82 FR 2417 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Introducing NYSE OptX

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 5 (January 9, 2017)

[Federal Register Volume 82, Number 5 (Monday, January 9, 2017)]
[Notices]
[Pages 2417-2418]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-00097]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79719; File No. SR-NYSEArca-2016-143]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
Introducing NYSE OptX

January 3, 2017.

I. Introduction

    On November 3, 2016, NYSE Arca, Inc. (the ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to introduce NYSE 
OptX, an order entry platform that will allow for the submission of 
Qualified Contingent Cross orders (``QCC Orders'') by OTP Holders and 
OTP Firms. On November 15, 2016, the Exchange filed Amendment No. 1 to 
the proposal.\3\ The proposed rule change, as modified by Amendment No. 
1, was published for comment in the Federal Register on November 22, 
2016.\4\ The Commission received no comment letters on the proposed 
rule change. This order approves the proposed rule change, as modified 
by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified that QCC Orders 
sent through NYSE OptX to the Exchange for execution will comply 
with the order format and EOC entry requirements established by the 
Exchange, which are set forth in Exchange Rule 6.67.
    \4\ See Securities Exchange Act Release No. 79327 (November 16, 
2016), 81 FR 83890 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to introduce NYSE OptX, an order entry 
platform that will allow OTP Holders \5\ and OTP Firms \6\ 
(collectively, ``OTPs'') to submit QCC Orders to the Exchange. 
According to the Exchange, OTPs currently send QCC Orders to the 
Exchange through the use of third-party front end order management 
systems or by calling Floor Brokers and relaying their orders by 
telephone.\7\
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    \5\ The term ``OTP Holder'' refers to a natural person, in good 
standing, who has been issued an OTP, or has been named as a 
Nominee. An OTP Holder must be a registered broker or dealer 
pursuant to Section 15 of the Act, or a nominee or an associated 
person of a registered broker or dealer that has been approved by 
the Exchange to conduct business on the Exchange's Trading 
Facilities. See Exchange Rule 1.1(q).
    \6\ The term ``OTP Firm'' refers to a sole proprietorship, 
partnership, corporation, limited liability company, or other 
organization in good standing that holds an OTP or upon which an 
individual OTP Holder has conferred trading privileges on the 
Exchange's Trading Facilities pursuant to and in compliance with 
Exchange Rules. An OTP Firm must be a registered broker or dealer 
pursuant to Section 15 of the Act. See Exchange Rule 1.1(r).
    \7\ See Notice, supra note 4, at 83891.
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    According to the Exchange, NYSE OptX is an order entry platform 
that will utilize a combination of Instant Messaging (``IM'') and 
browser-based technology to allow OTPs to submit QCC Orders for 
execution on the Exchange's trading system.\8\ To execute a QCC Order 
through NYSE OptX, an OTP will send the order in plain text to NYSE 
OptX,\9\ which will then translate the message into a pre-populated 
order ticket with details of the order and return the order ticket to 
the OTP in a browser-based URL. The OTP will then confirm the order 
ticket and submit the order to the Exchange for execution, or send the 
order to a Floor Broker for execution. After an order is executed on 
the Exchange, NYSE OptX will remit details of the execution back to the 
OTP.
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    \8\ See id. The Exchange represents that NYSE OptX will not 
require any changes to the Exchange's communication or surveillance 
rules. Id. at 83891, n.9.
    \9\ The Exchange states that OTPs will be required to provide 
all the essential information regarding the QCC Order when sending 
it to NYSE OptX, including the price of the option and the stock, 
the size and side of the order, and delta. The Exchange further 
represents that QCC Orders sent to the Exchange for execution will 
comply with the order format and EOC entry requirements established 
by the Exchange. See Notice, supra note 4, at 83891, n.11. See also 
Exchange Rule 6.67--Order Format and System Entry Requirements.
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    According to the Exchange, NYSE OptX is designed as an alternative 
to front end order management systems and the use of telephones for the 
sending of QCC Orders to the Exchange.\10\ The Exchange notes that NYSE 
OptX will not provide OTPs with the capability to send any other type 
of orders or the capability to send QCC Orders for execution to other 
options markets.\11\ Further, OTPs will continue to be able to submit 
QCC Orders through the use of a third-party front end order management 
system, or by telephone, as they currently do.\12\ The Exchange notes 
that use of OptX to send QCC Orders to the Exchange is optional and 
voluntary.\13\
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    \10\ See Notice, supra note 4, at 83891.
    \11\ See id.
    \12\ See id.
    \13\ See id.
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    The Exchange stated that it will announce the effective date of 
NYSE OptX in a Trader Update to be published no later than 90 days 
following approval of this proposal, and that such effective date will 
be no later than 270 days following publication of the Trader 
Update.\14\
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    \14\ See id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \15\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\16\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\17\ 
which requires, among other things, that the rules of a national 
securities exchange be 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 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, 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 and that the rules not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f.
    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
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    In particular, the Commission notes that, according to the 
Exchange, NYSE OptX will provide OTPs an alternative to third-party 
front end order management systems and the use of telephones to send 
QCC Orders to the Exchange.\18\ Such an alternative may help protect 
the interests of investors by

[[Page 2418]]

offering OTPs an additional way to send QCC Orders to the Exchange for 
execution. The Commission notes that the use of OptX will be entirely 
voluntary and OTPs will still be able to submit QCC Orders as they do 
today, either through the use of third-party front end order management 
systems or by telephone. For these reasons, the Commission finds that 
the proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \18\ See Notice, supra note 4, at 83891. As stated above, the 
Exchange represented that OTPs will be required to provide all the 
essential information regarding the QCC Order when sending the order 
to NYSE OptX and QCC Orders sent to the Exchange for execution will 
comply with the order format and EOC entry requirements established 
by the Exchange. Id. at 83891, n.11.
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IV. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NYSEArca-2016-143), as 
modified by Amendment No. 1, be, and hereby is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00097 Filed 1-6-17; 8:45 am]
BILLING CODE 8011-01-P