[Federal Register Volume 82, Number 188 (Friday, September 29, 2017)]
[Notices]
[Pages 45653-45656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20891]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81716; File No. SR-NYSEAMER-2017-10]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 928NY To Allow Certain Order Types To Be Excluded From the Risk 
Limitation Mechanism

September 25, 2017.
    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 11, 2017, NYSE American LLC (the ``Exchange'' 
or ``NYSE American'') 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 Rule 928NY (Risk Limitation 
Mechanism) to allow certain order types to be excluded from the risk 
limitation mechanism. 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 45654]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 928NY (Risk Limitation 
Mechanism) to allow certain order types to be excluded from the risk 
limitation mechanism. Specifically, the Exchange proposes to provide 
ATP Holders with the option to exclude Immediate-Or-Cancel (``IOC'') 
orders from being counted against risk limitation thresholds.\4\
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    \4\ An IOC order is ``[a] Limit Order that is to be executed in 
whole or in part on the Exchange as soon as such order is received, 
and the portion not so executed is to be canceled.'' See Rule 
900.3NY(k).
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Risk Limitation Mechanisms
    The Exchange offers ATP Holders the option of utilizing risk 
limitation settings to assist ATP Holders in managing risk related to 
submitting orders during periods of increased and significant trading 
activity.\5\ An ATP Holder can utilize one of three risk limitation 
mechanisms for its orders--based on the number of transactions 
executed, the number of contracts traded, or the percent of the ATP 
Holder's order size--which automatically cancels such orders when 
certain parameter settings are breached.\6\ The Exchange maintains 
trade counters that increment based on the number of trades executed, 
either from a single-leg order or any leg of a Complex Order, in any 
series in a specified class.\7\ The trade counters reset after an 
Exchange-determined time period.\8\ When an ATP Holder has breached its 
risk settings (i.e., has traded more than the contract or volume limit 
or cumulative percentage limit of a class during the specified 
measurement interval), the Exchange will cancel all of the ATP Holder's 
open orders in that class until the ATP Holder notifies the Exchange it 
will resume submitting orders.\9\ The temporary suspension of orders 
from the market that results when the risk settings are triggered is 
meant to operate as a safety valve that enables ATP Holders to re-
evaluate their positions before requesting to re-enter the market.
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    \5\ See Commentary .04(b) to Rule 928NY (providing that ATP 
Holders may avail themselves of one of the three risk limitation 
mechanisms for certain of their orders). Under the current Rule, 
Market Makers are required to utilize the risk limitation settings 
for quotes and the Exchange is not proposing to alter any aspect of 
this Rule in this regard. See also Commentary .04(a) to Rule 928NY; 
and Rule 928NY(b)(2), (c)(2), (d)(2) and (e)(2).
    \6\ See 928NY(b)(1), (c)(1), (d)(1) and Commentaries .01 to Rule 
928NY (regarding the cancellation of orders once the risk settings 
have been breached).
    \7\ See Rule 928NY(a)(1), (f). See also Commentaries .05-.07 to 
Rule 928NY (regarding the operation of the trade counters).
    \8\ See Commentary .06 to Rule 928NY.
    \9\ See Commentaries .01 and .02 to Rule 928NY (requiring that 
an ATP Holder request that it be re-enabled after a breach of its 
risk settings). In the event that an ATP Holder experiences 
multiple, successive triggers of its risk settings, the Exchange 
would cancel all of the open orders--as opposed to cancelling only 
those in the option class (underlying symbol) in which the risk 
settings were triggered. See Rule 928NY(f) and Commentary .02 to 
Rule 928NY.
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Proposed Exclusion of IOC Orders From Risk Settings
    Under the current Rule, an ATP Holder may activate a Risk 
Limitation Mechanism, and corresponding settings, for orders in a 
specified class and, once activated, the mechanism and the settings 
established will remain active unless, and until, the ATP Holder 
deactivates the Risk Limitation Mechanism or changes the settings.\10\ 
Thus, once an ATP Holder activates risk settings for orders in a 
specified class, the risk settings apply to all order types in that 
options class. The Exchange proposes to modify the rule to provide an 
ATP Holder that chooses to utilize risk settings for its orders the 
option to exclude both single-legged orders and Complex Orders 
designated as IOC from being considered by the trade counter. To effect 
this change, proposed Commentary .07 to Rule 928NY would be amended to 
provide that ``[a]ny ATP Holder that activates the Risk Limitation 
Mechanisms for orders pursuant to Commentary .04(b) of this Rule may 
opt to exclude any orders (i.e., whether single-leg orders or Complex 
Orders) designated with a time-in-force of IOC from being considered by 
a trade counter.'' \11\
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    \10\ See Commentary .04(b) to Rule 928NY.
    \11\ See proposed Commentary .07 to Rule 928NY. The Exchange 
also proposes to correct a typographical error and make singular the 
reference to Complex Orders in the sentence providing that 
``[e]xecutions of each leg of a Complex Orders will be considered by 
a trade counter as an individual transaction928NY.'' See id.
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    By their terms, IOC orders (or portions thereof) will cancel if not 
immediately executed. As such, IOC orders are never ranked (as resting 
interest) in the Consolidated Book. The Exchange believes that certain 
OTPs [sic] utilize IOC orders to access liquidity on the Exchange. 
Thus, the proposed change is designed to accommodate participants that 
utilize IOCs in this manner by enabling them to exclude IOC orders from 
being counted and avoid potentially triggering their risk settings 
(prematurely), resulting in the cancellation of open orders. The 
Exchange believes that providing ATP Holders this additional 
flexibility may encourage more ATP Holders to utilize the risk 
settings, which benefits all market participants. The Exchange also 
believes that the proposed change would result in risk settings that 
may be better calibrated to suit the needs of certain ATP Holders 
(i.e., those that routinely utilize IOC orders to access liquidity on 
the Exchange), which improved risk settings should encourage ATP 
Holders to direct additional order flow and liquidity to the Exchange.
    The Exchange notes that the proposed change is limited to IOC 
orders being counted towards whether a risk limitation threshold has 
been reached. In the event an ATP Holder breaches its risk limitation 
settings, any new orders in the specified class, including incoming IOC 
orders, sent by the ATP Holder would be rejected until the ATP Holder 
requests that the Exchange enable the entry of new orders.\12\
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    \12\ See Commentary .02 to Rule 928NY.
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Implementation
    The Exchange will announce by Trader Update the implementation date 
of the proposed rule change, which implementation will be no later than 
90 days after the effectiveness of this rule change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\13\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\14\ 
in particular, in that 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 regulating, clearing, settling, processing 
information with respect to, and 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market by 
providing ATP Holders greater control and flexibility over setting 
their risk tolerance, which may enhance the efficacy of the risk 
settings. By their terms, IOC orders (or portions thereof) will cancel 
if not immediately executed. As such, IOC orders are never ranked (as 
resting interest) in the Consolidated Book. The Exchange believes that

