[Federal Register Volume 80, Number 194 (Wednesday, October 7, 2015)]
[Notices]
[Pages 60724-60726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25464]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76064; File No. SR-NYSEMKT-2015-66]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Several Rules 
To Address Certain Order Handling Obligations on the Part of Its Floor 
Brokers

October 1, 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 September 16, 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, II, 
and III 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 amend several rules to address certain 
order handling obligations on the part of its Floor Brokers. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend several rules to address certain 
order handling obligations on the part of its Floor Brokers. 
Specifically, the Exchange is proposing to amend Rules 900.3NY, 933NY, 
and 936NY to clarify whether orders sent to Floor Brokers are 
considered ``Held'' or ``Not Held''. This proposal would enable the 
Exchange to compete with options exchanges that have already 
implemented the types of changes being proposed here.\4\
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    \4\ See Securities and Exchange Act Release Nos. 75299 (June 25, 
2015), 80 FR 37700 (July 1, 2015) (Approval Order); 74990 (May 18, 
2015), 80 FR 29767 (May 22, 2015) (SR-CBOE-2015-047) (Notice). The 
Exchange notes that, unlike CBOE, the Exchange does not route 
certain electronic order to Floor Brokers. Therefore, the Exchange 
is not proposing rule text mirroring CBOE's rule in this regard.
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    Current Rule 900.3NY(f) defines whether orders sent to Floor 
Brokers are presumed to be ``Held'' or ``Not Held.'' \5\ A ``Not Held'' 
order generally is one where the customer gives the Floor Broker 
discretion in executing the order, both with respect to the time of 
execution and the price (though the customer may specify a limit 
price), and the Floor Broker works the order over a period of time to 
avoid market impact while seeking best execution of the order. A 
``Held'' order generally is one where the customer seeks a prompt 
execution at the best currently available price or prices.
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    \5\ Rule 900.3NY(f) (Orders Defined) defines a ``Not Held 
Order'' as an order that is marked as ``not held'', ``NH'', or 
``take time,'' or ``which bears any qualifying notation giving 
discretion as to the price or time at which such order is to be 
executed.''
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    The Exchange now proposes to establish in Rules 900.3NY(f), 933NY, 
and 936NY a different default status for orders sent to Floor Brokers 
because the Exchange believes that these provisions are intended to 
protect against a broker failing to properly represent and ultimately 
execute orders.\6\ Specifically the Exchange is proposing to amend Rule 
900.3NY(f) to provide that ``[a]n order entrusted to a Floor Broker 
will be

[[Page 60725]]

