82 FR 49068 - Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 964NY To Adopt Additional Self-Trade Prevention Modifiers
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 203 (October 23, 2017)
Federal Register Volume 82, Issue 203 (October 23, 2017)
| Page Range | 49068-49071 | |
| FR Document | 2017-22882 |
[Federal Register Volume 82, Number 203 (Monday, October 23, 2017)] [Notices] [Pages 49068-49071] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-22882] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81887; File No. SR-NYSEAMER-2017-21] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 964NY To Adopt Additional Self-Trade Prevention Modifiers October 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 October 3, 2017, NYSE American LLC (the ``Exchange'' or ``NYSE American'') 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 the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 964NY (Display, Priority and Order Allocation--Trading Systems). 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the filing is to amend Commentary .02 to NYSE American Options Rule 964NY (Display, Priority and Order Allocation-- Trading Systems) regarding the Exchange's Self-Trade Prevention (``STP'') functionality.\4\ The Exchange currently offers a basic form of self-trade prevention \5\ pursuant to which the Exchange cancels any resting Market Maker quote(s) and order(s) \6\ to buy (sell) that are priced equal to or higher (lower) than an incoming Market Maker quote, order or both to sell (buy) entered under the same trading permit identification (``TPID'').\7\ --------------------------------------------------------------------------- \4\ Self-Trade Prevention is only applicable to electronic trading on the Exchange. \5\ See Securities Exchange Act Release No. 66385 (February 13, 2012), 77 FR 9719 (February 17, 2012) (SR-NYSEAmex-2012-03). \6\ Self-Trade Prevention currently is applicable to the following order types used by Market Makers: ``PNP Orders'' and ``PNP-Blind Orders.'' PNP Orders and PNP-Blind Orders are defined in NYSE American Options Rule 900.3NY, and each is a type of non- routable Limit Order that is only executed on the Exchange. The Exchange notes that Market Makers primarily use these order types, as opposed to other order types offered by the Exchange, because they are similar to quotes (i.e., they are non-routable Limit Orders). See Regulatory Information Bulletin RBO-AMEX-12-04 at https://www.nyse.com/publicdocs/nyse/markets/american-options/rule-interpretations/2012/NYSEAmex%20RBO-12-04%20Self%20Trade.pdf. \7\ The Exchange uses a Market Maker's TPID to monitor for self- trades. TPIDs are assigned to Market Makers, as well as other ATP Holders, to identify them in the Exchange's systems. Market Makers on the Exchange are not able to submit orders on an agency basis. Thus, a Market Maker within a firm that conducts both an agency and market making business has a unique TPID that could only be used for that Market Maker's quotes and orders. --------------------------------------------------------------------------- The Exchange proposes to expand the self-trade functionality by adopting three STP modifiers. The proposed STP modifiers are designed to prevent incoming Market Maker order(s) or quote(s) designated with an STP modifier from executing against an opposite side resting Market Maker order(s) or quote(s) also designated with an STP modifier and entered from the same TPID. As proposed, the STP modifier on the incoming Market Maker order or quote would control the interaction between two orders and/or quotes marked with STP modifiers. The proposed STP modifiers are intended to prevent interaction between the same TPIDs. STP modifiers must be present on both the buy and the sell interest in order to prevent an interaction from occurring and to effect a cancel instruction. The Exchange believes the proposed functionality will allow ATP Holders to better manage order flow and prevent undesirable or unexpected executions with themselves. Given enhancements in technology in today's trading environment, ATP Holders often have multiple connections into the Exchange. Orders, for example, routed by the same ATP Holder via different connections may, in certain circumstances, trade against each other. The proposed STP modifiers would provide ATP Holders the opportunity to prevent these potentially undesirable interactions occurring under the same TPID on both the buy and sell side of an execution. The three new STP modifiers are discussed more thoroughly below. STP Cancel Newest (``STPN'') An incoming order or quote marked with the STPN modifier will not execute against opposite side resting interest marked with any STP modifier from the same TPID. The incoming order or quote marked with the STPN modifier will be cancelled back to the originating TPID. The resting order(s) or quote(s) will remain on the Consolidated Book. STPN Example 1: Market Maker 1 is configured for one of the three proposed STP modifiers and submits a quote to sell 100 contracts @ $5.50. A Customer order to sell 5 contracts @ $5.49 is resting on the Consolidated Book. Market Maker 1 enters an order to buy 100 contracts @ $5.60 with an STPN modifier. STPN Result 1: Market Maker 1 buys 5 contracts @ $5.49 because Market Maker 1 has no interest at $5.49. The remaining quantity of Market Maker 1's order will be cancelled due to Market Maker 1's quote at $5.50. STPN Example 2: Market Maker 1 is configured for one of the three proposed [[Page 49069]] STP modifiers and submits a quote to sell 100 contracts @ $5.50. A Customer order to sell 5 contracts @ $5.50 is resting on the Consolidated Book. Market Maker 1 enters an order to buy 200 contracts @ $5.60 with an STPN modifier. STPN Result 2: Market Maker 1's entire order to buy 200 contracts is cancelled due to Market Maker 1's quote at $5.50. No execution with any other interest at $5.50 occurs. STP Cancel Oldest (``STPO'') An incoming order or quote marked with the STPO modifier will not execute against opposite side resting interest market with any STP modifier from the same TPID. The resting order(s) or quote(s) marked with the STP modifier will be cancelled back to the originating TPID. The incoming order or quote marked with the STPO modifier will remain on the Consolidated Book. STPO Example 1: Market Maker 1 is configured for one of the three proposed STP modifiers and submits a quote to sell 100 contracts @ $5.50. Market Maker 1 enters an order to buy 100 contracts @ $5.50 with an STPO modifier. STPO Result 1: Market Maker 1's buy order cannot trade with Market Maker 1's quote because the buy order is marked for STP and the quotes are configured for STP. Market Maker 1's quote to sell is cancelled and removed from the Consolidated Book. Market Maker 1's buy order will post to the Consolidated Book at $5.50. STPO Example 2: Market Maker 1 has a resting order on the Consolidated Book to sell 10 contracts @ 5.51 with an STPN modifier. Market Maker 1 is configured for one of the three proposed STP modifiers and submits a quote to sell 100 contracts @ $5.50. Customer 1 has an order to sell 5 contracts @ $5.50 resting on the Consolidated Book. Customer 2 has an order to sell 10 contracts @ $5.51 resting on the Consolidated Book. Market Maker 1 enters an order to buy 100 contracts @ $5.51 with an STPO modifier. STPO Result 2: Market Maker 1's buy order cannot trade with Market Maker 1's quote because the buy order is marked for STP and the quotes are configured for STP. Market Maker 1's quote to sell 100 contracts @ $5.50 is cancelled and removed from the Consolidated Book. Market Maker 1's buy order will trade 5 contracts with Customer 1 at $5.50, leaving 95 contracts. The remaining 95 contracts will now attempt to trade at the $5.51 price level. Market Maker 1's buy order, however, cannot trade with Market Maker 1's resting sell order and the sell order is therefore cancelled and removed from the Consolidated Book. Market Maker 1's buy order will then trade 10 contracts with the Customer 2 @ $5.51. The remaining 85 contracts of Market Maker 1's buy order will post to the Consolidated Book at $5.51. STP Cancel Both (``STPC'') An incoming order or quote marked with the STPC modifier will not execute against opposite side resting interest marked with any STP modifier from the same TPID. The entire size of both orders and/or quotes will be cancelled back to the originating TPID. STPC Example 1: Market Maker 1 is configured for one of the three proposed STP modifiers and submits a quote to sell 100 contracts @ $5.50. Market Maker 1 enters an order to buy 100 contracts @ $5.50 with an STPC modifier. STPC Result 1: No execution occurs. Both Market Maker 1's buy order and Market Maker 1's quote to sell are cancelled and removed from the Consolidated Book. STPC Example 2: Market Maker 1 has a resting order on the Consolidated Book to sell 10 contracts @ $5.51 with an STPN modifier. Market Maker 1 is configured for one of the three proposed STP modifiers and submits a quote to sell 100 contracts @ $5.50. Market Maker 1 enters an additional order to buy 100 contracts @ $5.51 with an STPC modifier. STPC Result 2: Market Maker 1's buy order cannot trade with Market Maker 1's quote to sell 100 contracts @ $5.50 because the buy order is marked for STP and the quotes are configured for STP. Both the Market Maker 1 buy order and the Market Maker 1 quote to sell are cancelled and removed from the Consolidated Book. Market Maker 1's resting order to sell 10 contracts @ $5.51 is not impacted as the incoming Market Maker 1 buy order never attempts to trade at the $5.51 price level and therefore, Market Maker 1's resting sell order remains on the Consolidated Book. Additional Discussion As with the current functionality, the enhanced STP functionality would be in effect throughout the trading day for all Market Makers on the Exchange,\8\ but not during Trading Auctions.\9\ In this regard, the Exchange believes, as it previously noted when STP was first adopted, it is highly unlikely that a Market Maker would trade against its own resting interest during a Trading Auction.\10\ The enhanced STP functionality would also not apply to individual legs of Complex Orders. As previously noted by the Exchange, senders of Complex Orders, including Market Makers, view them as discrete orders with a desire to execute all legs and to prevent the execution of one leg would be contrary to the investment purpose of the Complex Order.\11\ --------------------------------------------------------------------------- \8\ Market Markers on the Exchange would not have the ability to deactivate Self-Trade Prevention or change any settings related to it. \9\ See, e.g., NYSE American Options Rule 952NY. \10\ See supra, note 5. The Exchange also previously noted that it would be difficult to implement STP from a technological and operational perspective because it would require the Exchange to cancel resting, executable Market Maker trading interest as it is calculating the price at which to conduct the Trading Auction. \11\ See supra, note 5. --------------------------------------------------------------------------- As proposed, the enhanced STP functionality would not be applicable to Qualified Contingent Cross (``QCC'') Orders,\12\ and to orders executed in the Exchange's Customer Best Execution (``CUBE'') Auction by ATP Holders.\13\ Both QCC Orders and CUBE Orders are paired orders intended to serve a particular investment purpose that are contingent on the execution of the options leg, in the case of a QCC Order, and the execution of both sides of a CUBE Order. Because the non-execution of one or more legs of a QCC Order or a CUBE Order is contrary to the investment purpose of such orders, the Exchange has determined not to apply STP in a manner that would prevent the execution of a QCC Order or a CUBE Order. The Exchange notes that the enhanced STP functionality proposed herein would not relieve or modify a Market Maker's obligations under the Exchange's Rules, such as the Market Maker's quoting obligations, or any other rules and regulations to which the Market Maker is subject. --------------------------------------------------------------------------- \12\ A QCC Order is comprised of an originating order to buy or sell at least 1,000 contracts, or 10,000 mini-options contracts, that is identified as being part of a qualified contingent trade, as that term is defined in Commentary .01 to Rule 900.3NY, coupled with a contra-side order or orders totaling an equal number of contracts. See NYSE American Options Rule 900.3NY(y). \13\ CUBE is the Exchange's price improvement auction mechanism that allows an ATP Holder to electronically submit a limit order it represents as agent on behalf of a public customer, broker dealer, or any other entity (``CUBE Order'') provided that the Initiating Participant guarantees the execution of the CUBE Order by submitting a contra-side order representing principal interest or interest it has solicited to trade with the CUBE Order at a specified price or by utilizing auto-match or auto-match limit features provided in the Rule. See NYSE American Options Rule 971.1NY. --------------------------------------------------------------------------- The enhanced STP functionality proposed herein is similar to functionality currently offered by the Bats Exchange, Inc. (``Bats'').\14\ In [[Page 49070]] particular, Bats offers Match Trade Prevention (``MTP''), a self-trade prevention functionality where any incoming order designated with an MTP modifier is prevented from executing against a resting opposite side order also designated with an MTP modifier and originating from the same market participant identifier. Additionally, NYSE American, the Exchange's equities market, provides for self-trade prevention order modifiers that prevent orders so designated from executing against resting opposite side orders entered under the same equity trading permit identification that are also designated with the modifier.\15\ With two exceptions, the Exchange is proposing to adopt all the STP modifiers that are currently available on Bats.\16\ And with one exception, the Exchange is proposing to adopt all the STP modifiers that are currently available on the Exchange's equities market.\17\ The Exchange notes that while the Bats rule and the NYSE American equities rule apply to orders, and not to orders and quotes, the Exchange's proposal is otherwise similar to functionality offered on Bats and on the Exchange's equities market. --------------------------------------------------------------------------- \14\ See Bats Rule 21.1(g). \15\ See NYSE American Rule 7.31E(i)(2). \16\ Bats currently offers MTP Decrement and Cancel (``MDC'') where an incoming order with the MDC modifier is prevented from executing against opposite side resting interest marked with any MTP modifier originating from the same user on that exchange. If both orders are equal in size, both orders are canceled. For those not equivalent in size, the smaller order is canceled and the larger order is decremented by the size of the smaller order with the balance remaining on the order book. Bats also currently offers MTP Cancel Smallest (``MCS'') where an incoming order with the MCS modifier is prevented from executing against opposite side resting interest marked with any MTP modifier originating from the same user. If both orders are equal in size, both orders are cancelled. For those not equivalent in size, the smaller order is canceled and the larger order remains on the book. \17\ The NYSE American equities market also currently offers STP Decrement and Cancel (``STPD'') that provides similar self-trade prevention functionality as the Bats offering. At this time, the Exchange is not proposing to adopt the STPD modifier for the options market. --------------------------------------------------------------------------- The NASDAQ Options Market (``NOM'') currently offers functionality that applies to orders and quotes, but in a limit manner.