Notice2021-17757
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 952NY To Provide an Option for ATP Holders To Instruct the Exchange To Cancel Marketable Orders if a Series Is Not Opened Within a Specified Time Period
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Published
August 19, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 158 (Thursday, August 19, 2021)</title>
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[Federal Register Volume 86, Number 158 (Thursday, August 19, 2021)]
[Notices]
[Pages 46746-46749]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17757]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92668; File No. SR-NYSEAMER-2021-36]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 952NY To Provide an Option for ATP Holders To Instruct the
Exchange To Cancel Marketable Orders if a Series Is Not Opened Within a
Specified Time Period
August 13, 2021.
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 August 10, 2021, NYSE American LLC (``NYSE American'' or
the ``Exchange'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 952NY (Opening Process) to
provide an option for ATP Holders to instruct the Exchange to cancel
Marketable orders if a series is not opened within a specified time
period. The proposed rule change is available on the Exchange's website
at <a href="http://www.nyse.com">www.nyse.com</a>, 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 952NY (Opening Process) to
provide an option for ATP Holders to instruct the Exchange to cancel
Marketable \4\ orders if a series is not opened within a specified time
period.
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\4\ The term ``Marketable'' is defined in Rule 900.2NY(39) to
mean, for a Limit Order, the price matches or crosses the NBBO on
the other side of the market and that market orders are always
considered marketable.
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Rule 952NY sets forth the Exchange's process for opening and
reopening a series for trading. Rule 952NY(b) provides that the
Exchange will accept market and limit orders for inclusion in the
opening auction process (``Auction Process'') until such time as the
Auction Process is initiated in that option series. As further provided
for in Rule 952NY(b), once the primary market for the underlying
security disseminates a quote and a trade that is at or within the
quote, the Exchange will open the related option series automatically
based on the principles and procedures set forth in paragraphs (A)-(F)
of Rule 952NY(b). However, as described in Rule 952NY(b)(D), the
Exchange will not conduct an Auction Process if the bid-ask
differential for that series is not within an acceptable range, i.e.,
is not within the bid-ask differential guidelines established in Rule
925NY(b)(4). Because Rule 952NY(b)(D) cross-references the bid-ask
differential requirement of Rule 925NY(b)(4), which relates to the
obligations of Market Makers in appointed classes, the Exchange will
not open a series for trading if Market Makers have not entered
quotations in a series that are within such bid-ask differentials. If a
series does not open for trading, market and limit orders entered in
advance of the Auction Process will remain in the Consolidated Book and
will not be routed, even if another exchange opens that series for
trading and such orders become Marketable against an away market NBBO.
The Exchange proposes to amend Rule 952NY to provide ATP Holders
[[Page 46747]]
with an option to instruct the Exchange to cancel their Marketable
orders if an option series has not been opened within a specified time
period. As proposed, new subparagraph (d) to Rule 952NY \5\ would
provide that an ATP Holder may instruct the Exchange to cancel all
Marketable orders in a series, including GTC Orders, if that series has
not opened within a designated time period after the Exchange receives
notification that the primary market for the underlying security has
disseminated a quote and a trade that is at or within the quote. This
proposed change is designed to provide ATP Holders that electronically
enter orders before Core Trading Hours \6\ begin in a multitude of
option series with an optional risk protection mechanism for the
Exchange to automatically cancel Marketable orders on their behalf. ATP
Holders could submit requests to cancel such orders themselves, but
would have to monitor which series have been opened on the Exchange.
The proposed optional functionality would reduce operational risk for
ATP Holders that sent orders in multiple series by providing them with
a bulk cancel feature that would instruct the Exchange to cancel orders
on their behalf if a series has not been opened by a specified time.
Specifically, rather than have Marketable orders remain unexecuted on
the Consolidated Book if the option series has not opened on the
Exchange within a specified time period, ATP Holders would have the
option to instruct the Exchange to cancel such orders back to the ATP
Holder. Once cancelled back, the ATP Holder could choose to re-enter
such orders on an exchange that has opened that series for trading.
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\5\ The Exchange proposes a non-substantive amendment to Rule
952NY to renumber current subparagraph (d) to that Rule as
subparagraph (e).
\6\ The term ``Core Trading Hours'' is defined in Rule
900.2NY(15) to mean the regular trading hours for business set forth
in the rules of the primary markets underlying those option classes
listed on the Exchange.
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The Exchange further proposes to provide that the Exchange would
not cancel any Marketable orders received after the designated time
period ends, even if the series has not yet opened. The Exchange
believes that if an ATP Holder sends an order in an option series to
the Exchange after Core Trading Hours begin, and more than the
designated time period after the primary market for the underlying
security has opened (i.e., the series open trigger), such ATP Holder
should be aware that the Exchange has not opened that series for
trading when it sends the order to the Exchange, and therefore intends
for such order to be sent to the Exchange even though it has not yet
opened that series for trading.
