commission will change as described in Items I and II,
III. Date of Effectiveness of the post all comments on the Commission’s below, which Items have been prepared
Proposed Rule Change and Timing for Internet Web site (http://www.sec.gov/ by the self-regulatory organization. The
Commission Action Commission is publishing this notice to
rules/sro.shtml). Copies of the
Because the foregoing proposed rule submission, all subsequent solicit comments on the proposed rule
change does not: (i) Significantly affect amendments, all written statements change from interested persons.
the protection of investors or the public with respect to the proposed rule
interest; (ii) impose any significant I. Self-Regulatory Organization’s
change that are filed with the Statement of the Terms of Substance of
burden on competition; and (iii) become Commission, and all written
operative for 30 days from the date on the Proposed Rule Change
communications relating to the
which it was filed, or such shorter time proposed rule change between the The Exchange proposes to amend
as the Commission may designate, it has
Commission and any person, other than Rule 6.80 to make permanent a program
become effective pursuant to Section
those that may be withheld from the that allows transactions to take place at
19(b)(3)(A)(iii) of the Act 12 and
public in accordance with the a price that is below $1 per option
subparagraph (f)(6) of Rule 19b–4
thereunder.13 provisions of 5 U.S.C. 552, will be contract. The proposed rule change is
At any time within 60 days of the available for Web site viewing and available on the Exchange’s Web site at
filing of the proposed rule change, the printing in the Commission’s Public www.nyse.com, at the principal office of
Commission summarily may Reference Room, 100 F Street NE., the Exchange, and at the Commission’s
temporarily suspend such rule change if Washington, DC 20549, on official Public Reference Room.
it appears to the Commission that such business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the II. Self-Regulatory Organization’s
action is: (i) Necessary or appropriate in
filing also will be available for Statement of the Purpose of, and
the public interest; (ii) for the protection
of investors; or (iii) otherwise in inspection and copying at the principal Statutory Basis for, the Proposed Rule
furtherance of the purposes of the Act. office of the Exchange. All comments Change
If the Commission takes such action, the received will be posted without change; In its filing with the Commission, the
Commission shall institute proceedings the Commission does not edit personal self-regulatory organization included
to determine whether the proposed rule identifying information from statements concerning the purpose of,
should be approved or disapproved. submissions. You should submit only and basis for, the proposed rule change
IV. Solicitation of Comments information that you wish to make and discussed any comments it received
available publicly. All submissions on the proposed rule change. The text
Interested persons are invited to should refer to File Number SR–ISE–
submit written data, views, and of those statements may be examined at
2017–27 and should be submitted on or the places specified in Item IV below.
arguments concerning the foregoing, before April 13, 2017.
including whether the proposed rule The Exchange has prepared summaries,
change is consistent with the Act. For the Commission, by the Division of set forth in sections A, B, and C below,
Trading and Markets, pursuant to delegated of the most significant parts of such
sradovich on DSK3GMQ082PROD with NOTICES
12 15 U.S.C. 78s(b)(3)(A)(iii). authority.14 statements.
13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– Eduardo A. Aleman,
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
Assistant Secretary.
the proposed rule change at least five business days [FR Doc. 2017–05744 Filed 3–22–17; 8:45 am]
prior to the date of filing of the proposed rule BILLING CODE 8011–01–P 1 15 U.S.C.78s(b)(1).
change, or such shorter time as designated by the
2 15 U.S.C. 78a.
Commission. The Exchange has satisfied this
requirement. 14 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.
VerDate Sep<11>2014 17:13 Mar 22, 2017 Jkt 241001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\23MRN1.SGM 23MRN1](https://thefederalregister.org/doc/82_FR_14989/page/1.svg)
![14936 Federal Register / Vol. 82, No. 55 / Thursday, March 23, 2017 / Notices
to be appropriate and publishes its should refer to File Number SR– on the proposed rule change. The text
reasons for so finding or (ii) as to which NYSEARCA–2017–24 and should be of those statements may be examined at
the self-regulatory organization submitted on or before April 13, 2017. the places specified in Item IV below.
consents, the Commission will: For the Commission, by the Division of The Exchange has prepared summaries,
(A) By order approve or disapprove Trading and Markets, pursuant to delegated set forth in sections A, B, and C below,
such proposed rule change, or authority.9 of the most significant parts of such
(B) institute proceedings to determine Eduardo A. Aleman, statements.
whether the proposed rule change Assistant Secretary.