\18\ Notwithstanding the fact that the STPN and STPC modifiers, as proposed for orders and quotes, are not currently available on an options market, the Exchange does not believe the proposed functionality is novel and does not raise any new regulatory concerns. Further, the STP functionality currently available on the Exchange applies to both orders and quotes, and Market Makers are therefore generally familiar with the application of self-trade prevention to orders and quotes. The Exchange further believes the proposed adoption of the STPN and STPC modifiers would add further specificity to the rule while aligning the proposed functionality with Market Makers' expectation. Self-trade prevention is a risk mechanism tool to prevent inadvertent trading of both orders and quotes that has been widely used for many years in both the equities and options markets. The enhanced functionality proposed herein would provide Market Makers with a method of managing their trading interest that is similar to functionality currently available on other markets. --------------------------------------------------------------------------- \18\ See NOM, Chapter VI, Section 10(6). The NOM anti- internalization (``AIQ'') functionality works similar to the proposed STPO modifier in that quotes and orders entered by NOM market makers using the same market participant identifier are automatically prevented from interacting with each other. Rather than executing quotes and orders from the same market participant identifier, the AIQ functionality cancels the oldest of the quotes and orders. --------------------------------------------------------------------------- The Exchange also proposes at this time to make a procedural change for announcements regarding the STP functionality. Presently the Exchange issues Regulatory Information Bulletins when making announcements related to STP functionality. Going forward, the Exchange proposes to issue a Trader Update in lieu of a Regulatory Information Bulletin. Regulatory Information Bulletins generally contain information regarding legal and regulatory matters while a Trader Update deals with issues such as trading, systems changes and real-time market announcements. The Exchange believes that it is more appropriate to make announcements regarding the STP functionality via Trader Update. Trader Updates, like Regulatory Information Bulletins, are electronically distributed to ATP Holders and posted on the Exchange's Web site. Accordingly, the Exchange proposes to amend Commentary .02 to current Rule 964NY by replacing reference to ``Regulatory Information Bulletin'' with ``Trader Update.'' Implementation Because of the technology changes associated with this proposed rule change, the Exchange will announce by Trader Update the implementation date of the proposed rule change, which will be no later than 60 days from the effective date of this rule filing. 2.Statutory Basis The proposed rule change is consistent with Section 6(b) \19\ of the Securities Exchange Act of 1934 (the ``Act''), in general, and furthers the objectives of Section 6(b)(5),\20\ 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 mechanisms of a free and open market and a national market system. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78f(b). \20\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- As discussed above, the Exchange believes that the proposed rule change is designed to promote just and equitable principles of trade because it would provide Market Makers with a functionality that is similar to functionality currently available on other markets.\21\ Additionally, the Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest, because it would allow Market Makers to better manage their trading interest and provide a means to prevent executions against their own trading interest. --------------------------------------------------------------------------- \21\ See supra, notes 14, 15 and 18. --------------------------------------------------------------------------- The Exchange notes that Market Makers have expressed an interest in the proposed functionality as it would prevent them from inadvertently trading with their own interest. In such a situation, ATP Holders currently ask the Exchange to nullify such inadvertent trades, which they are permitted to do under the Exchange's rules because the ATP Holder is on both sides of the trade.\22\ While the proposed STP functionality would prevent inadvertent self-trading, the Exchange notes that the functionality would also prevent intentional self- trading. In this regard, the proposed rule change provides a means to prevent manipulative conduct such as ``wash trading.'' --------------------------------------------------------------------------- \22\ See NYSE American Options Rule 966NY. --------------------------------------------------------------------------- Finally, the replacement of reference to Regulatory Information Bulletin with Trader Update, would foster cooperation and coordination with persons engaged in facilitating transactions in securities as Trader Updates deal with issues such as trading, systems changes and real-time market announcements and are electronically distributed to ATP Holders and posted on the Exchange's Web site. [[Page 49071]] 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 not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to enhance STP functionality provided to Exchange Market Makers, and will benefit members that wish to protect their orders and quotes against trading with other orders and quotes that originate from the same TPID. The new functionality, which is similar to functionality currently offered on other markets, is also voluntary, and the Exchange therefore does not believe that providing an enhanced offering to prevent against self-trading will have any significant impact on competition. The Exchange believes that the proposed rule change is evidence of the competitive environment in the options industry where exchanges must continually improve their offerings to maintain competitive standing. 