Notice2023-28704
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify Rule 900.3NYP
Primary source
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Published
December 28, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 248 (Thursday, December 28, 2023)</title>
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[Federal Register Volume 88, Number 248 (Thursday, December 28, 2023)]
[Notices]
[Pages 89783-89788]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28704]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99231; File No. SR-NYSEAMER-2023-66]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify Rule
900.3NYP
December 22, 2023.
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 December 19, 2023, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 modify Rule 900.3NYP (Orders and
Modifiers) to adopt electronic Customer Cross Order and Complex
Customer Cross Order functionality and to amend Rule 900.2NY
(Definitions) to specify the treatment of certain Professional Customer
interest. 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 modify Rule 900.3NYP (Orders and
Modifiers) to adopt electronically-entered Customer Cross (``C2C'')
Orders and Complex Customer Cross (``Complex C2C'') Orders
(collectively, ``Customer Cross Orders''). The Exchange also proposes
to amend the definition of Professional Customer (Rule 900.2NY) to
specify that, for purposes of proposed Rule 900.3NYP(g)(2) and Rule
971.1NYP, Professional Customer interest would be treated in the same
manner as Broker/Dealers (non-Customers).
Proposed Rule 900.3NYP(g)(2): Customer Cross Orders
Rule 934NY(a) describes Customer-to-Customer Cross orders on the
Trading Floor wherein ``[a] Floor Broker who holds a Customer order to
buy and a Customer order to sell the same option contract may cross
such orders,'' provided that the Floor Broker proceeds in the manner
set forth in paragraphs (1)-(3) of Rule 934NY(a).\4\ The Exchange
proposes to adopt rules governing electronically-entered Customer Cross
Orders, which allow ATP Holders to conduct this type of crossing
transaction electronically and without having to utilize a Floor
Broker. Although the proposed Customer Cross Orders are conceptually
the same as the existing Customer-to-Customer Cross, the latter order
type differs in that it must adhere
[[Page 89784]]
to Floor-specific open outcry rules.\5\ The Exchange notes that the
proposed Customer Cross Order types are consistent with customer
crossing functionality available on another options exchange.\6\
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\4\ As discussed infra, Professional Customer volume is not
eligible to be included on a Customer-to-Customer Cross submitted
pursuant to Rule 934NY(a). See Rule 900.2NY (providing in relevant
part that, for purposes of Rule 934NY (Crossing), Professional
Customers are treated as Broker/Dealers).
\5\ See, e.g., Rule 934NY(a)(3)(A) and (C) (each of which
require that the Customer-to-Customer Cross comply with the other
Exchange open outcry rules).
\6\ See Cboe Exchange, Inc. (``Cboe'') Rules 5.37(f) and 5.38(f)
(providing the requirements for Customer-to-Customer AIM/C-AIM
Immediate Crosses to bypass Cboe's Automated Improvement Mechanism
(AIM)/Complex Automated Improvement Mechanism (C-AIM), respectively,
and immediately execute).
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Proposed Rule 900.3NYP(g)(2) would describe Customer Cross Orders.
Proposed Rule 900.3NYP(g)(2)(A) would provide that a C2C Order and a
Complex C2C Order must be comprised of a Customer (but not a
Professional Customer) order to buy and a Customer (but not a
Professional Customer) order to sell at the same price and for the same
quantity. The proposal to limit eligible interest to Customer but not
Professional Customer interest is consistent with the rules of another
options exchange.\7\ In addition, as proposed, a C2C Order or Complex
C2C Order that is not rejected on arrival would immediately trade in
full at its limit price.\8\ Further, proposed Rule 900.3NYP(g)(2)(A)
would provide that C2C Orders and Complex C2C Orders would not route
and may be entered with a Minimum Price Variation (``MPV'') of $0.01
regardless of the MPV of the options series.\9\ Finally, the proposed
Rule would specify that Commentary .01 to Rule 935NY would apply to
Customer Cross Orders, which means that ATP Holders may not utilize
Customer Cross Orders to increase their economic gain without first
giving other trading interest on the Exchange an opportunity to
participate in the trade or to trade at the transaction price when the
ATP Holder was already bidding or offering at that price.\10\ This
proposed handling would align with at least one other options exchange
that offers customer crossing orders.\11\
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\7\ See Cboe Rule 5.37(f) and Rule 5.38(f) (providing that each
side of a ``Customer-to-Customer Immediate Cross,'' for single-leg
and complex orders, respectively, must be for the account of a
``Priority Customer''). Cboe defines a Priority Customer as ``a
person or entity that is a Public Customer and is not a
Professional.'' See Cboe Rule 1.1.