considered a Not Held Order, unless otherwise specified by a Floor 
Broker's client.'' The Exchange is also proposing to add new Commentary 
.06 to Rule 933NY (Responsibilities of Floor Brokers) and to add 
language to Rule 936NY (Discretionary Transaction) that mirrors the 
language it proposes to add to Rule 900.3NY(f). The Exchange believes 
that these proposed changes, taken together, would result in a change 
to the default order handling obligations for orders sent to Floor 
Brokers (i.e., the Exchange would consider all orders sent to Floor 
Brokers to be ``Not Held'' by default).
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    \6\ The Exchange notes that at the time these rules were 
adopted, virtually all options orders (large or small and retail or 
professional) were handled by Floor Brokers. Given the discrete 
profile of orders handled by Floor Brokers today (generally large 
size orders and often multi-leg) it is reasonable for Floor Brokers 
to ``work'' orders that are entrusted to them because that is the 
reason a customer would utilize a Floor Broker in today's 
environment.
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    The Exchange notes that Rules 933NYand 936NY were based upon rules 
that were adopted prior to electronic trading and, therefore, did not 
contemplate the interaction between an electronic environment and a 
trading floor and have not been amended to specifically address that 
interaction. While it is clear that Floor Brokers have more discretion 
with regards to the manner in which they represent and execute orders 
on a trading floor than does a computer routing an order to the 
Exchange for execution, the bounds of the discretion have not been 
entirely clear. Rules 933NYand 936NY, among others, set certain 
boundaries to a Floor Broker's discretion, but the Exchange believes 
the current marketplace, with electronic and floor trading, favors an 
amendment to those boundaries.
    Electronic and floor trading gives clients the choice between an 
Amex Trading Permit Holder (``ATP'') that routes orders to the Exchange 
electronically or an ATP that executes orders via a Floor Broker. The 
Exchange believes that clients are keenly aware that the differences 
between electronic and floor trading include at least the following 
factors: A computer cannot deviate from its programed instructions, 
whereas a Floor Broker can take into account the nuance of the 
marketplace, such as the makeup of a particular trading floor, the 
individuals on that trading floor, and how the electronic books 
interact with that environment. The Exchange believes that clients use 
Floor Brokers precisely because Floor Brokers can take into account the 
nuance of the marketplace (i.e., exercise a certain level of 
discretion) to potentially provide higher execution quality. The 
Exchange likewise believes that if a client did not want a Floor Broker 
to use their expertise in the execution of an order, the client would 
simply send orders to the Exchange electronically.
    Given that Floor Brokers have more discretion with regards to the 
manner in which they represent and execute orders than do computers 
executing electronic orders, the Exchange is proposing to change 
certain boundaries related to that discretion. In particular, in 
recognition of the discretion implicit with the use of a Floor Broker, 
the Exchange seeks to provide notice to the marketplace that, unless 
otherwise specified by a Floor Broker's client, an order is deemed to 
be ``not held.'' The Exchange believes clients that choose to use Floor 
Brokers do so in order to utilize a Floor Broker's expertise in the 
execution of orders. This rule change would update Exchange rules by 
setting forth the presumptive discretion available to Floor Brokers in 
a manner consistent with modern market structure and the Floor Broker's 
role in the current trading environment. This filing also serves as 
notice to the investing community that orders sent to Floor Brokers 
will be deemed ``not held'' unless otherwise specified by the Floor 
Broker's client.
    In addition, the Exchange will announce the implementation of this 
rule change by Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed 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 foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitation transactions 
in securities, to remove impediments to, and perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest. Additionally, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \9\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that it has articulated a 
reasonable basis for changing the current default presumption of 
whether a customer intends to provide a Floor Broker with the ability 
to exercise time and price discretion on its behalf as long as the 
order is not otherwise marked in a manner to suggest that the customer 
did not intend for its order to be treated as Not Held. Other than 
changing the default presumption to ``Not Held'' for most orders sent 
to Floor Brokers, the Exchange is not proposing to change any other 
order handling obligations applicable to Floor Brokers. The Exchange 
believes that its proposal is consistent with the Act and is designed 
to promote just and equitable principles of trade and remove 
impediments to and perfect the mechanism of a free and open market 
because it responds to an understanding of the changing role of Floor 
Brokers on the Exchange's Floor since it adopted Rule 936NY, and its 
understanding of how customers today use, and intend to continue to 
use, the services of Floor Brokers on the Exchange. In addition, the 
Exchange believes designating certain orders as ``not held'' is in the 
interest of facilitating transactions in securities and reflective of 
today's marketplace, which generally helps to protect investors and the 
public interest.

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

    The Exchange does not believe that this proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed rule change will impose any burden on competition because 
the rule change adds clarity regarding the default orders handling 
obligations for orders sent to Floor Brokers, reflects the modern 
market structure, is consistent with the reasons customers utilize 
Floor Brokers, and will be applied equally to all ATPs. To the extent 
that the proposed rule change will cause clients or brokers to choose 
the Exchange over other trading venues, market participants on other 
exchanges are welcome to become ATPs and trade at the Exchange if they 
determine that this proposed rule change has made the Exchange more 
attractive or favorable. In addition, as noted above, the Exchange 
believes the proposed rule change is pro-competitive and would allow 
the Exchange to compete more effectively with other options exchanges 
that have already adopted similar rule changes.\10\
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    \10\ See supra n. 4.
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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

    The Exchange has filed the proposed rule change pursuant to Section

[[Page 60726]]

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\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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-2015-66 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2015-66. 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 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 Section, 100 F Street 
NE., Washington, DC 20549-1090. Copies of the filing will also be 
available for inspection and copying at the NYSE's principal office and 
on its Internet Web site at www.nyse.com. 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-2015-66 and should be submitted 
on or before October 28, 2015.

    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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25464 Filed 10-6-15; 8:45 am]
 BILLING CODE 8011-01-P