Notice2022-19680
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.62P-O(a)(4)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 176 (Tuesday, September 13, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56097-56099]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19680]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95687; File No. SR-NYSEARCA-2022-57]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
6.62P-O(a)(4)
September 7, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 29, 2022, NYSE Arca, Inc. (``NYSE Arca'' 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.
---------------------------------------------------------------------------
\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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.62P-O(a)(4) to modify the
values used to determine Trading Collars. 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 6.62P-O(a)(4) to modify the
values used to determine Trading Collars as set forth below.
The Exchange has in place various price check features that are
designed to help maintain a fair and orderly market, including Trade
Collar Protection.\4\ Trading Collars mitigate the risks associated
with orders sweeping through multiple price points (including during
extreme market volatility) and resulting in executions at prices that
are potentially erroneous. Specifically, a Market Order or Limit Order
to buy (sell) will not trade or route to an Away Market at a price
above (below) the Trading Collar assigned to that order.\5\ As such,
Trading Collars function as a ceiling (for buy orders) or floor (for
sell orders) of the price at which such order could be traded,
displayed, or routed.
---------------------------------------------------------------------------
\4\ See Rule 6.62P-O(a)(4)(A). Trading Collars assigned to an
order are calculated once per trading day and would be updated only
if the series is halted. See id.
\5\ Rule 6.62P-O(a)(1) provides that a Market Order is ``[a]n
unpriced order message to buy or sell a stated number of option
contracts at the best price obtainable, subject to the Trading
Collar assigned to the order. A Market Order may be designated Day
or GTC.'' Rule 6.62P-O(a)(2) provides that a Limit Order is ``[a]n
order message to buy or sell a stated number of option contracts at
a specified price or better, subject to Limit Order Price Protection
and the Trading Collar assigned to the order.''
---------------------------------------------------------------------------
Trading Collars are determined based on the Reference Price, which
for an order to buy (sell) is the NBO (NBB).\6\ Under the current rule,
the Trading Collar for an order to buy (sell) is a specified amount
above (below) the Reference Price, as follows: (1) for orders with a
Reference Price of $1.00 or lower, $0.25; or (2) for orders with a
Reference Price above $1.00, the lower of $2.50 or 25%.\7\
---------------------------------------------------------------------------
\6\ See Rule 6.62P-O(a)(4)(B).
\7\ See Rule 6.62P-O(a)(4)(C).
---------------------------------------------------------------------------
The current Trading Collar functionality (and the method of
calculation) was recently implemented in connection with the Exchange's
migration to the Pillar trading platform.\8\ Consistent with the pre-
Pillar functionality (under Rule 6.60-O(a)),
[[Page 56098]]
the Trading Collar thresholds were designed to be within the current
parameters for determining whether a trade is an Obvious Error or
Catastrophic Error to protect per Rule 6.87-O (the ``Obvious Error
Rule'').\9\ While the Exchange believes that these recent changes have
been generally successful in protecting market participants against bad
executions, the Exchange has determined that additional modifications
would enhance the Trading Collar functionality. The Exchange therefore
proposes to modify the Trading Collar thresholds to better align with
the thresholds in the Obvious Error Rule. As such, the proposed change
is designed to (further) prevent the trading of aggressively-priced
interest that, if executed, would qualify to be handled under the
procedures set forth in the Obvious Error Rule.
---------------------------------------------------------------------------
\8\ The Exchange announced the migration of the fifth and final
tranche of symbols to the Pillar trading platform, via Trader
Update, available here: <a href="https://www.nyse.com/trader-update/history#110000440092">https://www.nyse.com/trader-update/history#110000440092</a>.
\9\ See Rules 6.87-O(c)(1) (thresholds for Obvious Errors) and
6.87-O(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------
Specifically, the Exchange proposes to amend Rule 6.62P-O(a)(4)(C)
to modify the values used to calculate the Trading Collars as follows:
* * * * *
------------------------------------------------------------------------
Reference price Trading collar
------------------------------------------------------------------------
$0.00 to $1.00.................... $0.20.
$1.01 to $2.00.................... Lesser of $0.20 or 25% of the
Reference Price.
$2.01 to $3.00.................... Lesser of $0.30 or 25% of the
Reference Price.
$3.01 to $5.00.................... Lesser of $0.30 or 25% of the
Reference Price.