\8\ See proposed Rule 900.3NYP(g)(2)(A) (providing, in relevant
part, that ``[a] C2C Order or Complex C2C Order that is not rejected
per Rule 900.3NYP(g)(2)(B) [Execution of C2C Orders] or (C)
[Execution of Complex C2C Orders], respectively, will immediately
trade in full at its price'').
\9\ Rule 900.2NY defines ``Minimum Price Variation'' or ``MPV''
as the price variations established by the Exchange, which for
quoting and trading options traded on the Exchange are set forth in
Rule 960NY.
\10\ See proposed Rule 900.3NYP(g)(2)(A). See also Rule 935NY,
Commentary .01.
\11\ See Cboe Interpretation and Policy .03 to Rules 5.37 and
5.38 (providing an identical prohibition in each Cboe rule--which
prohibition is identical to Rule 935NY, Commentary .01 and prevents
order-senders from using the customer crossing mechanism to increase
economic gain without first providing an opportunity of eligible
interest to trade at the transaction price of the cross order).
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Proposed Rule 900.3NYP(g)(2)(B) provides that a C2C Order that has
one option leg would be rejected if received when the NBBO is crossed
or if the C2C would trade at a price that (i) is at the same price as a
displayed Customer order on the Consolidated Book and (ii) is not at or
between the NBBO and the Exchange BBO. The Exchange believes that the
proposal would provide for the efficient entry and execution of C2C
Orders while continuing to protect same-priced, displayed Customer
interest (i.e., by ensuring that the C2C Order does not trade ahead of
displayed Customer interest resting in the Consolidated Book). As noted
above, the proposed C2C Orders would operate in a manner that is
consistent with the handling of single-leg customer cross orders on
another options exchange.\12\
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\12\ See Cboe Rule 5.37(f) (stating that Customer-to-Customer
Immediate Cross comprised of ``Priority Customer'' orders will
immediately execute provided that the execution (i) is ``at or
between the BBO and the NBBO'' and (ii) ``is not at the same price
as any Priority Customer Order resting on the Book.'').
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Proposed Rule 900.3NYP(g)(2)(C) would describe the Exchange's
pricing requirements for a Complex C2C Order. To validate the price of
a Complex C2C Order, the Exchange would rely on the Derived BBO
(``DBBO'') as described in Rule 980NYP(a)(5).\13\ If the Exchange is
not able to calculate the DBBO for a complex strategy because of one of
the circumstances described in Rule 980NYP(a)(5)(B)-(C), the Exchange
will not execute an order for that strategy until the circumstance is
resolved.\14\ Consistent with this handling, the Exchange proposes that
it would reject a Complex C2C Order if the Exchange is unable to
calculate the DBBO for a leg of the Complex C2C Order per Rule
980NYP(a)(5)(B) or (a)(5)(C).\15\
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\13\ The DBBO provides for the establishment of a derived
(theoretical) bid or offer for a particular complex strategy. See
Rule 980NYP(a)(5) (defining the DBBO and providing that the bid
(offer) price used to calculate the DBBO on each leg will be the
Exchange BB (BO) (if available), bound by the maximum allowable Away
Market Deviation). The Away Market Deviation, as defined in Rule
980NYP(a)(1), ensures that an ECO does not execute too far away from
the prevailing market. Rule 980NYP(a)(5) also provides for the
establishment of the DBBO in the absence of an Exchange BB (BO), or
ABB(ABO), or both.
