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)

[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]]

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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.
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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 955NY.
    \4\ See Securities Exchange Act Release No. 79328 (November 16, 
2016), 81 FR 83888 (``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 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\
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    \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.
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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 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.
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    \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.
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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 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\
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    \9\ See Notice, supra note 4, at 83889.
    \10\ See id.
    \11\ See id.
    \12\ 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.\13\
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    \13\ 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 \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.
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    \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).
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    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.
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    \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.
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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.
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    \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