[Federal Register Volume 80, Number 116 (Wednesday, June 17, 2015)]
[Notices]
[Pages 34770-34772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14825]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75151; File No. SR-NYSEMKT-2015-42]


Self-Regulatory Organizations; NYSE MKT, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Revising the 
Schedule for Implementing the Exchange's Recently Approved Rule To 
Provide a Price Protection for Market Maker Quotes Pursuant to Rule 
967.1NY

June 11, 2015.
    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 June 5, 2015, 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 revise the schedule for implementing the 
Exchange's recently approved rule to provide a price protection for 
Market Maker quotes pursuant to Rule 967.1NY. 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.

[[Page 34771]]

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 revise the schedule for implementing 
the Exchange's recently approved rule to provide a price protection 
risk mechanism for Market Maker quotes pursuant to Rule 967.1NY.\4\
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    \4\ See Securities Exchange Act Release No. 74440 (March 4, 
2015), 80 FR 12687 (March 10, 2015) (SR-NYSEMKT-2014-116) (Approval 
Order); see also Securities Exchange Act Release No. 74017 (January 
8, 2015), 80 FR 1979 (January 14, 2015) (SR-NYSEMKT-2014-116) 
(Notice).
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    Rule 967.1NY provides two layers of price protection to incoming 
Market Maker quotes, rejecting those Market Maker quotes that exceed 
certain parameters, as a risk mitigation tool. The first layer of price 
protection, set forth in Rule 967.1NY(a)(1), assesses incoming sell 
quotes against the NBB and incoming buy quotes against the NBO (the 
``NBBO Price Reasonability Check''). Specifically, per Rule 
967.1NY(a)(1), provided that an NBBO is available, a Market Maker quote 
would be rejected if it is priced a specified dollar amount or 
percentage through the contra-side NBBO.
    The second layer of price protection assesses the price of call or 
put bids against a specified benchmark (the ``Underlying Stock Price/
Strike Price Check''), per Rule 967.1NY(a)(2) and (3). This second 
layer of protection applies to bids in call options or put options when 
(1) there is no NBBO available, for example, during pre-opening or 
prior to conducting a re-opening after a trading halt, or (2) if the 
NBBO is so wide as to not reflect an appropriate price for the 
respective options series.
    Rule 967.1NY(b) operates as an additional safeguard and risk 
control feature. In particular, when a Market Maker quote is rejected 
pursuant to Rule 967.1NY(a), the Exchange will also cancel any resting 
same-side quote(s) in the affected series, if rejected pursuant to 
(a)(1); or the Exchange will also cancel any resting same-side quote(s) 
in the affected class(es), if rejected pursuant to (a)(2) or (a)(3) of 
the Rule.
    When the Exchange proposed Rule 967.1NY, it stated that it would 
announce via Trader Update the implementation date of the Rule.\5\ 
Because of the differing technology associated with the two layers of 
price protection, the Exchange now proposes a two-stage implementation 
of the Rule. Specifically, the Exchange proposes to implement Rule 
967.1NY(a)(1) and Rule 967.1NY(b) as it relates to quotes that have 
been rejected pursuant to the NBBO Price Reasonability Check first. The 
Exchange believes that because the NBBO Price Reasonability Check is an 
approved rule of the Exchange, implementing it as soon as practicable 
would enable Market Makers and investors alike to benefit from the 
protections that would be afforded by the NBBO Price Reasonability 
Check.\6\ The Exchange would announce the implementation date by Trader 
Update to be published no later than five (5) days after the 
Commission's publication of this filing.
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    \5\ See Notice, id., 80 FR at 1981.
    \6\ The Exchange notes that to the extent that Rule 967.1NY(b) 
references Rule 967.1NY(a)(2) and (3), that language would be 
without force until the implementation of the latter sections of the 
Rule.
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    The Exchange further proposes a separate, later implementation date 
for Rule 967.1NY(a)(2) and (3) (the Underlying Stock Price/Strike Price 
Check) and Rule 967.1NY(b) as it relates to the Underlying Stock Price/
Strike Price Check. This two-stage implementation would provide the 
Exchange additional time to implement the technology related to the 
Underlying Stock Price/Strike Price Check. The Exchange proposes to add 
Commentary .01 to the rule, directing ATP Holders to consult Trader 
Updates for additional information regarding the implementation 
schedule for paragraphs (a)(2) and (a)(3) of the Rule, with final 
implementation of such paragraphs to be completed by no later than 
March 4, 2016. As noted above, the Exchange proposes to announce the 
implementation date via Trader Update and would indicate those symbols 
for which the Underlying Stock Price/Strike Price Check will be 
unavailable, as the Exchange anticipates that this functionality would 
be implemented on an iterative basis depending on the symbol. Further, 
the Exchange will issue subsequent Trader Updates whenever there is a 
change to the list of symbols for which the Underlying Stock Price/
Strike Price Check is unavailable.
    The Exchange is proposing this rule change to provide transparency 
regarding the implementation schedule regarding the two layers of price 
protection for Marker Maker quotes pursuant to Rule 967.1NY.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\7\ in general, and furthers the objectives of Section 6(b)(5),\8\ 
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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that providing an iterative implementation 
schedule for the approved price protection features set forth in Rule 
967.1NY is consistent with the Act because it would enable Market 
Makers and the public to immediately benefit from the approved NBBO 
Reasonability Check while allowing the Exchange additional time to 
implement the technology associated with the Underlying Stock Price/
Strike Price Check when there is no reliable NBBO available.
    Specifically, the proposed iterative implementation schedule for 
Rule 967.1NY would assist with the maintenance of a fair and orderly 
market and protect investors and the public interest because it would 
enable the Exchange to implement the NBBO Reasonability Check 
immediately, thereby helping to mitigate the risks associated with the 
entry of quotes that are priced a specified dollar amount or percentage 
through the prevailing contra-side market, which the Exchange believes 
is evidence of error. The Exchange further believes that announcing the 
implementation dates of the new risk mitigation tools via Trader 
Updates would remove impediments to and perfects the mechanism of a 
free and open market because they would provide notice of when each of 
the approved risk control features is being implemented, and for which 
symbols.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues, but rather, to propose 
an iterative implementation schedule for an approved rule of the 
Exchange. Therefore, the Exchange does not believe that the proposed 
rule change will impose any burden on competition, but rather, would 
enable Market Makers, the public, and investors to immediately benefit 
from the additional price protection offered by the NBBO Reasonability 
Check and delay the implementation of the Underlying Stock Price/Strike 
Price Check pending finalization of the technology associated with that 
feature.

[[Page 34772]]

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

    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 for 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 \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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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 stated that waiver of this requirement would 
enable the Exchange to implement immediately the approved price 
protection risk mechanisms for which the associated Exchange technology 
is currently available or is in the process of becoming finalized, 
consistent with the proposed implementation schedule. The Commission 
believes the waiver of the operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposed rule change to be operative upon filing.\11\
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    \11\ 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-2015-42 on the subject line.

Paper Comments

     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-NYSEMKT-2015-42. 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, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office 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-2015-42, and should 
be submitted on or before July 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14825 Filed 6-16-15; 8:45 am]
 BILLING CODE 8011-01-P