Notice2024-04299
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca Rule 1.1
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
March 1, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 42 (Friday, March 1, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 42 (Friday, March 1, 2024)]
[Notices]
[Pages 15239-15242]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-04299]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99606; File No. SR-NYSEARCA-2024-16]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Arca
Rule 1.1
February 26, 2024.
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 February 14, 2024, NYSE Arca, Inc. (``NYSE
[[Page 15240]]
Arca'' 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.
---------------------------------------------------------------------------
\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 1.1 (Definitions) to adopt a
category of Market Makers called Floor Market Makers and to make other
conforming changes. 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 purpose of this filing is to amend Exchange Rule 1.1
(Definitions) to adopt a category of Market Makers called Floor Market
Makers and to make other conforming changes. The Exchange notes that
the proposed category of Floor Market Makers is substantively identical
to the category of Floor Market Makers on at least one other options
exchange, including on the Exchange's affiliated SRO, NYSE American LLC
(``NYSE American'').\4\
---------------------------------------------------------------------------
\4\ See NYSE American Rules 900.2NY (Definitions) (defining a
``Floor Market Maker'' as ``a registered Market Maker who makes
transactions as a dealer-specialist while on the Floor of the
Exchange'').
---------------------------------------------------------------------------
The Exchange proposes to adopt a category of Market Maker called a
Floor Market Maker, which would be substantively identical to the
category of Floor Market Maker on NYSE American. In this regard, the
Exchange proposes to add a definition of Floor Market Maker that would
provide that a Floor Market Maker is ``a registered Market Maker who
makes transactions as a dealer-specialist while on the Floor of the
Exchange.'' Consistent with this proposal, the Exchange also proposes
to amend Rules 6.32-O (Market Maker Defined) to make clear that Floor
Market Makers are included in the definition of Market Maker, unless
otherwise specified or unless context requires otherwise.\5\ As such,
Floor Market Makers are required to satisfy the myriad of obligations
imposed on Market Makers including registration requirements per Rule
6.33-O (Registration of Market Makers), minimum trading requirements
for option issues in appointment per Rule 6.35-O (Appointment of Market
Makers), minimum continuous quoting requirements per Rules 6.37-O
(Obligations of Market Maker) and 6.37AP-O (Market Maker Quotations),
among others.\6\ In particular, at least 75% of the trading activity of
each Market Maker, including Floor Market Makers, must be in option
issues in its appointed issues (the ``minimum 75% trading
requirement'').\7\ However, relevant to the proposed category of Floor
Market Maker, trades executed on the Trading Floor are counted toward
the minimum 75% trading requirement, regardless of whether the trades
are in option issues in the Market Maker's appointment.\8\
---------------------------------------------------------------------------
\5\ Compare proposed Rule 6.32-O (providing, in relevant part,
that ``[a] Market Maker on the Exchange will be a Market Maker,
Floor Market Maker, or a Lead Market Maker'' and that ``[u]nless
specified, or unless the context requires otherwise, the term Market
Maker refers to Market Makers, Floor Market Makers, and Lead Market
Makers'') (emphasis added) with NYSE American Rule 920NY (providing,
in relevant part, that ``[a] Market Maker on the Exchange will be
either a Remote Market Maker, a Floor Market Maker, a Specialist or
an e-Specialist'' and that ``[u]nless specified, or unless the
context requires otherwise, the term Market Maker refers to Remote
Market Makers, Floor Market Makers, Specialists and e-
Specialists'').
\6\ Floor Market Makers likewise must comply with the other
requirements specific to Market Makers, including Rules 6.34-O
(Trading by OTP Holders and OTP Firms on the Floor), 6.34A-O (Market
Maker Authorized Traders--OX), 6.35-O (Appointment of Market
Makers), 6.36-O (Letters of Guarantee), 6.37B-O (Market Maker
Orders), and 6.39-O (Securities Accounts and Orders of Market
Makers).
\7\ See Rule 6.35-O(i) (Appointment of Market Makers), Trading
Requirements).
\8\ See Commentary .01 to Rule 6.35-O (providing that trades
effected on the Trading Floor to accommodate cross trades executed
pursuant to Rule 6.47-O (i.e., taking the other side of a
``crossing'' order) will ``count toward the Market Maker's 75%
requirement, regardless of whether the trades are in issues within
or without the Market Maker's appointment'').
---------------------------------------------------------------------------
The primary role of Market Makers is to provide liquidity. The
Exchange does not limit the number of participants who may act as
Market Makers and would likewise not limit the number of Market Makers
acting as Floor Market Makers. The proposed category of Floor Market
Makers would have a specific focus on providing liquidity for orders
submitted for execution on the Floor of the Exchange through open
outcry. The Exchange believes that the nature of open outcry
transactions lends itself better to larger-sized transactions than the
liquidity that is typically available electronically and the proposed
installation of Floor Market Makers would encourage greater
participation in, and increased liquidity for, such large trades. The
Exchange therefore believes that all market participants stand to
benefit from any increased opportunities for order execution resulting
from the infusion of liquidity on the Trading Floor.
The Exchange has submitted a separate fee filing that will make
Market Makers acting as Floor Market Makers eligible for beneficial fee
treatment, provided the Floor Market Maker satisfies certain criteria,
as is the case on NYSE American.\9\
---------------------------------------------------------------------------
\9\ See SR-NYSEArca-2024-12 (providing for discounted rates on
monthly OTP fees to Floor Market Makers that satisfy certain
criteria). The Exchange notes that the description of Floor Market
Makers set forth SR-NYSEArca-2024-12 is identical to the description
proposed herein and the proposed minimum 75% Manual trading
requirement aligns with Commentary .01 to Rule 6.35-O, as described
herein. See NYSE American Fee Schedule, Section III.A. (Monthly ATP
Fees) and Section III.A., n. 1 (describing discounted rates
available to Floor Market Makers that meet specific criteria, which
rates/criteria are identical to those proposed herein).
---------------------------------------------------------------------------
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\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.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes the proposal to adopt a new category of
Market Makers called Floor Market Maker and to subject Floor Market
Makers to the same requirements as non-Floor Market
[[Page 15241]]
Makers will remove impediments to and perfect the mechanism of a free
and open market and a national market system, and, in general, protect
investors and the public interest, by creating a subset of Market
Makers that will have a presence on the Trading Floor with a focus on
providing liquidity for the execution of open outcry orders The
Exchange notes that Floor Market Makers would have an incentive to
execute orders in all options issues in open outcry because all such
trades would count towards the 75% minimum trading requirement (per
Commentary .01 to Rule 6.35-O). As noted herein, the Exchange would not
limit the number of Market Makers acting as Floor Market Makers. The
Exchange believes that the nature of open outcry transactions lends
itself better to larger-sized transactions than the liquidity that is
generally available electronically and the proposed installation of
Floor Market Makers would encourage greater participation in such large
trades. Therefore, the proposal will benefit all market participants
trading on the Exchange, especially those seeking liquidity for large-
sized and complex orders. Moreover, the Exchange believes that the
proposal would benefit investors, the national market system, and the
Exchange by increasing competition for order flow and executions, which
would improve price discovery.
The Exchange notes that, as proposed, Floor Market Makers would be
subject to the same requirements and obligations as non-Floor Market
Makers. That said, Floor Market Makers, by virtue of their presence on
the Trading Floor, would be better positioned to execute trading
interest in open outcry, which would increase liquidity on the Trading
Floor to the benefit of all market participants. Because the proposed
category of Floor Market Makers are subject to the same obligations as
non-Floor Market Makers, the Exchange notes that it would not need to
undertake any additional procedures or create additional surveillances
to regulate its Floor Market Makers together with non-Floor Market
Makers.
As noted herein, the proposal to have Floor Market Makers is not
new or novel as Floor Market Makers exist pursuant to the rules of
Exchange's affiliated options SRO, NYSE American.\12\ As such, this
proposal does not raise any issues not previously considered by the
Exchange.
---------------------------------------------------------------------------
\12\ See NYSE American Rule 900.2NY (Definitions) (defining a
``Floor Market Maker'' as ``a registered Market Maker who makes
transactions as a dealer-specialist while on the Floor of the
Exchange''). See also BOX Options LLC (``BOX'') Rule 8510 (defining
a ``Floor Market Maker'' as ``an Options Participant of the Exchange
located on the Trading Floor who has received permission from the
Exchange to trade in options for his own account'').
---------------------------------------------------------------------------
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 that the proposed change would continue to encourage
competition because it would apply to all similarly-situated Market
Makers. The Exchange believes the proposed change would not unduly
burden market participants trading on the Exchange but would instead
allow (and encourage) market making firms that do not already have a
presence on the Trading Floor to install a Floor Market Maker. The
Exchange believes that all market participants stand to benefit from
this proposal because Floor Market Makers focused on open outcry
transactions would encourage increased liquidity and quote competition
on the Exchange. The Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting, its rules to remain competitive with
other exchanges. For the reasons described above, the Exchange believes
that the proposed rule change reflects this competitive environment.
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 \13\ and Rule 19b-4(f)(6) thereunder.\14\
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) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\15\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ Id. 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.
---------------------------------------------------------------------------
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 become operative immediately upon filing. The Exchange states that
waiver of the operative would be consistent with the protection of
investors and the public interest because it would enable the Exchange
to allow a subset of Market Makers to have a presence on the Trading
Floor with a specific focus on providing liquidity for the execution of
open outcry orders without delay. The Exchange further states that it
believes the presence of Floor Market Makers may result in increased
liquidity for open outcry interest, which would benefit investors and
the public interest and should therefore be implemented without delay.
Finally, the Exchange notes that its affiliate Exchange (NYSE American)
has a substantially identical rule and therefore the proposed rule
change does not raise any new novel regulatory issues. For the
foregoing reasons, the Commission does not believe that the proposal
raises any new or novel regulatory issues, and may provide market
participants with an additional opportunities to interact with
liquidity on the Trading Floor. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the proposed rule
change operative upon filing.\18\
---------------------------------------------------------------------------
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ 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).
---------------------------------------------------------------------------
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
[[Page 15242]]
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.
---------------------------------------------------------------------------
\19\ 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="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#99ebecf5fcb4faf6f4f4fcf7edead9eafcfab7fef6ef"><span class="__cf_email__" data-cfemail="6b191e070e46080406060e051f182b180e08450c041d">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-16 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-2024-16. 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 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-NYSEARCA-2024-16 and should
be submitted on or before March 22, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04299 Filed 2-29-24; 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 March 1, 2024.
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.