\14\ See proposed Rule 900.3NYP(g)(2)(C). See also Rule
980NYP(a)(5)(B) (providing that, ``[i]f, for a leg of a complex
strategy, there is neither an Exchange BBO nor an ABBO, the Exchange
will not allow the complex strategy to trade until, for that leg,
there is either an Exchange BB or BO, or an ABB or ABO, on at least
one side of the market'') and (a)(5)(C) (providing, in relevant part
that, ``[i]f the best bid and offer prices (when not based solely on
the Exchange BBO) for a component leg of the complex strategy are
locked or crossed, the Exchange will not allow an ECO for that
strategy to execute against another ECO until this condition
resolves'').
\15\ See proposed Rule 900.3NYP(g)(2)(B).
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In addition, proposed Rule 900.3NYP(g)(2)(C) provides that no
option leg of a Complex C2C Order will trade at a price worse than the
Exchange BBO and such order would be rejected if it fails to meet the
following requirements:
<bullet> the transaction price must be at or between the DBBO and
may not equal the DBBO if the DBBO is calculated using the Exchange BBO
and the Exchange BBO of any component of the complex strategy on either
side of the market includes displayed Customer interest. If the DBB
(DBO) includes a displayed Customer interest on the Exchange, the
transaction price must improve the DBB (DBO) by at least one cent
($0.01). This proposed requirement is consistent with price parameters
applied to complex customer cross orders on another options exchange;
\16\ and
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\16\ See Cboe Rule 5.38(f)(i) (providing, in relevant part, that
the transaction price of a Complex Customer Cross Order must be ``at
or between the SBBO [Synthetic Bid or Offer] and may not equal
either side of the SBBO if the BBO of any component of the complex
strategy represents a Priority Customer''). Cboe's concept of the
SBBO is analogous to the Exchange's concept of the DBBO. See Cboe
Rule 5.33.
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<bullet> the transaction price must be at or between the best-
priced Complex Orders to buy and sell in the complex strategy and may
not equal the price of a resting Customer Complex Order, which proposed
requirement is consistent with price parameters required for complex
customer cross orders on another options exchange.\17\
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\17\ See Cboe Rule 5.38(f)(ii) (providing, in relevant part,
that the transaction price of a Complex Customer Cross Order must be
``at or between the best-priced complex orders in the complex
strategy'' on Cboe ``and may not equal the price of a Priority
Customer complex order'' resting on either side of the COB'').
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The Exchange also proposes a conforming change to Rule 980NYP(b)(1)
to include Complex Customer Cross Orders among the type of Electronic
Complex Orders available for trading on the Exchange, which change
would add clarity, transparency, and internal consistency to Exchange
rules.\18\
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\18\ See proposed Rule 980NYP(b)(1) (providing that Electronic
Complex Orders ``may be entered as Limit Orders, Limit Orders
designated as Complex Only Orders, Complex QCCs, or as Complex
Customer Cross Orders) (emphasis added).
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[[Page 89785]]
Rule 900.2NY: Definitions of Customer and Professional Customer
Rule 900.2NY defines a ``Customer'' as ``an individual or
organization that is not a Broker/Dealer; when not capitalized,
`customer' refers to any individual or organization whose order is
being represented, including a Broker/Dealer.'' Rule 900.2NY defines a
``Professional Customer'' as ``an individual or organization that (i)
is not a Broker/Dealer in securities, and (ii) places more than 390
orders in listed options per day on average during a calendar month for
its own beneficial account(s).'' \19\ Included in the definition of
Professional Customer is a list of Exchange Rules, including Rule 934NY
(Crossing), for purposes of which Professional Customers are treated in
the same manner as Broker/Dealers (or non-Customers).\20\ Accordingly,
Professional Customers are treated as Broker/Dealers (or non-Customers)
for purposes of Crossing Orders executed pursuant to Rule 934NY. As
such, Professional Customer volume is not eligible to be executed as
part of a Customer-to-Customer Cross executed on the Trading Floor per
Rule 934NY(a).
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\19\ See Rule 900.2NY (defining a Professional Customer).