Proposed Rule 952NY(d) would also provide that the designated time
period would be two minutes, unless determined otherwise by the
Exchange and announced to ATP Holders via Trader Update, in which case
the designated time period would not be greater than five minutes. The
Exchange believes that a two-minute period would provide time for
Market Makers to update their quotes after the Exchange receives the
series open trigger so that the bid-ask differential in an option
series can be within an acceptable range and therefore the series can
open for trading on the Exchange. Specifically, the Exchange has
observed that on a typical trading day, nearly 98% of all series are
opened by 9:32 a.m. Eastern Time, and nearly 99% of all series are
opened by 9:35 a.m. Eastern Time. By waiting two minutes before
cancelling orders, the Exchange believes that the majority of series
would be opened, thereby minimizing the number of series where there
would be a bulk cancel of Marketable orders. In addition, ATP Holders
that want to cancel orders less than two minutes after the series open
trigger would still be able to submit requests to cancel individual
orders. The Exchange further believes that it is appropriate to provide
the Exchange with the ability to adjust the designated time period via
Trader Update to no more than five minutes because it would provide
additional flexibility for the Exchange to respond to the needs of ATP
Holders to implement the instruction to cancel Marketable orders on a
different time basis. The Exchange believes that a cap of five minutes
would be reasonable because very few series remain unopened five
minutes after the series open trigger. The Exchange notes that this is
an optional instruction, and therefore no ATP Holder is required to use
this proposed new risk feature. The Exchange further notes that
Exchange flexibility in connection with designating time periods for
risk limitation measures is consistent with current Exchange rules.\7\
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\7\ See, e.g., Commentary .03 to Rule 928NY (Risk Limitation
Mechanism) (providing that the Exchange will ``specify via Trader
Update any applicable time period(s) for the Risk Limitation
Mechanisms; provided, however, that the Exchange will not specify a
time period of less than 100 milliseconds, inclusive of the duration
of any trading halt occurring within that time''). The Exchange also
provides for flexibility in its rules for other risk mechanism
parameters. See, e.g., Rule 967NY(b) (``Unless determined otherwise
by the Exchange and announced to ATP Holders via Trader Update, the
specified percentage shall be as follows: 100% for the contra-side
NBB or NBO priced at or below $1.00; and 50% for the contra-side NBB
or NBO priced above $1.00.'')
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Finally, proposed Rule 952NY(d) would provide that this instruction
would not be available for orders entered by Floor Brokers via the
Electronic Order Capture System.\8\ The current EOC provider could not
systemically apply the proposed optional instruction on a firm-by firm
basis and therefore it would not be available to individual Floor
Brokers. The Exchange believes that because of the unique role of Floor
Brokers on the Exchange to provide manual, high-touch services on
behalf of customers, Floor Brokers should not need this optional
feature. Specifically, unlike an off-Floor ATP Holder that may be
relying on an algorithm to send orders in a multitude of series, a
Floor Broker that provides high-touch services would be present on the
Trading floor and in a position to monitor whether the Exchange has
opened a series, and if not, whether to cancel an order that becomes
Marketable.
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\8\ As defined in Rule 900.2NY(20), the term ``Electronic Order
Capture System'' or ``EOC'' means the Exchange's electronic audit
trail and order tracking system that provides an accurate time-
sequenced record of all orders and transactions on the Exchange. As
further defined, the EOC includes the electronic communications
interface between EOC booth terminals and the Floor Broker Hand Held
applications and also contains an electronic order entry screen.
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The Exchange will announce via Trader Update when this proposed
optional feature will be available, which, subject to effectiveness of
this proposed rule change, the Exchange anticipates will be in early
August 2021.
2. Statutory Basis
For the reasons set forth above, the Exchange believes the proposed
rule change is consistent with Section 6(b) of the Act \9\ in general,
and furthers the objectives of Sections 6(b)(4) and (5) of the Act,\10\
in that it is designed to promote just and equitable principles of
trade, 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it is designed to provide ATP Holders
with an optional risk protection mechanism to instruct the Exchange to
cancel Marketable orders in an option series on their behalf if that
series has not opened on the Exchange within a
[[Page 46748]]
specified time period. The Exchange does not open a series if Market
Makers have not quoted within the acceptable range of bid-ask
differentials as specified in Rule 925NY(b)(4). However, it is possible
that another exchange, with different opening process rules, could have
opened that series for trading even if the Exchange does not. If an
order that an ATP Holder sent to the Exchange before Core Trading Hours
begins becomes Marketable on another exchange before the Exchange opens
that series for trading, such ATP Holder could choose to cancel the
order and then send it to the other exchange. By providing ATP Holders
with an option to instruct the Exchange to cancel their Marketable
orders in a series under the specified circumstances, the Exchange
would perform this monitoring function on behalf of ATP Holders,
thereby reducing their operational risk.