$5.01 to $7.50.................... Lesser of $0.40 or 25% of the
Reference Price.
$7.51 to $10.00................... Lesser of $0.40 or 25% of the
Reference Price.
$10.01 to $20.00.................. Lesser of $0.70 or 25% of the
Reference Price.
$20.01 to $50.00.................. Lesser of $0.90 or 25% of the
Reference Price.
$50.01 to $100.00................. Lesser of $1.40 or 25% of the
Reference Price.
$100.01 and above................. Lesser of $1.90 or 25% of the
Reference Price.
------------------------------------------------------------------------
Consistent with current Rule 6.62P-O(a)(4)(C)(i), if the
calculation of a Trading Collar would not be in the Minimum Price
Variation or MPV for the series, such calculation would be rounded down
to the nearest price within the applicable MPV.
In addition, the Exchange proposes that the amounts in the proposed
table above would apply, ``[u]nless announced otherwise by Trader
Update,'' which discretion is consistent with the implementation of
Trading Collars on other option exchanges.\10\
---------------------------------------------------------------------------
\10\ See, e.g., NYSE American Rule 967NY(a)(2) (providing that
the values set forth in paragraphs (A)(i)-(v) of Rule 967NY(a)(2)
apply ``unless announced otherwise via Trader Update. . .''). The
Exchange notes that, when migrating to Pillar, it inadvertently
failed to include this language affording the Exchange discretion to
modify the Trading Collars. See, e.g., Rule 6.60-O(a)(2) (providing
that the values set forth in paragraphs (A)(i)-(v) of Rule 6.60-
O(a)(2) apply ``unless announced otherwise via Trader Update. .
.'').
---------------------------------------------------------------------------
The Exchange believes that the proposed modifications would enhance
the efficacy of the price protection afforded by Trading Collars and
the proposed values for determining such collars would better align
with the current parameters for determining whether a trade is an
Obvious Error or Catastrophic Error.
Implementation
The Exchange will announce the implementation of this proposal via
Trader Update to be published no later than 60 days following the
effectiveness of this this rule.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and
furthers the objectives of Section 6(b)(5),\12\ in particular, because
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, 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Overall, the Exchange believes the proposed change is consistent
with the protection of investors and the investing public and would
promote a fair and orderly market because it would enhance the
(recently revised) operation of the Trading Collar functionality and
would continue to protect investors from receiving bad executions away
from prevailing market prices. Further, the Exchange believes that the
proposed modification would promote just and equitable principles of
trade as the proposed values for determining Trading Collars would
better align with the current parameters for determining whether a
trade is an Obvious Error or Catastrophic Error.\13\
---------------------------------------------------------------------------
\13\ See, e.g., Rules 6.87-O(c)(1) (thresholds for Obvious
Errors) and 6.87-O(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------
In addition, the Exchange believes that its proposal to retain
discretion to modify the values used to determine the Trading Collar
would promote just and equitable principles of trade because it would
allow the Exchange to respond to certain market conditions as
necessary, which discretion is consistent with the implementation of
Trading Collars on other option exchanges.\14\
---------------------------------------------------------------------------
\14\ See, e.g., NYSE American Rule 967NY(a)(2).
---------------------------------------------------------------------------
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. Instead, the Exchange
believes the proposal would enhance the operation of the Trading
Collars that provide market participants with protection from anomalous
executions. Thus, the Exchange does not believe the proposal creates
any significant impact on competition.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
Because the 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
[[Page 56099]]
prior to 30 days from the date on which it was filed, or such shorter
time as the Commission may designate, if consistent with the protection
of investors and the public interest, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule
19b-4(f)(6)(iii) thereunder.\17\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 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 fulfilled this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission
may 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 proposal
may become operative immediately upon filing. The Commission believes
that waiver of the operative delay is consistent with the protection of
investors and the public interest because it will allow the Exchange to
provide, without delay, further protections against potentially
erroneous executions. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon
filing.\20\
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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#c2b0b7aea7efa1adafafa7acb6b182b1a7a1eca5adb4"><span class="__cf_email__" data-cfemail="c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2022-57 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-NYSEARCA-2022-57. 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-NYSEARCA-2022-57 and should be submitted
on or before October 4, 2022.
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19680 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on September 13, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.