\20\ See supra note 4 (citing Rule 900.2NY, which specifies that
for purposes Rule 934NY(Crossing) Professional Customer interest
will be treated in the same manner as a Broker/Dealer (or non-
Customer) interest). See id. (defining Professional Customer).
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The Exchange proposes to amend Rule 900.2NY to include proposed
Rule 900.3NYP(g)(2) in the list of Exchange Rules pursuant to which
Professional Customers are treated in the same manner as Broker/Dealers
(or non-Customers).\21\ This proposed handling of non-Customer interest
for purposes of the proposed Customer Cross Orders would align with the
handling of such interest for purposes of Customer-to-Customer Cross
Orders executed on the Trading Floor per Rule 934NY(a) and would
therefore promote internal consistency in Exchange rules. In addition,
excluding Professional Customer orders from being eligible to trade as
part of the proposed Customer Cross Orders would put the Exchange on
equal footing with at least one other options exchange that likewise
disallows such Professional interest from being executed as part of
customer cross orders.\22\
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\21\ See proposed Rule 900.2NY (including proposed Rule
900.3NYP(g)(2) (Customer Cross Orders and Complex Customer Cross
Orders) among the list of Exchange Rule pursuant to which
Professional Customer interest is treated in the same manner as a
Broker/Dealer (or non-Customer) interest).
\22\ As noted supra, only ``Priority Customers'' on Cboe may
participate in ``Customer-to-Customer Immediate Cross.'' See Cboe
Rules 5.37(f) and Rule 5.38(f).
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Finally, the Exchange believes this proposed change would add
clarity, transparency, and internal consistency to Exchange rules.
Professional Customers in the Customer Best Execution (``CUBE'')
Auctions
As noted above, Rule 900.2NY defines ``Professional Customer'' as
``an individual or organization that (i) is not a Broker/Dealer in
securities, and (ii) places more than 390 orders in listed options per
day on average during a calendar month for its own beneficial
account(s).'' \23\ Included in the definition of Professional Customer
is a list of Exchange Rules pursuant to which Professional Customers
are treated in the same manner as Broker/Dealers (or non-Customers).
Among the rules on this list is Rule 971.1NY, which means that for
purposes of single-leg CUBE Auctions, Professional Customer interest is
treated as Broker/Dealer (non-Customer) interest.\24\ The Exchange
recently migrated to the Pillar trading platform and Rule 971.1NY no
longer applies to CUBE Auctions; instead, CUBE Auctions on Pillar are
governed by Rule 971.1NYP (``the Pillar CUBE Rule'').\25\
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\23\ See Rule 900.2NY (defining a Professional Customer).
\24\ See Trader Update, NYSE American Options: NYSE Pillar Final
Migration Tranche, dated October 30, 2023, available here: <a href="https://www.nyse.com/trader-update/history#110000748137">https://www.nyse.com/trader-update/history#110000748137</a> (announcing the last
phrase of the Pillar migration).
\25\ Compare Rule 971.1NY with the Pillar CUBE Rule. See also
Securities Exchange Act Release No. 97938 (July 18, 2023), 88 FR
47536 (July 24, 2023) (NYSEAmer-2023-35) (adopting Pillar Rule
971.1NYP (Single-Leg Electronic Cross Transactions) on an
immediately effective basis).
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The Exchange proposes to amend Rule 900.2NY to treat Professional
Customer interest submitted to CUBE Auctions pursuant to the Pillar
CUBE Rule in the same manner as such interest was handled when
submitted to CUBE Auctions pursuant to Rule 971.1NY.\26\ The Exchange
believes that this proposal would ensure consistent handling of
Professional Customer interest in the CUBE Auction prior to and after
the Exchange's migration to Pillar and would continue to afford
Customer interest priority over non-Customer interest for purposes of
the Exchange's price improvement auction. The Exchange notes that at
least one other options exchange likewise treats Professional Customer
interest as Broker/Dealer (non-Customer) interest for purposes of their
price improvement auction.\27\
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\26\ See proposed Rule 900.2NY (providing in relevant part, that
for purposes of Rule 971.1NYP (Single-Leg Electronic Cross
Transactions), ``[a] Professional Customer will be treated in the
same manner as a Broker/Dealer (or non-Customer) in securities'')
(emphasis added).