The Exchange believes that it would remove impediments to and
perfect the mechanism of a free and open market and a national market
system to provide that such instructions would not be applicable to
Marketable orders received after the designated time period ends
because the Exchange believes that ATP Holders that send orders to the
Exchange more than a specified period after series open trigger should
be aware that the Exchange has not yet opened that series for trading.
Therefore, any orders sent after that designated time period ends were
likely purposefully directed to the Exchange even though the Exchange
has not yet opened that series for trading.
The Exchange believes that the proposed designated time period of
two minutes would remove impediments to and perfect the mechanism of a
free and open market and a national market system because it is
designed to provide time for Market Makers to update their quotes so
that the bid-ask differential in an option series is within an
acceptable range and therefore the series can open for trading on the
Exchange. The Exchange believes that the proposed two-minute period is
reasonable because on a typical trading day, approximately 98% of all
series that trade on the Exchange are open. ATP Holders that want to
cancel orders less than two minutes after the series open trigger would
still be able to submit requests to cancel individual orders. The
Exchange further believes that providing the Exchange with flexibility
to change the designated time period via Trader Update, provided that
it would never be longer than five minutes, would enable the Exchange
to respond to the needs of ATP Holders to implement the instruction to
cancel Marketable orders on a different time basis. The Exchange
believes that the proposed cap of five minutes would remove impediments
to and perfect the mechanism of a free and open market and a national
market system because on a typical day, approximately 99% of all series
are opened by 9:35 a.m. Eastern Time. The Exchange further notes that
this proposed risk mechanism would be optional, and therefore ATP
Holders would not be required to request that the Exchange cancel
unexecuted Marketable orders on their behalf if a series has not opened
within the designated time period. In addition, Exchange flexibility in
connection with designating time periods for risk limitation measures
is consistent with current Exchange rules.\11\
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\11\ See supra note 7.
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Finally, the Exchange believes that the proposal that the optional
instruction would not be available for orders entered by Floor Brokers
via the EOC would remove impediments to and perfect the mechanism of a
free and open market and a national market system because the current
EOC provider could not systemically apply the proposed optional
instruction on a firm-by firm basis. The instruction could therefore
not be segregated by individual Floor Brokers that each use the EOC.
The Exchange believes that because of the unique role of Floor Brokers
on the Exchange to provide manual, high-touch services on behalf of
customers, Floor Brokers should not need this optional bulk-cancel
feature. Specifically, unlike an off-Floor ATP Holder that may be
relying on an algorithm to send orders in a multitude of series, a
Floor Broker that provides high-touch services would be present on the
Trading floor and in a position to monitor whether the Exchange has
opened a series, and if not, whether to cancel an order that becomes
Marketable.
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 does not
believe the proposed rule change would impose any burden on intermarket
competition, as the proposed rule change is designed to provide an
option for ATP Holders to instruct the Exchange to cancel Marketable
orders if an option series does not open on the Exchange within a
designated time period. The Exchange believes that the proposed rule
change would promote intermarket competition because if the Exchange
cancels such orders on the instruction of an ATP Holder, such ATP
Holder could then choose to route such orders to another exchange that
has opened the option series for trading.
The Exchange does not believe that the proposed rule change would
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed rule change provides for optional functionality. ATP Holders
would not be required to use this functionality. In addition, the
Exchange believes that because of the unique role of Floor Brokers on
the Exchange to provide manual, high-touch services on behalf of
customers, Floor Brokers should not need this optional bulk-cancel
feature and it would not impose any undue burden on intramarket
competition not to provide this optional feature to Floor Brokers.
Specifically, unlike an off-Floor ATP Holder that may be relying on an
algorithm to send orders in a multitude of series, a Floor Broker that
provides high-touch services would be present on the Trading floor and
in a position to monitor whether the Exchange has opened a series, and
if not, whether to cancel an order that becomes Marketable.
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and 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.
The Exchange has satisfied this requirement.
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[[Page 46749]]
A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposed rule change may become operative prior to 30 days after
the date of the filing. The Exchange states that waiver of the
operative delay would be consistent with the protection of investors
and the public interest because the proposed rule change, as described
above, would offer ATP Holders an additional, and optional, risk
limitation feature to instruct the Exchange to cancel their Marketable
orders if the Exchange does not open an option series within a
designated time frame. The Exchange further states that the technology
supporting the proposed rule change will be available prior to 30 days
after the date of the filing, and the Exchange seeks to implement the
proposed rule change without delay. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 change 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 Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a6d4d3cac38bc5c9cbcbc3c8d2d5e6d5c3c588c1c9d0"><span class="__cf_email__" data-cfemail="ed9f988188c08e8280808883999ead9e888ec38a829b">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2021-36 on the subject line.
Paper Comments
<bullet> 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-2021-36. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2021-36, and should be
submitted on or before September 9, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17757 Filed 8-18-21; 8:45 am]
BILLING CODE 8011-01-P
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