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 Because the foregoing 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 for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b- 4(f)(6) thereunder.\23\ --------------------------------------------------------------------------- \23\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b- 4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. --------------------------------------------------------------------------- A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act \24\ normally does not become operative for 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) \25\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the Exchange can implement the enhanced functionality without delay. The Exchange believes that waiver of the operative delay is consistent with the protection of investors and the public interest because it would enable the Exchange to implement the change when the technology supporting the change is available, which the Exchange anticipates will be no later than 60 days from the effective date of this rule filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the new functionality is designed to provide market makers with a tool to prevent undesirable executions against themselves and therefore may assist market makers in managing their order flow. Therefore, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.\26\ --------------------------------------------------------------------------- \24\ 17 CFR 240.19b-4(f)(6). \25\ 17 CFR 240.19b-4(f)(6)(iii). \26\ For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- At any time within 60 days of the filing of the 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 to determine whether the proposed rule should be approved or 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-NYSEAMER-2017-21 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-NYSEAMER-2017-21. 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 such 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-NYSEAMER-2017-21, and should be submitted on or before November 13, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\27\ --------------------------------------------------------------------------- \27\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-22882 Filed 10-20-17; 8:45 am] BILLING CODE 8011-01-P
![49068 Federal Register / Vol. 82, No. 203 / Monday, October 23, 2017 / Notices
provides additional clarity in the rule Exchange’s Web site at www.nyse.com, The Exchange proposes to expand the
text and additional analysis of several at the principal office of the Exchange, self-trade functionality by adopting
aspects of the proposal, thus facilitating and at the Commission’s Public three STP modifiers. The proposed STP
the Commission’s ability to make the Reference Room. modifiers are designed to prevent
findings set forth above to approve the incoming Market Maker order(s) or
II. Self-Regulatory Organization’s
proposal. Accordingly, the Commission quote(s) designated with an STP
Statement of the Purpose of, and
finds good cause for approving the modifier from executing against an
Statutory Basis for, the Proposed Rule
proposed rule change, as modified by opposite side resting Market Maker
Change
Amendment No. 1, on an accelerated order(s) or quote(s) also designated with
basis. In its filing with the Commission, the an STP modifier and entered from the
self-regulatory organization included same TPID. As proposed, the STP
VI. Conclusion statements concerning the purpose of, modifier on the incoming Market Maker
It is therefore ordered, pursuant to and basis for, the proposed rule change order or quote would control the
Section 19(b)(2) of the Act,200 that the and discussed any comments it received interaction between two orders and/or
proposed rule change (SR–BatsEDGX– on the proposed rule change. The text quotes marked with STP modifiers. The
2017–29), as modified by Amendment of those statements may be examined at proposed STP modifiers are intended to
No. 1, be, and hereby is, approved on an the places specified in Item IV below. prevent interaction between the same
accelerated basis. The Exchange has prepared summaries, TPIDs. STP modifiers must be present
set forth in sections A, B, and C below, on both the buy and the sell interest in
For the Commission, by the Division of
Trading and Markets, pursuant to delegated of the most significant parts of such order to prevent an interaction from
authority.201 statements. occurring and to effect a cancel
Eduardo A. Aleman, A. Self-Regulatory Organization’s instruction.