\27\ See Cboe Rule 5.38(e) (providing that ``Priority Customer''
interest executes first with the Agency Order submitted to the price
improvement auction, followed by non-Priority Customer interest).
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Implementation
Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date by
Trader Update, which, subject to effectiveness of this proposed rule
change, is anticipated to be in the first quarter of 2024.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\28\ in general, and furthers the
objectives of Section 6(b)(5),\29\ 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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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed Customer Cross Orders (for
single-leg and complex interest) would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because the proposed rules would allow market participants to
electronically trade these types of crossing orders on the Exchange.
The proposed functionality would benefit investors and the public
interest because it would enhance and automate each order entry firms'
ability to submit two-sided Customer orders--i.e., Customer Cross
Orders (both single-leg and complex). As such, the proposed rule change
would provide market participants with an efficient means of executing
their Customer orders. In addition, the proposed Customer Cross Orders
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because market participants
would be given an additional way to execute single-leg and Complex
Orders on the Exchange. As noted herein, at least one other competing
options exchange--Cboe--offers substantially similar customer crossing
orders for single-leg and complex trading
[[Page 89786]]
interest.\30\ With this proposal, market participants would likewise
have an additional venue on which to execute two-sided Customer orders
electronically--i.e., Customer Cross Orders. As such, the proposed
order types may attract additional Customer order flow (both two-sided
and single-sided) to the Exchange, which may, in turn, result in
greater liquidity available for trading on the Exchange.
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\30\ See Cboe Rules 5.37(f) and 5.38(f) (describing the
analogous requirements for Cboe's single-leg and Complex Customer-
to-Customer Immediate Crosses, respectively).
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Regarding the proposed single-leg C2C Order type, the Exchange
believes that the adoption of this order type would provide for the
efficient entry and execution of C2C Orders while continuing to protect
same-priced, displayed Customer interest (i.e., by ensuring that the
C2C Order does not trade ahead of displayed Customer interest resting
in the Consolidated Book). Further, as noted herein, the proposed order
type is not new or novel because each C2C Order would operate in a
manner that is consistent with single-leg customer cross orders that
are available on another options exchange.\31\
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\31\ See Cboe Rule 5.37(f) (describing the analogous
requirements for Cboe's single-leg Customer-to-Customer Immediate
Cross).
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The proposed Complex C2C Order would protect investors and the
public interest by assuring that these orders comply with the existing
priority and allocation rules applicable to the processing and
execution of Complex Orders per Rule 980NYP. In particular, the
proposed Complex C2C Orders would continue to protect same-priced,
displayed Customer interest and would ensure that Complex C2C Orders do
not trade ahead of such displayed Customer interest, whether in the leg
markets or as Customer Complex Orders. The Exchange believes the
proposed Complex C2C Orders would promote just and equitable principles
of trade because (as discussed herein) the proposed orders--which are
not new or novel--would operate in a manner that is consistent with
complex customer cross orders that are available on another options
exchange.\32\
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\32\ See Cboe Rule 5.38(f) (describing the analogous
requirements for Cboe's Complex Customer-to-Customer Immediate
Cross).
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Finally, the proposed change to the definition of Professional
Customer to make clear that Professional Customers are treated as
Broker/Dealers (or non-Customers) for purposes of the proposed Customer
Crosses Orders and Single-Leg Electronic Cross Transactions, per Rule
971.1NYP would remove impediments to and perfect the mechanism of a
free and open market and a national market system and would protect
investors and the public interest because such changes would ensure
consistent handling of Professional Customer interest in the CUBE
Auction prior to and after the Exchange's migration to Pillar and would
align Exchange rules with the rules of another options exchange that
likewise differentiates the treatment of Professional Customer interest
from Customer interest for purposes of customer crossing orders and for
price improvement auctions, where Customers (but not Professional
Customers) are afforded first priority to trade in the auction.\33\
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\33\ See Cboe Rule 5.37(e)-(f) and 5.38(e)-(f) (regarding the
handling of Priority Customer interest for purposes of priority and
allocation in Cboe's C-AIM Auction and for inclusion on customer
crossing orders).