should be disapproved. A. Self-Regulatory Organization’s
[FR Doc. 2017–05742 Filed 3–22–17; 8:45 am] Statement of the Purpose of, and the
IV. Solicitation of Comments BILLING CODE 8011–01–P Statutory Basis for, the Proposed Rule
Interested persons are invited to Change
submit written data, views, and 1. Purpose
arguments concerning the foregoing, SECURITIES AND EXCHANGE
including whether the proposed rule COMMISSION The Exchange proposes to amend
change is consistent with the Act. Rule 968NY to make permanent a
[Release No. 34–80272; File No. SR–
Comments may be submitted by any of NYSEMKT–2017–13] program that allows transactions to take
the following methods: place at a price that is below $1 per
Self-Regulatory Organizations; NYSE option contract.4 The program is
Electronic Comments MKT LLC; Notice of Filing of Proposed currently subject to a pilot that is
• Use the Commission’s Internet Rule Change Amending Rule 968NY To scheduled to expire on July 5, 2017.5
comment form (http://www.sec.gov/ Make Permanent a Program That An ‘‘accommodation’’ or ‘‘cabinet’’
rules/sro.shtml); or Allows Transactions To Take Place at trade refers to trades in listed options on
• Send an email to rule-comments@ a Price That Is Below $1 per Option the Exchange that are worthless and
sec.gov. Please include File Number SR– Contract typically not actively traded. Trading is
NYSEARCA–2017–24 on the subject generally conducted in accordance with
line. March 17, 2017. Exchange Rules, except as provided in
Pursuant to Section 19(b)(1) 1 of the Exchange Rule 968NY, Accommodation
Paper Comments Securities Exchange Act of 1934 (the Transactions (Cabinet Trades), which
• Send paper comments in triplicate ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 sets forth specific procedures for
to Secretary, Securities and Exchange notice is hereby given that, on March 2, engaging in cabinet trades.
Commission, 100 F Street NE., 2017, NYSE MKT LLC (the ‘‘Exchange’’ Rule 968NY currently provides that
Washington, DC 20549–1090. or ‘‘NYSE MKT’’) filed with the cabinet transactions at a price of $1 per
All submissions should refer to File Securities and Exchange Commission option contract to occur via open outcry
Number SR–NYSEARCA–2017–24. This (the ‘‘Commission’’) the proposed rule in any options series open for trading on
file number should be included on the change as described in Items I and II, the Exchange, except option classes
subject line if email is used. To help the below, which Items have been prepared participating in the Penny Pilot
Commission process and review your by the self-regulatory organization. The Program.6 Rule 968NY provides that
comments more efficiently, please use Commission is publishing this notice to bids and offers (whether opening or
only one method. The Commission will solicit comments on the proposed rule closing a position) at a price of $1 per
post all comments on the Commission’s change from interested persons. option contract may be represented in
Internet Web site (http://www.sec.gov/ the trading crowd by a Floor Broker or
I. Self-Regulatory Organization’s by a Market Maker or be provided in
rules/sro.shtml). Copies of the Statement of the Terms of Substance of
submission, all subsequent response to a request by a Trading
the Proposed Rule Change Official, a Floor Broker or a Market
amendments, all written statements
The Exchange proposes to amend Maker, but must yield priority to all
with respect to the proposed rule
Rule 968NY to make permanent a resting orders in the Cabinet (those
change that are filed with the
program that allows transactions to take orders held by the Trading Official, and
Commission, and all written
place at a price that is below $1 per which resting cabinet orders may be
communications relating to the
option contract. The proposed rule closing only). If the buyer and the seller
proposed rule change between the
change is available on the Exchange’s yield to resting cabinet orders, opening
Commission and any person, other than
Web site at www.nyse.com, at the cabinet bids can trade with opening
those that may be withheld from the
principal office of the Exchange, and at cabinet offers at $1 per option contract.
public in accordance with the
the Commission’s Public Reference The Exchange has amended the
provisions of 5 U.S.C. 552, will be
Room. cabinet procedures to allow transactions
available for Web site viewing and
to take place in open outcry at a price
printing in the Commission’s Public II. Self-Regulatory Organization’s of at least $0 but less than $1 per option
Reference Room, 100 F Street NE., Statement of the Purpose of, and
Washington, DC 20549 on official Statutory Basis for, the Proposed Rule 4 See Commentary .01 to Rule 968NY.
business days between the hours of Change 5 See Securities Exchange Act Release No. 79564
10:00 a.m. and 3:00 p.m. Copies of the In its filing with the Commission, the (December 15, 2016), 81 FR 93716 (December 21,
filing also will be available for self-regulatory organization included
2016) (SR–NYSEMKT–2016–116). The Exchange
inspection and copying at the principal initially adopted the program in 2010. See
sradovich on DSK3GMQ082PROD with NOTICES
statements concerning the purpose of, Securities Exchange Act Release No. 63475
office of the Exchange. All comments and basis for, the proposed rule change (December 8, 2010), 75 FR 77932 (December 14,
received will be posted without change; and discussed any comments it received 2010) (SR–NYSE Amex–2010–114).
the Commission does not edit personal 6 The $1 cabinet trading procedures are not
identifying information from 9 17
available in Penny Pilot Program classes because in
CFR 200.30–3(a)(12). those classes an option series can trade in a
submissions. You should submit only 1 15 U.S.C. 78s(b)(1). standard increment as low as $0.01 per share (or
information that you wish to make 2 15 U.S.C. 78a.
$1.00 per option contract with a 100 share
available publicly. All submissions 3 17 CFR 240.19b–4. multiplier).
VerDate Sep<11>2014 17:13 Mar 22, 2017 Jkt 241001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 E:\FR\FM\23MRN1.SGM 23MRN1](https://thefederalregister.org/doc/82_FR_14989/page/3.svg)
Document Created: 2017-03-23 02:45:31
Document Modified: 2017-03-23 02:45:31
| 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 | 82 FR 14934 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR