82_FR_2432 82 FR 2427 - Self-Regulatory Organizations; NYSE MKT LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Introducing NYSE OptX

82 FR 2427 - Self-Regulatory Organizations; NYSE MKT LLC; 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)

Page Range2427-2428
FR Document2017-00098

Federal Register, Volume 82 Issue 5 (Monday, January 9, 2017) 
[Federal Register Volume 82, Number 5 (Monday, January 9, 2017)]
[Notices]
[Pages 2427-2428]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-00098]



[[Page 2427]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79720; File No. SR-NYSEMKT-2016-102]


Self-Regulatory Organizations; NYSE MKT LLC; 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 MKT LLC, on behalf of NYSE Amex Options 
(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 
(``QCC'') Orders and orders executed in the Exchange's Customer Best 
Execution (``CUBE'') Auction by ATP Holders. 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.
---------------------------------------------------------------------------

    \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 955NY.
    \4\ See Securities Exchange Act Release No. 79328 (November 16, 
2016), 81 FR 83888 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to introduce NYSE OptX, an order entry 
platform that will allow ATP Holders to submit QCC Orders and CUBE 
Orders (collectively, ``paired orders'') to the Exchange.\5\ According 
to the Exchange, ATP Holders currently send paired 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.\6\
---------------------------------------------------------------------------

    \5\ The term ``ATP Holder'' refers to a natural person, sole 
proprietorship, partnership, corporation, limited liability company, 
or other organization, in good standing, that has been issued an 
ATP. An ATP Holder must be a registered broker or dealer pursuant to 
Section 15 of the Act. See Exchange Rule 900.2NY.(5).
    \6\ See Notice, supra note 4, at 83889.
---------------------------------------------------------------------------

    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 ATP Holders to submit paired orders 
for execution on the Exchange's trading system.\7\ To execute a paired 
order through NYSE OptX, an ATP Holder will send the order in plain 
text to NYSE OptX,\8\ which will then translate the message into a pre-
populated order ticket with details of the order and return the order 
ticket to the ATP Holder in a browser-based URL. The ATP Holder 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 ATP Holder.
---------------------------------------------------------------------------

    \7\ See id. The Exchange represents that NYSE OptX will not 
require any changes to the Exchange's communication or surveillance 
rules. Id. at 83889, n.8.
    \8\ The Exchange states that ATP Holders will be required to 
provide all the essential information regarding the paired order 
when sending the order 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 83889, n.10. See also Exchange Rule 955NY--Order Format and 
System Entry Requirements.
---------------------------------------------------------------------------

    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 paired orders to the Exchange.\9\ The Exchange notes that 
NYSE OptX will not provide ATP Holders with the capability to send any 
other type of orders or the capability to send paired orders for 
execution to other options markets.\10\ Further, ATP Holders will 
continue to be able to submit paired orders through the use of a third-
party front end order management system, or by telephone, as they 
currently do.\11\ The Exchange notes that use of OptX to send paired 
orders is optional and voluntary.\12\
---------------------------------------------------------------------------

    \9\ See Notice, supra note 4, at 83889.
    \10\ See id.
    \11\ See id.
    \12\ See id.
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

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 \14\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\15\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\16\ 
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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 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).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Commission notes that, according to the 
Exchange, NYSE OptX will provide ATP Holders an alternative to third-
party front end order management systems and the use of telephones to 
send paired orders to the Exchange.\17\ Such an alternative may help 
protect the interests of investors by offering ATP Holders an 
additional way to send paired orders to the Exchange for execution. The 
Commission notes that the use of OptX will be entirely voluntary and 
ATP Holders will still be able to submit paired 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

[[Page 2428]]

and regulations thereunder applicable to a national securities 
exchange.
---------------------------------------------------------------------------

    \17\ See Notice, supra note 4, at 83889. As stated above, the 
Exchange represented that ATP Holders will be required to provide 
all the essential information regarding the paired 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 83889, n.10.
---------------------------------------------------------------------------

IV. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-NYSEMKT-2016-102), as 
modified by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2).
    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00098 Filed 1-6-17; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 82, No. 5 / Monday, January 9, 2017 / Notices 2427 SECURITIES AND EXCHANGE Brokers and relaying their orders by than 270 days following publication of COMMISSION telephone.6 the Trader Update.13 According to the Exchange, NYSE III. Discussion and Commission [Release No. 34–79720; File No. SR– OptX is an order entry platform that will Findings NYSEMKT–2016–102] utilize a combination of Instant Messaging (‘‘IM’’) and browser-based After careful review, the Commission Self-Regulatory Organizations; NYSE technology to allow ATP Holders to finds that the proposed rule change is MKT LLC; Order Approving Proposed submit paired orders for execution on consistent with the requirements of Rule Change, as Modified by the Exchange’s trading system.7 To Section 6 of the Act 14 and the rules and Amendment No. 1 Thereto, Introducing execute a paired order through NYSE regulations thereunder applicable to a NYSE OptX national securities exchange.15 In OptX, an ATP Holder will send the January 3, 2017. order in plain text to NYSE OptX,8 particular, the Commission finds that which will then translate the message the proposed rule change is consistent I. Introduction into a pre-populated order ticket with with Section 6(b)(5) of the Act,16 which On November 3, 2016, NYSE MKT details of the order and return the order requires, among other things, that the LLC, on behalf of NYSE Amex Options ticket to the ATP Holder in a browser- rules of a national securities exchange (the ‘‘Exchange’’) filed with the based URL. The ATP Holder will then be designed to prevent fraudulent and Securities and Exchange Commission confirm the order ticket and submit the manipulative acts and practices, to (‘‘Commission’’) pursuant to Section order to the Exchange for execution, or promote just and equitable principles of 19(b)(1) of the Securities Exchange Act send the order to a Floor Broker for trade, to foster cooperation and of 1934 (‘‘Act’’) 1 and Rule 19b–4 execution. After an order is executed on coordination with persons engaged in thereunder,2 a proposed rule change to the Exchange, NYSE OptX will remit regulating, clearing, settling, processing introduce NYSE OptX, an order entry details of the execution back to the ATP information with respect to, and platform that will allow for the Holder. facilitating transactions in securities, to submission of Qualified Contingent According to the Exchange, NYSE remove impediments to and perfect the Cross (‘‘QCC’’) Orders and orders OptX is designed as an alternative to mechanism of a free and open market executed in the Exchange’s Customer front end order management systems and a national market system, and, in Best Execution (‘‘CUBE’’) Auction by and the use of telephones for the general, to protect investors and the ATP Holders. On November 15, 2016, sending of paired orders to the public interest and that the rules not be the Exchange filed Amendment No. 1 to Exchange.9 The Exchange notes that designed to permit unfair the proposal.3 The proposed rule NYSE OptX will not provide ATP discrimination between customers, change, as modified by Amendment No. Holders with the capability to send any issuers, brokers, or dealers. 1, was published for comment in the other type of orders or the capability to In particular, the Commission notes Federal Register on November 22, send paired orders for execution to that, according to the Exchange, NYSE 2016.4 The Commission received no other options markets.10 Further, ATP OptX will provide ATP Holders an comment letters on the proposed rule Holders will continue to be able to alternative to third-party front end order change. This order approves the submit paired orders through the use of management systems and the use of proposed rule change, as modified by a third-party front end order telephones to send paired orders to the Amendment No. 1. management system, or by telephone, as Exchange.17 Such an alternative may II. Description of the Proposed Rule they currently do.11 The Exchange notes help protect the interests of investors by Change that use of OptX to send paired orders offering ATP Holders an additional way is optional and voluntary.12 to send paired orders to the Exchange The Exchange proposes to introduce The Exchange stated that it will for execution. The Commission notes NYSE OptX, an order entry platform announce the effective date of NYSE that the use of OptX will be entirely that will allow ATP Holders to submit OptX in a Trader Update to be voluntary and ATP Holders will still be QCC Orders and CUBE Orders published no later than 90 days able to submit paired orders as they do (collectively, ‘‘paired orders’’) to the following approval of this proposal, and today, either through the use of third- Exchange.5 According to the Exchange, that such effective date will be no later party front end order management ATP Holders currently send paired orders to the Exchange through the use systems or by telephone. For these of third-party front end order 6 See Notice, supra note 4, at 83889. reasons, the Commission finds that the management systems or by calling Floor 7 See id. The Exchange represents that NYSE proposed rule change, as modified by OptX will not require any changes to the Amendment No. 1, is consistent with Exchange’s communication or surveillance rules. 1 15 Id. at 83889, n.8. Section 6(b)(5) of the Act and the rules U.S.C. 78s(b)(1). 2 17 8 The Exchange states that ATP Holders will be CFR 240.19b–4. 3 In Amendment No. 1, the Exchange clarified required to provide all the essential information 13 See id. that QCC Orders sent through NYSE OptX to the regarding the paired order when sending the order 14 15 U.S.C. 78f. Exchange for execution will comply with the order to NYSE OptX, including the price of the option 15 In approving this proposed rule change, the format and EOC entry requirements established by and the stock, the size and side of the order, and Commission has considered the proposed rule’s the Exchange, which are set forth in Exchange Rule delta. The Exchange further represents that QCC impact on efficiency, competition, and capital 955NY. Orders sent to the Exchange for execution will formation. See 15 U.S.C. 78c(f). sradovich on DSK3GMQ082PROD with NOTICES 4 See Securities Exchange Act Release No. 79328 comply with the order format and EOC entry 16 15 U.S.C. 78f(b)(5). (November 16, 2016), 81 FR 83888 (‘‘Notice’’). requirements established by the Exchange. See 17 See Notice, supra note 4, at 83889. As stated 5 The term ‘‘ATP Holder’’ refers to a natural Notice, supra note 4, at 83889, n.10. See also above, the Exchange represented that ATP Holders Exchange Rule 955NY—Order Format and System person, sole proprietorship, partnership, will be required to provide all the essential Entry Requirements. corporation, limited liability company, or other 9 See Notice, supra note 4, at 83889. information regarding the paired order when organization, in good standing, that has been issued sending the order to NYSE OptX and QCC Orders 10 See id. an ATP. An ATP Holder must be a registered broker sent to the Exchange for execution will comply with 11 See id. or dealer pursuant to Section 15 of the Act. See the order format and EOC entry requirements Exchange Rule 900.2NY.(5). 12 See id. established by the Exchange. Id. at 83889, n.10. VerDate Sep<11>2014 21:14 Jan 06, 2017 Jkt 241001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 E:\FR\FM\09JAN1.SGM 09JAN1