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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. Specifically, the Exchange's
proposal to adopt a new electronically-entered crossing order type
(i.e., the Customer Cross Order) would not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. The Exchange believes that the proposed change would not
impose a burden on intramarket competition because the proposed order
types would provide all market participants on the Exchange with the
option of utilizing another means of executing two-side Customer
interest--both single-leg and Complex Orders on the Exchange. The
proposed change would also benefit investors by providing another venue
(i.e., in addition to Cboe) on which Customer Cross Orders may be
submitted electronically.
The Exchange believes that the proposed change would enhance inter-
market competition by enabling the Exchange to compete for this type of
order flow with at least one other options exchange that has similar
rules and functionalities in place (i.e., Cboe).\34\ The Exchange
believes that adopting Customer Cross Orders would promote competition
as it would afford market participants another venue on which to
execute two-sided Customer orders for single-leg and complex trading
interest. Further, the Exchange anticipates that this proposal will
create new opportunities for the Exchange to attract new business to
the Exchange. As such, the Exchange believes that this proposal does
not create an undue burden on intermarket competition. Rather, the
Exchange believes that the proposed rule would bolster intermarket
competition by promoting fair competition among individual markets.
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\34\ See Cboe Rules 5.37(f) and 5.38(f) (describing the
analogous requirements for Cboe's single-leg and Complex Customer-
to-Customer Immediate Crosses, respectively.)
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The Exchange does not believe the proposed amendment to the
definition of Professional Customer to include proposed Rule
900.3NYP(g)(2) among the rules pursuant to which Professional Customer
interest is treated as Broker/Dealer (non-Customer) interest would
impose any undue burden on intramarket or intermarket competition as
all market participants on the Exchange would be subject to the updated
definition. In addition, the proposal to limit the availability of
Customer Cross Orders to interest submitted on behalf of Customers
would align the Exchange with at least one other options exchange that
had adopted a similar limitation.\35\
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\35\ See id.
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Similarly, the proposal to treat Professional Customer interest as
Broker/Dealer (non-Customer) interest for purposes of the Pillar CUBE
Rule would not impose any undue burden on intramarket or intermarket
competition as use of the CUBE Auction, per the Pillar CUBE Rule, is
optional. For those market participants that choose to utilize CUBE
Auctions on Pillar (per Pillar Rule 971.1NYP), the proposed definition
applies equally to all similarly-situated investors. In addition, all
investors that opt to use the CUBE Auction would be subject to the same
(amended) definition--which is consistent with the definition that
applied to pre-Pillar Rule 971.1NY--and would also align the Exchange
with at least one other options exchange that likewise affords priority
in price improvement auctions to ``Priority Customers'' but not to
Professional Customers.\36\
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\36\ See Cboe Rule 5.37(e)-(f) and 5.38(e)-(f) (regarding the
handling of Priority Customer interest for purposes of priority and
allocation in Cboe's C-AIM Auction).
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In addition, the proposed conforming change to include Complex
Customer Cross Orders among the list of available Electronic Complex
Orders set forth in Rule 980NYP(b)(1) would not impose an undue burden
on intramarket or intermarket competition but would instead add
clarity, transparency, and
[[Page 89787]]
internal consistency to Exchange rules.\37\
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\37\ See proposed Rule 980NYP(b)(1) (providing that Electronic
Complex Orders (ECOs) ``may be entered as Limit Orders, Limit Orders
designated as Complex Only Orders, Complex QCCs, or as Complex
Customer Cross Orders) (emphasis added).
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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
Pursuant to Section 19(b)(3)(A) of the Act \38\ and Rule 19b-
4(f)(6) \39\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.\40\
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\38\ 15 U.S.C. 78s(b)(3)(A).
\39\ 17 CFR 240.19b-4(f)(6).
\40\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission written notice of its intent to
file 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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \41\ 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 proposal
may become operative immediately upon filing. Exchange Rule 934NY(a)
currently provides for the trading of Customer-to-Customer Cross orders
on the floor of the Exchange. The Exchange proposes to adopt Exchange
Rule 900.3NYP(g)(2) to provide for the electronic trading of C2C and
Complex C2C Orders. The proposed C2C and Complex C2C Orders, which must
be comprised of a Customer (but not a Professional Customer) order to
buy and a Customer (but not a Professional Customer) order to sell at
the same price and for the same quantity, will trade immediately in
full at their limit prices, provided that they satisfy the requirements
in proposed Exchange Rule 900.3NYP(g)(2)(B) or (C), as applicable.\42\
The Exchange states that the proposed C2C and Complex C2C Orders would
allow the Exchange to make available to market participants without
delay an additional and more efficient means of executing Customer
orders on the Exchange, and an additional venue for electronically
trading two-sided Customer single-leg and complex orders.
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\41\ 17 CFR 240.19b-4(f)(6)(iii).
\42\ See proposed Exchange Rule 900.3NYP(g)(2)(A). Proposed
Exchange Rule 900.3NYP(g)(2)(B) provides, among other things, that a
C2C Order will be rejected if it would trade at a price that is (i)
at the same price as displayed Customer interest on the Consolidated
Book; or (ii) not at or between the NBBO and the Exchange BBO.
Proposed Exchange Rule 900.3NYP(g)(2)(C) provides, among other
things, that no option leg of a Complex C2C Order will trade at a
price that is worse than the Exchange BBO and that the transaction
price must be at or between the DBBO and may not equal the DBBO if
the DBBO is calculated using the Exchange BBO and the Exchange BBO
for any component of the complex strategy on either side of the
market includes displayed Customer interest.
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As discussed above, the proposed C2C and Complex C2C Orders are
consistent with the customer-to-customer immediate cross and complex
customer-to-customer immediate cross functionality available on another
options exchange and do not raise new or novel regulatory issues.\43\
Waiver of the operative delay will allow the Exchange to immediately
provide market participants with an additional venue for electronically
trading single-leg and complex customer cross orders. The proposal to
amend Exchange Rule 900.2NY to add proposed Exchange Rule
900.3NYP(g)(2) to the list of Exchange rules pursuant to which
Professional Customers are treated as Broker/Dealers (or non-Customers)
will help to align the Exchange's rules with the rules of at least one
other options exchange that limits its customer cross functionality to
Priority Customer orders.\44\ In addition, the definition of
Professional Customer in Exchange Rule 900.2NY currently includes the
CUBE Auction provided in Exchange Rule 971.1NY. The proposal to add the
CUBE Auction in Exchange Rule 971.1NYP to the definition of
Professional Customer will provide for consistent treatment of
Professional Customer orders in the CUBE Auctions prior to and after
the Exchange's migration to the Pillar trading platform. The proposal
to add Complex Customer Cross Orders to Exchange Rule 980NYP(b)(1) will
help to ensure that Exchange Rule 980NYP(b)(1) provides a complete and
accurate list of the ECOs available on the Exchange. For these reasons,
the Commission hereby waives the operative delay and designates the
proposal operative upon filing.\45\
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\43\ See Cboe Rules 5.37(f) and 5.38(f).
\44\ See id. As discussed above, Professional Customers also are
treated as Broker/Dealers (or non-Customers) for purposes of the
Customer-to-Customer Cross orders traded on the Exchange's floor
pursuant to Exchange Rule 934NY(a).
\45\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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.
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b6c4c3dad39bd5d9dbdbd3d8c2c5f6c5d3d598d1d9c0"><span class="__cf_email__" data-cfemail="91e3e4fdf4bcf2fefcfcf4ffe5e2d1e2f4f2bff6fee7">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-66 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-2023-66. 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="https://www.sec.gov/rules/sro.shtml">https://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
[[Page 89788]]
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-NYSEAMER-2023-66 and should be submitted on or before January 18,
2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12), (59).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-28704 Filed 12-27-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on December 28, 2023.
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.