Notice2024-19778
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.64P-O
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 4, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 171 (Wednesday, September 4, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 171 (Wednesday, September 4, 2024)]
[Notices]
[Pages 71962-71964]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19778]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100864; File No. SR-NYSEARCA-2024-66]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
6.64P-O
August 28, 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 August 13, 2024, 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 6.64P-O (Auction Process). 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 6.64P-O (Auction Process)
regarding the automated process for opening (and reopening) option
series on the Exchange.\4\
---------------------------------------------------------------------------
\4\ An ``Auction'' refers to the opening or reopening of a
series for trading either with or without a trade. See Rule 6.64P-
O(a)(1). For simplicity, the Exchange will simply refer to the
``opening'' of a series herein.
---------------------------------------------------------------------------
Rule 6.64P-O (the ``Rule'') describes the opening Auction
Process.\5\ The Exchange has determined that the Auction Process could
be incrementally improved by removing the existing requirement that the
Exchange disseminate a Rotational Quote before commencing an Auction.
The Exchange believes that this proposed modification could enhance the
speed and efficiency of its Auction Process without impairing price
discovery.
---------------------------------------------------------------------------
\5\ ``Auction Process'' refers to the process that begins when
the Exchange receives an Auction Trigger for a series and ends when
the Auction is conducted. See Rule 6.64P-O(a)(5).
---------------------------------------------------------------------------
Commencement of the Auction Process
Pursuant to the Rule, for each option series, the Auction Process
begins once the Exchange receives the Auction Trigger, and the Exchange
sends a Rotational Quote \6\ to both OPRA and proprietary data
feeds.\7\ The Auction Trigger occurs when the Primary Market for the
underlying security first disseminates both a two-sided quote and a
trade of any size that is at or
[[Page 71963]]
within the quote.'' \8\ The Auction Trigger signals the opening of
trading in an underlying security, which in turn, enables the Exchange
to commence the process of opening options on that underlying.
---------------------------------------------------------------------------
\6\ ``Rotational Quote'' refers to the highest Market Maker bid
and lowest Market Maker offer on the Exchange when the Auction
Process begins, and such Rotational Quote will be updated (for price
and size) during the Auction Process. See Rule 6.64P-O(a)(13).
\7\ See Rule 6.64P-O(d)(1).
\8\ See Rule 6.64P-O(a)(7). For a Core Open Auction, the Auction
Trigger occurs at or after 9:30 a.m. EST and for a Trading Halt
Auction, the Auction Trigger occurs at the end of a trading halt.
See Rule 6.64P-O(a)(7)(A) and (B), respectively.
---------------------------------------------------------------------------
After the Auction Trigger, the Exchange sends a Rotational Quote
for each option series on the underlying security. Once a Rotational
Quote is disseminated, the Exchange waits a minimum of two milliseconds
and then conducts an Auction, provided that ``there is both a Legal
Width Quote and, if applicable, Market Maker quotes with a non-zero
offer in the series (subject to the Opening MMQ Timer(s) requirements
in paragraph (d)(3) of this Rule).'' \9\
---------------------------------------------------------------------------
\9\ See Rule 6.64P-O(d)(2). See Rule 6.64P-O(a)(10)(A)-(C)
(describing that a Legal Width Quote is comprised of a Calculated
NBBO that may be locked, but not crossed, does not contain a zero
offer, and does not exceed the Exchange-determined ``maximum
differential''). A Calculated NBBO is ``the highest bid and lowest
offer'' among all Market Maker quotes and the ABBO [i.e., Away
Market BBO] during the Auction Process. See Rule 6.64P-O(a)(8).
---------------------------------------------------------------------------
Proposed Change to Commencement of the Auction Process
The Exchange proposes to remove from the Rule the requirements that
the Exchange delay its opening Auction until it disseminates a
Rotational Quote and waits at least two additional milliseconds post-
dissemination (the ``Rotational Quote Requirement'').\10\ The proposed
rule will specify that, upon receipt of an Auction Trigger for an
underlying security, the Exchange will disseminate a message to market
participants indicating the initiation of the opening process and will
begin transitioning each option series for that underlying security
from a pre-open state to continuous trading.\11\ This proposed change
does not alter any of the other prerequisites to commencing an Auction.
Consistent with current functionality, the Auction process will begin
opening an option series once there is a Legal Width Quote.\12\
---------------------------------------------------------------------------
\10\ See proposed Rule 6.64P-O(d)(1)-(2). Consistent with this
proposed change, the Exchange proposes to eliminate from Rule 6.64P-
O(a)(13) the definition of Rotational Quote. See proposed Rule
6.64P-O(a) (which would no longer include (a)(13)).
\11\ See proposed Rule 6.64P-O(d)(1). The proposed rule
specifies that a message is disseminated to market participants
informing them that the Auction Trigger has been received, the
receipt of which enables the Exchange to transition option series in
that underlying security from a pre-open state to continuous
trading. The Exchange notes that the dissemination of a message
indicating receipt of the Auction Trigger is consistent with current
functionality except that, with the removal of the Rotational Quote
Requirement, this message now signals to market participants that
the Exchange may commence its transition of option series in that
underlying to continuous trading.
\12\ The Rule addresses how an option series transitions from
pre-open state to continuous trading in circumstances where, after a
specified time period, the prerequisites to commencing an Auction
have not yet been satisfied. See Rule 6.64P-O(d)(4).
---------------------------------------------------------------------------
The Exchange believes that this proposed change would result in a
more timely and efficient opening process. At a minimum, once the
Auction Trigger is received and, absent the Rotational Quote
Requirement, each option series would open at least two milliseconds
earlier.\13\ The Exchange has determined (based on feedback from market
participants) that the relative benefit of delaying the Auction Process
for the Rotational Quote Requirement is outweighed by the benefit of
improving the speed at which each option series opens. The Exchange
notes that, notwithstanding the proposal to eliminate the Rotational
Quote Requirement, the Exchange would continue to disseminate imbalance
messages as early as 8:00 a.m. EST indicating the trading interest
available in each option series pre-Auction (i.e., the ``Auction
Imbalance Information'').\14\ Similarly, the proposed elimination of
the Rotational Quote Requirement would likewise not alter the other
prerequisites to the Exchange commencing an Auction (e.g., the presence
of a Legal Width Quote). Furthermore, the Exchange notes that its
Auction Process, as modified herein, would remain consistent with that
of at least one other options exchange that likewise does not include a
Rotational Quote Requirement as a precondition to opening each option
series.\15\ The Exchange therefore believes that the proposal to
eliminate the Rotational Quote Requirement would benefit market
participants because it would allow the Exchange to compete on more
equal footing with at least one other options exchange that does not
include such a requirement as a precondition to opening each series.
---------------------------------------------------------------------------
\13\ Compare proposed Rule 6.64P-O(d)(2) with (current) Rule
6.64P-O(d)(2). The Exchange notes that the required delay of at
least two milliseconds occurs after the Exchange has disseminated a
Rotational Quote. Thus, under the current Rule, the time lapse from
receipt of Auction Trigger to commencing an Auction is, by
necessity, longer than two milliseconds. See Rule 6.64P-O(d)(2).
\14\ See Rule 6.64P-O(c)(1). The Auction Imbalance Information
includes the Auction Collars, Auction Indicator, Book Clearing
Price, Far Clearing Price, Indicative Match Price, Matched Volume,
Market Imbalance, and Total Imbalance. See Rule 6.64P-O(a)(3)(A)-
(D). For Trading Halt Auctions, the Exchange disseminates the
Auction Imbalance Information at the beginning of a trading halt See
Rule 6.64P-O(c)(2).
\15\ See, e.g., Cboe Options Exchange Inc. (``Cboe'') Rule
5.31(d)(1)(A)(ii) (providing that Cboe initiates its ``opening
rotation'' for a series upon receipt of ``both the first
disseminated transaction and the first disseminated quote on the
primary market'' on or after 9:30 a.m. EST, which is identical the
Exchange's ``Auction Trigger,'' without waiting for the
dissemination of a Rotational Quote (or an additional two
milliseconds)). The Exchange believes that its ``Auction Process''
is akin to Cboe's ``opening rotation'' (compare Rule 6.64P-O(a)(5)
with Cboe Rule 5.31(e)) and its ``Auction Imbalance Information'' is
akin to Cboe's ``Opening Auction Updates'' (compare Rule 6.64P-
O(a)(3) with Cboe Rule 5.31(c)). Like Cboe, the Exchange
disseminates a message to its market participants to signal the
initiating of the opening process. Compare Cboe Rule 5.31(d) with
proposed Rule 6.64P-O(d)(1).
---------------------------------------------------------------------------
Finally, the Exchange proposes to make a technical change to
renumber current Rule 6.64P-O(a)(5)(i) to Rule 6.64P-O(a)(5)(A), which
would add clarity and internal consistency to Exchange rules.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\16\ in general, and
furthers the objectives of Section 6(b)(5),\17\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes the proposed changes to its Auction Process
would promote a fair and orderly market by improving the speed and
efficiency of the Exchange's opening process. The Exchange has
determined (based on feedback from market participants) that the
relative benefit of delaying the Auction Process for the Rotational
Quote Requirement is outweighed by the benefit of improving the speed
at which each option series opens. The Exchange notes that,
notwithstanding the proposal to eliminate the Rotational Quote
Requirement, the Exchange would continue to disseminate the Auction
Imbalance Information, which informs market participants about the
trading interest available pre-Auction. Moreover, the proposed change
would not alter any of the Exchange's other prerequisites to commencing
an Auction (e.g., the presence of a Legal Width Quote).
Furthermore, the Exchange believes that the proposed change would
[[Page 71964]]
promote just and equitable principles of trade because it would allow
the Exchange to compete on more equal footing with at least one other
options exchange that does not include an analogous Rotational Quote
Requirement as a precondition to opening each option series.\18\
---------------------------------------------------------------------------
\18\ See supra note 15 (regarding Cboe's opening process, per
Cboe Rule 5.31).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed change to the Auction Process would not impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because all market participants
that participate in the opening process may benefit equally from the
proposal, as the rules of the Exchange apply equally to all market
participants. With respect to inter-market competition, the Exchange
notes that the Exchange's modified Auction Process would remain
consistent with that of other options exchanges that likewise do not
include a Rotational Quote Requirement as a precondition to opening
each option series.\19\
---------------------------------------------------------------------------
\19\ Id.
---------------------------------------------------------------------------
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 \20\ and Rule 19b-4(f)(6) thereunder.\21\
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.\22\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(3)(A)(iii).
\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-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) \23\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\24\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\23\ 17 CFR 240.19b-4(f)(6).
\24\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\25\ 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#fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188"><span class="__cf_email__" data-cfemail="83f1f6efe6aee0eceeeee6edf7f0c3f0e6e0ade4ecf5">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-66 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-NYSE-SR-NYSEARCA-2024-
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 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-SR-NYSEARCA-2024-66 and
should be submitted on or before September 25, 2024.
---------------------------------------------------------------------------
\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19778 Filed 9-3-24; 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 September 4, 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.