2428 Federal Register / Vol. 82, No. 5 / Monday, January 9, 2017 / Notices and regulations thereunder applicable to Amendment No. 1 to the proposal.5 The exposes the Agency Order in the BAM a national securities exchange. Commission is publishing this notice to Auction pursuant to the proposed Rule. solicit comment on Amendment No. 1 IV. Conclusion A. Auction Eligibility Requirements from interested persons and is IT IS THEREFORE ORDERED, approving the proposed rule change, as All options traded on the Exchange pursuant to Section 19(b)(2) of the modified by Amendment No. 1, on an are eligible for BAM.7 To initiate a BAM Act,18 that the proposed rule change accelerated basis, with certain Auction, an Initiating Member first must (SR–NYSEMKT–2016–102), as modified provisions subject to a pilot period ‘‘stop’’ the Agency Order such that: (A) by Amendment No. 1, be, and hereby is, scheduled to expire on January 18, If the Agency Order is for less than 50 approved. 2017. option contracts and the difference between the National Best Bid and Offer For the Commission, by the Division of II. Description of the Proposal, as Trading and Markets, pursuant to delegated (‘‘NBBO’’) is $0.01, the Initiating Amended Member must stop the entire Agency authority.19 Eduardo A. Aleman, EDGX proposes to establish a price- Order at one minimum price improvement auction, the Bats Auction improvement increment better than the Assistant Secretary. Mechanism (‘‘BAM,’’ ‘‘BAM Auction,’’ NBBO; or (B) for any other Agency [FR Doc. 2017–00098 Filed 1–6–17; 8:45 am] or ‘‘Auction’’) on the Exchange’s equity Order, the Initiating Member must stop BILLING CODE 8011–01–P the entire Agency Order at the better of options platform, in which an Exchange Member (an ‘‘Initiating Member’’) may the NBBO or the Agency Order’s limit electronically submit for execution a price. In addition, if the EDGX BBO on SECURITIES AND EXCHANGE the same side of the market as the two-sided paired order, where one side COMMISSION Agency Order represents a Priority is an order it represents as agent on [Release No. 34–79718; File No. SR– behalf of a Priority Customer,6 broker- Customer order on the book, the stop BatsEDGX–2016–41] dealer, or any other person or entity price must be at least $0.01 better than (‘‘Agency Order’’) and the other side is the booked order’s limit price. If the Self-Regulatory Organizations; Bats principal interest or any other order it EDGX BBO on the same side of the EDGX Exchange, Inc.; Notice of Filing represents as agent (an ‘‘Initiating market as the Agency Order represents of Amendment No. 1 and Order Order’’) provided that the Member first a quote or order that is not a Priority Granting Accelerated Approval of a Customer order on the book, the stop Proposed Rule Change, as Modified by 5 In Amendment No. 1, EDGX provided price must be at least $0.01 better than Amendment No. 1, Related to the additional details to its proposal and made certain the booked order’s limit price unless the Exchange’s Equity Options Platform changes to original aspects of the proposal. Agency Order is a Priority Customer Specifically, the proposal as revised would: (i) To Adopt a Price Improvement Restrict an Auction from commencing with a stop order and the Customer Overlay set Auction, the Bats Auction Mechanism price equal to a same side resting order unless the forth in Rule 21.8(d)(1) is in effect.8 In resting order is not a Priority Customer order, the addition, Auctions in the same series of January 3, 2017. Exchange’s ‘‘Customer Overlay’’ is in effect, and the Agency Orders for less than 50 contracts incoming Agency Order is a Priority Customer I. Introduction order; (ii) prohibit an Initiating Order from being a may not queue or overlap in any solicited order for the account of an Options Market manner; however, Auctions of Agency On September 16, 2016, Bats EDGX Orders for 50 contracts or more will be Maker assigned in the affected series on the Exchange, Inc. (the ‘‘Exchange’’ or Exchange; (iii) describe a survey conducted by the allowed to occur at the same time as ‘‘EDGX’’) filed with the Securities and Exchange regarding the ability of participants to other Auctions (of any size Agency Exchange Commission (‘‘Commission’’), respond to an Auction lasting no less than one Order) in the same series.9 Finally, an pursuant to Section 19(b)(1) of the hundred milliseconds and no more than one second; (iv) provide additional explanation and Securities Exchange Act of 1934 justification of certain aspects of the proposal, 7 See proposed EDGX Rule 21.19(a). (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a including additional examples describing Auction 8 According to the Exchange, this condition is proposed rule change for the Exchange’s processing and order allocation in various scenarios consistent with the operation of the Exchange equity options platform (‘‘EDGX and details regarding the handling of overlapping generally, where Priority Customer orders receive a Auctions for 50 contracts or more; and (v) make priority advantage over all other orders. See Options’’) to adopt a price improvement other minor structural, technical, and clarifying Amendment No. 1, supra note 5. See also EDGX auction, the Bats Auction Mechanism. amendments to the proposal and the proposed rule Rule 21.8(d)(1), which specifies that when the The proposed rule change was text that EDGX believes does not result in any Customer Overlay is in effect, Priority Customer published for comment in the Federal material differences over its original proposal. Orders shall have priority over orders on behalf of Amendment No. 1 amends and replaces the original all other types of participants (‘‘non-Customers’’) at Register on October 5, 2016.3 The filing in its entirety. To promote transparency of its the same price. The Exchange noted that the Commission received no comments proposed amendment, when EDGX filed Customer Overlay is currently in effect with respect regarding the proposal. On November Amendment No. 1 with the Commission, it also to all options traded on the Exchange. See 17, 2016, the Commission extended the submitted a comment letter to the file with a brief Amendment No. 1, supra note 5. description of Amendment No. 1, which the 9 In its proposal, the Exchange notes that although time period within which to approve Commission posted on its Web site and placed in it is possible for one or more Auctions for 50 the proposed rule change, disapprove the public comment file for SR–BatsEDGX–2016– contracts or more to overlap, each Auction will be the proposed rule change, or institute 41. The Exchange also posted a copy of its started in a sequence and will have a distinct proceedings to determine whether to Amendment No. 1 on its Web site when it filed the conclusion at which time the Auction will be amendment with the Commission. allocated. Therefore, when the first Auction disapprove the proposed rule change.4 6 A ‘‘Priority Customer’’ means any person or concludes, unrelated orders that then exist will be On December 15, 2016, EDGX filed entity that is not: (A) A broker or dealer in considered for participation in that Auction. If there securities; or (B) a Professional. The term ‘‘Priority is remaining unrelated order interest after the first sradovich on DSK3GMQ082PROD with NOTICES 18 15 U.S.C. 78s(b)(2). Customer Order’’ means an order for the account of Auction has been allocated, then such unrelated 19 17 a Priority Customer. See EDGX Rule 16.1(a)(45). A order interest will be considered for allocation CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). ‘‘Professional’’ is any person or entity that: (A) Is when the subsequent Auction is processed. If there not a broker or dealer in securities; and (B) places are multiple Auctions underway that are each 2 17 CFR 240.19b–4. more than 390 orders in listed options per day on terminated early pursuant to proposed EDGX Rule 3 See Securities Exchange Act Release No. 78988 average during a calendar month for its own 21.19(b)(2)(B) or (C), the Auctions will be processed (September 29, 2016), 81 FR 69172. beneficial account(s). All Professional orders shall sequentially based on the order in which they 4 See Securities Exchange Act Release No. 79339, be appropriately marked by Options Members. See commenced. See Notice, supra note 3, at 69178–79 81 FR 84625 (November 23, 2016). EDGX Rule 16.1(a)(46). and Amendment No. 1, supra note 5. See also VerDate Sep<11>2014 21:14 Jan 06, 2017 Jkt 241001 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 E:\FR\FM\09JAN1.SGM 09JAN1


Document Created: 2018-10-24 11:08:45
Document Modified: 2018-10-24 11:08:45
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 2427 
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR