[Federal Register Volume 78, Number 108 (Wednesday, June 5, 2013)]
[Notices]
[Pages 33866-33867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13287]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69673; File No. SR-NYSEMKT-2013-42]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending NYSE MKT Rule 
980NY, To Remove Provisions Governing How the Complex Matching Engine 
Handles Electronic Complex Orders That Contain a Stock Leg

May 30, 2013.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of 
1934 (the ``Act'')\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on May 17, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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.
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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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE MKT Rule 980NY, to remove 
provisions governing how the Complex Matching Engine (``CME'') handles 
Electronic Complex Orders that contain a stock leg. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend NYSE MKT Rule 980NY to delete 
provisions governing CME functionality for Electronic Complex Orders 
\4\ containing a stock leg submitted to the Exchange by ATP Holders. 
Exchange Rule 980NY provides that Electronic Complex Orders that are 
entered into the NYSE MKT system are routed to the CME for possible 
execution. Provisions governing the functioning of the CME were 
originally incorporated in Rule 980NY in 2009.\5\ The Rule, amended in 
2010,\6\ states that the execution of the stock component of a Complex 
Order must be executed consistent with the rules of the stock execution 
venue, and sets out the priority ranking used by Exchange systems to 
execute Stock/Option Orders,\7\ Stock/Complex Orders,\8\ and the option 
components of such orders.
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    \4\ An ``Electronic Complex Order'' is any Complex Order, as 
defined in Exchange Rule 900.3NY(e), or Stock/Option Order or Stock/
Complex Order, as defined in Rule 900.3NY(h) (see, infra, footnotes 
6 and 7). Rule 900.3NY(e) defines a Complex Order as any order 
involving the simultaneous purchase and/or sale of two or more 
different option series in the same underlying security, for the 
same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for 
the purpose of executing a particular investment strategy. Exchange 
Rule 900.3NY governs Complex Orders, Stock/Option Orders and Stock/
Complex Orders on the Exchange and Rule 990NY lists definitions 
applicable to intermarket linkage.
    \5\ See Securities Exchange Act Release No. 60554 (Aug. 21, 
2009), 74 FR 43737 (Aug. 27, 2009) (SR-NYSEAmex-2009-42) (order 
granting approval).
    \6\ See Securities Exchange Act Release No. 63558 (Dec. 16, 
2010), 75 FR 80553 (Dec. 22, 2010) (SR-NYSEAmex-2010-100) (order 
granting approval).
    \7\ A Stock/Option Order is defined in Rule 900.3NY(h)(l) as an 
order to buy or sell a stated number of units of an underlying stock 
or a security convertible into the underlying stock coupled with the 
purchase or sale of options contract(s) on the opposite side of the 
market representing either (A) the same number of units of the 
underlying stock or convertible security, or (B) the number of units 
of the underlying stock necessary to create a delta neutral 
position, but in no case in a ratio greater than eight options 
contracts per unit of trading of the underlying stock or convertible 
security established for that series by the Clearing Corporation.
    \8\ A Stock/Complex Order is defined in Rule 900.3NY(h)(2) as 
the purchase or sale of a Complex Order coupled with an order to buy 
or sell a stated number of units of an underlying stock or a 
security convertible into the underlying stock (``convertible 
security'') representing either (A) the same number of units of the 
underlying stock or convertible security as are represented by the 
options leg of the Complex Order with the least number of options 
contracts, or (B) the number of units of the underlying stock 
necessary to create a delta neutral position, but in no case in a 
ratio greater than eight-to-one (8.00), where the ratio represents 
the total number of units of the underlying stock or convertible 
security in the option leg to the total number of units of the 
underlying stock or convertible security in the stock leg.
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    The Exchange is proposing to amend Rule 980NY to delete provisions 
governing how the CME processes Electronic Complex Orders that contain 
a stock leg. Two types of Electronic Complex Orders, Stock/Option 
Orders and Stock/Complex Orders, contain a stock leg. Rule 980NY(c)(i) 
provides that ``the CME will accept an incoming Electronic Complex 
Order and will automatically execute it against Electronic Complex 
Orders in the Consolidated Book, or, if not marketable against another 
Electronic Complex Order, against individual quotes or orders residing 
in the Consolidated Book,'' subject to specified conditions. The CME, 
however, rejects Electronic Complex Orders that contain a stock leg. 
The development and implementation of the technology supporting the 
CME's capability to accept Electronic Complex Orders that contain a 
stock leg has taken longer than anticipated to complete and is not yet 
available. The Exchange is therefore proposing to delete from the Rule 
those provisions that permit the CME to accept Electronic Complex 
Orders that contain a stock leg.
    The Exchange expects that this CME functionality will not be ready 
until the Fall of 2013. The Exchange therefore believes it is 
appropriate to delete from Rule 980NY provisions governing the 
described functionality until such time as it is ready to be 
implemented. In addition, the Exchange is proposing the deletion of 
Commentary .03 to Rule 980NY to conform the Rule's Commentary to the 
proposed amendments to the Rule. When the CME functionality to support 
the acceptance of a Stock/Option Order or Stock/Complex Order is ready 
to be implemented, the Exchange will file a rule proposal to add back 
the provisions relating to the functionality, amended as necessary to 
reflect how such functionality would operate.
    The use of Stock/Option and Stock/Complex Orders in open outcry 
trading on the Exchange Floor remains available to ATP Holders and is 
not impacted by the proposed amendment to Rule 980NY, which only 
relates to CME's current inability to accept Electronic Complex Orders 
that contain a stock leg.

[[Page 33867]]

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \9\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5),\10\ in 
particular, in that it is designed to promote just and equitable 
principles of trade, 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. Specifically, the 
Exchange believes that the removal of unavailable functionality will 
add transparency and clarity to the Exchange's rules. Additionally, the 
removal would reduce potential confusion that may result from the 
Exchange's rulebook referring to order execution functionality that is 
unavailable. Finally, the proposed amendment would not otherwise affect 
the operation of any other provision of the Rule on Exchange systems, 
including the availability of Stock/Option and Stock/Complex Orders in 
open outcry trading referenced above.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition. The proposed change is not designed to 
address any competitive issue but rather would delete unavailable 
functionality in the Exchange's rulebook, thereby reducing confusion 
and making the Exchange's rules easier to understand and navigate.

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 \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \13\ Id.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 believes that the waiver of the operative delay is 
consistent with the protection of investors and the public interest 
because the change will provide clarity as to what functionality is 
offered by the Exchange, and because the CME functionality proposed to 
be removed from the rule set is not actually available, its removal 
will not have a negative effect on investors. Furthermore, the Exchange 
notes that the waiver of the 30-day operative period will enable the 
Exchange's rules to immediately reflect the functionality available on 
the Exchange. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest. Therefore, the Commission waives the operative delay and 
designates the proposal operative upon filing.\15\
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    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 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.

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEMKT-2013-42 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2013-42. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site viewing and 
printing in the Commission's Public Reference Room at 100 F Street NE., 
Washington, DC 20549-1090 on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal offices of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEMKT-2013-42, and should be submitted on or before June 26, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13287 Filed 6-4-13; 8:45 am]
BILLING CODE 8011-01-P