Notice2022-25357
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend 6.41P-O
Primary source
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Published
November 22, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 224 (Tuesday, November 22, 2022)</title>
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[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Notices]
[Pages 71389-71391]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25357]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96333; File No. SR-NYSEARCA-2022-77]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend 6.41P-O
November 16, 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 November 9, 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, II,
and III 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 6.41P-O (Price Reasonability
Checks--Orders and Quotes). 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 6.41P-O (Price Reasonability
Checks--Orders and Quotes) to modify the application of certain risk
checks on Pillar as set forth below.
The Exchange recently revised Rule 6.41P-O to clarify the
application of the ``Price Reasonability Checks'' to orders and quotes,
which include the Arbitrage Check and the Intrinsic Value Check
(collectively, the ``Checks''), when such Checks rely on last sale
information.\4\ In particular, the Exchange modified the rule to
reflect Pillar functionality that excluded from the Checks those
transactions (such as odd lot transactions) that are not ``last-sale
eligible.'' However, the Exchange has determined to modify the
operation of the Checks under Pillar such that they apply to trades in
underlying securities of any size, including odd lots.\5\ The Exchange
believes that applying the Checks based on a broader range of
underlying transactions--both round lots and odd lots--would enhance
the efficacy of the Checks as this proposed functionality would provide
a better representation of the trade prices occurring in the underlying
market.\6\ As such, the Exchange believes that the proposed
functionality would continue to provide price protection to OTP Holders
and OTP Firms.
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\4\ See Rule 6.41P-O(b) and (c) (describing the Arbitrage Check
and the Intrinsic Value Check, respectively). See Securities
Exchange Act Release No. 95088 (June 13, 2022), 87FR 36556 (June 17,
2022) (SR-NYSEArca-2022-34) (immediately effective filing to modify
Rule 6.41P-O(b) and (c) to use as a basis for the Check ``the price
of the last--sale eligible trade'' of the underlying security,
rather than the ``last sale price'' of the underlying security).
\5\ The Exchange notes, prior to migrating to Pillar, the
Exchange included odd lots in its application of the Arbitrage Check
and Intrinsic Value Check, per Rules 6.60-O (Price Protection--
Orders) and 6.61-O (Price Protection--Quotes). See also NYSE
American LLC (``NYSE American'') Rules 967NY (c)(1), (2) and 967.1NY
(regarding the application of Arbitrage Checks and Intrinsic Value
Checks to orders and quotes, respectively).
\6\ The Exchange notes that trades in higher-priced underlying
securities tend to be odd lots, which highlights the importance of
capturing such trades in the Checks.
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As proposed, the Arbitrage Check would reject or cancel (if
resting) a buy order or quote for call options if the price of the
order or quote is equal to or greater than the price of the last trade
(of any size) of the underlying security on the Primary Market, plus a
specified threshold to be determined by the Exchange and announced by
Trader Update.\7\ Regarding the Intrinsic Value Check, the Exchange
proposes that the Intrinsic Value of a put option would be equal to the
strike price minus the price of the last trade (of any size) of the
underlying security on the Primary Market'' and the Intrinsic Value of
a call option would be equal to the price of
[[Page 71390]]
the last trade (of any size) of the underlying security on the Primary
Market minus the strike price.\8\
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\7\ See Rule 6.41P-O(b)(2).
\8\ See Rule 6.41P-O(c)(1), (2).
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In addition, the Exchange proposes a conforming change to delete
Rule 6.41P-O(a)(3)(iv) as no longer applicable, because the Checks
would no longer impose a size/last sale eligible trade condition
restriction on the underlying trade.\9\ The Exchange believes this
proposed rule change would align with the proposed functionality and
add clarity and transparency to Exchange rules making them easier to
navigate and comprehend.
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\9\ See proposed Rule 6.41P-O(a)(3). The Exchange also proposes
to make non-substantive conforming changes to this paragraph,
including by renumbering, which changes add clarity, transparency,
and internal consistency to Exchange rules. See id.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\10\ in general, and
furthers the objectives of Section 6(b)(5),\11\ 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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change to modify the
operation of the Checks to apply to transactions of any size--whether
odd lots or round lots--would promote just and equitable principles of
trade and remove impediments to and perfect the mechanism of a free and
open market and a national market system and protect investors because
the Checks would be applied to a broader spectrum of trade prices in
underlying securities, which would enhance the efficacy of the Checks
to the benefit of investors and the investing public. As such, the
Exchange believes that the proposed functionality would continue to
provide price protection to OTP Holders and OTP Firms.
The proposed non-substantive conforming changes would add clarity,
transparency, and internal consistency to Exchange rules making them
easier to comprehend.
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 proposed change is not
intended to address competition, but rather to modify the operation of
the Exchange's Checks by accounting for trade prices in underlying
transactions of any size (both odd lots and round lots), which would
impact (and benefit) all similarly-situated market participants.
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 \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 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)(iii) of the Act \14\ and Rule
19b-4(f)(6)(iii) thereunder.\15\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ 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 take effect immediately. The Commission believes that waiver of the
operative delay is consistent with the protection of investors and the
public interest because it will provide enhanced price protection
checks to market participants without delay. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ 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).
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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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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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#cfbdbaa3aae2aca0a2a2aaa1bbbc8fbcaaace1a8a0b9"><span class="__cf_email__" data-cfemail="9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2022-77 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-2022-77. 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
[[Page 71391]]
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-2022-77 and should be submitted
on or before December 13, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25357 Filed 11-21-22; 8:45 am]
BILLING CODE 8011-01-P
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