Assistant Secretary. Statement of the Purpose of, and The Exchange believes the proposed
[FR Doc. 2017–22886 Filed 10–20–17; 8:45 am] Statutory Basis for, the Proposed Rule functionality will allow ATP Holders to
Change better manage order flow and prevent
BILLING CODE 8011–01–P
undesirable or unexpected executions
1. Purpose with themselves. Given enhancements
SECURITIES AND EXCHANGE The purpose of the filing is to amend in technology in today’s trading
COMMISSION Commentary .02 to NYSE American environment, ATP Holders often have
Options Rule 964NY (Display, Priority multiple connections into the Exchange.
[Release No. 34–81887; File No. SR– and Order Allocation—Trading Orders, for example, routed by the same
NYSEAMER–2017–21] ATP Holder via different connections
Systems) regarding the Exchange’s Self-
Trade Prevention (‘‘STP’’) may, in certain circumstances, trade
Self-Regulatory Organizations; NYSE
functionality.4 The Exchange currently against each other. The proposed STP
American LLC; Notice of Filing and
offers a basic form of self-trade modifiers would provide ATP Holders
Immediate Effectiveness of Proposed
prevention 5 pursuant to which the the opportunity to prevent these
Rule Change To Amend Rule 964NY To
Exchange cancels any resting Market potentially undesirable interactions
Adopt Additional Self-Trade Prevention
Maker quote(s) and order(s) 6 to buy occurring under the same TPID on both
Modifiers
(sell) that are priced equal to or higher the buy and sell side of an execution.
October 17, 2017. (lower) than an incoming Market Maker The three new STP modifiers are
Pursuant to Section 19(b)(1) 1 of the quote, order or both to sell (buy) entered discussed more thoroughly below.
Securities Exchange Act of 1934 (the under the same trading permit STP Cancel Newest (‘‘STPN’’)
‘‘Act’’),2 and Rule 19b–4 thereunder,3 identification (‘‘TPID’’).7
notice is hereby given that on October An incoming order or quote marked
3, 2017, NYSE American LLC (the 4 Self-Trade Prevention is only applicable to with the STPN modifier will not execute
‘‘Exchange’’ or ‘‘NYSE American’’) filed electronic trading on the Exchange. against opposite side resting interest
with the Securities and Exchange
5 See Securities Exchange Act Release No. 66385
marked with any STP modifier from the
(February 13, 2012), 77 FR 9719 (February 17, 2012) same TPID. The incoming order or quote
Commission (the ‘‘Commission’’) the (SR–NYSEAmex–2012–03).
proposed rule change as described in 6 Self-Trade Prevention currently is applicable to
marked with the STPN modifier will be
Items I and II below, which Items have the following order types used by Market Makers: cancelled back to the originating TPID.
been prepared by the self-regulatory ‘‘PNP Orders’’ and ‘‘PNP–Blind Orders.’’ PNP The resting order(s) or quote(s) will
organization. The Commission is
Orders and PNP–Blind Orders are defined in NYSE remain on the Consolidated Book.
American Options Rule 900.3NY, and each is a type STPN Example 1: Market Maker 1 is
publishing this notice to solicit of non-routable Limit Order that is only executed
configured for one of the three proposed
comments on the proposed rule change on the Exchange. The Exchange notes that Market
Makers primarily use these order types, as opposed STP modifiers and submits a quote to
from interested persons.
to other order types offered by the Exchange, sell 100 contracts @ $5.50. A Customer
I. Self-Regulatory Organization’s because they are similar to quotes (i.e., they are order to sell 5 contracts @ $5.49 is
non-routable Limit Orders). See Regulatory
Statement of the Terms of the Substance Information Bulletin RBO–AMEX–12–04 at https:// resting on the Consolidated Book.
of the Proposed Rule Change www.nyse.com/publicdocs/nyse/markets/american- Market Maker 1 enters an order to buy
The Exchange proposes to amend options/rule-interpretations/2012/ 100 contracts @ $5.60 with an STPN
NYSEAmex%20RBO-12-04%20Self%20Trade.pdf. modifier.
Rule 964NY (Display, Priority and Order 7 The Exchange uses a Market Maker’s TPID to
STPN Result 1: Market Maker 1 buys
ethrower on DSK3G9T082PROD with NOTICES
Allocation—Trading Systems). The monitor for self-trades. TPIDs are assigned to
proposed rule change is available on the Market Makers, as well as other ATP Holders, to 5 contracts @ $5.49 because Market
identify them in the Exchange’s systems. Market Maker 1 has no interest at $5.49. The
200 15U.S.C. 78s(b)(2).
Makers on the Exchange are not able to submit remaining quantity of Market Maker 1’s
201 17
orders on an agency basis. Thus, a Market Maker order will be cancelled due to Market
CFR 200.30–3(a)(12). within a firm that conducts both an agency and
1 15 U.S.C. 78s(b)(1).
market making business has a unique TPID that Maker 1’s quote at $5.50.
2 15 U.S.C. 78a.
could only be used for that Market Maker’s quotes STPN Example 2: Market Maker 1 is
3 17 CFR 240.19b–4. and orders. configured for one of the three proposed
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![Federal Register / Vol. 82, No. 203 / Monday, October 23, 2017 / Notices 49071
B. Self-Regulatory Organization’s the Commission to waive the 30-day file number should be included on the
Statement on Burden on Competition operative delay so that the Exchange can subject line if email is used. To help the
The Exchange does not believe that implement the enhanced functionality Commission process and review your
the proposed rule change will impose without delay. The Exchange believes comments more efficiently, please use
any burden on competition not that waiver of the operative delay is only one method. The Commission will
necessary or appropriate in furtherance consistent with the protection of post all comments on the Commission’s
of the purposes of the Act. The investors and the public interest Internet Web site (http://www.sec.gov/
proposed rule change is designed to because it would enable the Exchange to rules/sro.shtml). Copies of the
enhance STP functionality provided to implement the change when the submission, all subsequent
Exchange Market Makers, and will technology supporting the change is amendments, all written statements
benefit members that wish to protect available, which the Exchange with respect to the proposed rule
their orders and quotes against trading anticipates will be no later than 60 days change that are filed with the
with other orders and quotes that from the effective date of this rule filing. Commission, and all written
originate from the same TPID. The new The Commission believes that waiving communications relating to the
the 30-day operative delay is consistent proposed rule change between the
functionality, which is similar to
with the protection of investors and the Commission and any person, other than
functionality currently offered on other
public interest because the new those that may be withheld from the
markets, is also voluntary, and the
functionality is designed to provide public in accordance with the
Exchange therefore does not believe that
market makers with a tool to prevent provisions of 5 U.S.C. 552, will be
providing an enhanced offering to
undesirable executions against available for Web site viewing and
prevent against self-trading will have
themselves and therefore may assist printing in the Commission’s Public
any significant impact on competition.
market makers in managing their order Reference Room, 100 F Street NE.,
The Exchange believes that the
flow. Therefore, the Commission hereby Washington, DC 20549 on official
proposed rule change is evidence of the
waives the operative delay and business days between the hours of
competitive environment in the options designates the proposed rule change
industry where exchanges must 10:00 a.m. and 3:00 p.m. Copies of such
operative upon filing.26 filing also will be available for
continually improve their offerings to At any time within 60 days of the
maintain competitive standing. inspection and copying at the principal
filing of the proposed rule change, the office of the Exchange. All comments
C. Self-Regulatory Organization’s Commission summarily may received will be posted without change;
Statement on Comments on the temporarily suspend such rule change if the Commission does not edit personal
Proposed Rule Change Received From it appears to the Commission that such identifying information from
Members, Participants, or Others action is necessary or appropriate in the submissions. You should submit only
public interest, for the protection of information that you wish to make
No written comments were solicited
investors, or otherwise in furtherance of available publicly. All submissions
or received with respect to the proposed
the purposes of the Act. If the should refer to File Number SR–
rule change.
Commission takes such action, the NYSEAMER–2017–21, and should be
III. Date of Effectiveness of the Commission shall institute proceedings submitted on or before November 13,
Proposed Rule Change and Timing for to determine whether the proposed rule 2017.
Commission Action should be approved or disapproved.
For the Commission, by the Division of
Because the foregoing proposed rule IV. Solicitation of Comments Trading and Markets, pursuant to delegated
change does not: (i) Significantly affect Interested persons are invited to authority.27
the protection of investors or the public submit written data, views, and Eduardo A. Aleman,
interest; (ii) impose any significant arguments concerning the foregoing, Assistant Secretary.
burden on competition; and (iii) become including whether the proposed rule [FR Doc. 2017–22882 Filed 10–20–17; 8:45 am]
operative for 30 days from the date on change is consistent with the Act. BILLING CODE 8011–01–P
which it was filed, or such shorter time Comments may be submitted by any of
as the Commission may designate, it has the following methods:
become effective pursuant to Section SECURITIES AND EXCHANGE
19(b)(3)(A) of the Act and Rule 19b– Electronic Comments
COMMISSION
4(f)(6) thereunder.23 • Use the Commission’s Internet
A proposed rule change filed comment form (http://www.sec.gov/ Submission for OMB Review;
pursuant to Rule 19b–4(f)(6) under the rules/sro.shtml); or Comment Request
Act 24 normally does not become • Send an email to rule-comments@
operative for 30 days after the date of its sec.gov. Please include File Number SR– Upon Written Request, Copies Available
filing. However, Rule 19b–4(f)(6)(iii) 25 NYSEAMER–2017–21 on the subject From: Securities and Exchange
permits the Commission to designate a line. Commission, Office of FOIA Services,
shorter time if such action is consistent 100 F Street NE., Washington, DC
with the protection of investors and the Paper Comments 20549–2736
public interest. The Exchange has asked • Send paper comments in triplicate Extension:
to Secretary, Securities and Exchange Form N–17f–2, SEC File No. 270–317,
23 17 CFR 240.19b–4(f)(6). As required under Rule Commission, 100 F Street NE., OMB Control No. 3235–0360
ethrower on DSK3G9T082PROD with NOTICES
19b–4(f)(6)(iii), the Exchange provided the Washington, DC 20549–1090.
Commission with written notice of its intent to file Notice is hereby given that, pursuant
the proposed rule change, along with a brief All submissions should refer to File to the Paperwork Reduction Act of 1995
description and the text of the proposed rule Number SR–NYSEAMER–2017–21. This (44 U.S.C. 350l et seq.), the Securities
change, at least five business days prior to the date
of filing of the proposed rule change, or such 26 For purposes only of waiving the 30-day
and Exchange Commission (the
shorter time as designated by the Commission. operative delay, the Commission has considered the
‘‘Commission’’) has submitted to the
24 17 CFR 240.19b–4(f)(6).
proposed rule’s impact on efficiency, competition,
25 17 CFR 240.19b–4(f)(6)(iii). and capital formation. See 15 U.S.C. 78c(f). 27 17 CFR 200.30–3(a)(12).
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Document Created: 2017-10-21 02:35:44
Document Modified: 2017-10-21 02:35:44
| 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 49068 |
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