[[Page 45655]]

certain market participants utilize IOC orders to access liquidity on 
the Exchange. Thus, the proposed change is designed to accommodate 
participants that utilize IOCs in this manner by enabling them to 
exclude IOC orders from being counted and avoid potentially triggering 
their risk settings (prematurely), resulting in the cancellation of 
open orders. The Exchange believes that providing ATP Holders this 
additional flexibility may encourage more ATP Holders to utilize the 
risk settings, which benefits all market participants. Further, the 
proposed change would promote just and equitable principles of trade 
because it would result in risk settings that may be better calibrated 
to suit the needs of certain OTPs [sic] (i.e., those that routinely 
utilize IOC orders to access liquidity on the Exchange), which improved 
risk settings should encourage ATP Holders to direct additional order 
flow and liquidity to the Exchange. To the extent additional order flow 
is submitted to the Exchange as a result of the proposed change, all 
market participants stand to benefit from increased trading.\15\
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    \15\ The Exchange believes that the proposed correct of a 
typographical error in current Commentary .07 to Rule 928NY (see 
supra note 11) would add clarify [sic] and transparency to the Rule 
which benefits investors and the public interest.
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    The Exchange notes that an ATP Holder has the option of utilizing 
risk settings for all orders submitted to the Exchange and, as 
proposed, would have the additional option of excluding from these risk 
settings any IOC orders in a given options class submitted to the 
Exchange.
    This proposed change, which was specifically requested by some ATP 
Holders, would foster cooperation and coordination with persons engaged 
in regulating, clearing, settling, and processing information with 
respect to, and facilitating transactions in, securities as it will be 
available to all OTPs [sic] on an optional basis and may encourage more 
ATP Holders to utilize this enhanced functionality to [sic] benefit of 
all market participants. Because the risk controls are designed to 
prevent the execution of erroneously priced trades, the Exchange 
believes that any proposal designed to increase the number of ATP 
Holders that utilize the functionality would benefit all market 
participants.

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 is proposing a 
market enhancement that would provide ATP Holders with greater control 
and flexibility over setting their risk tolerance and, potentially, 
more protection over risk exposure. The proposal is structured to offer 
the same enhancement to all ATP Holders, regardless of size, and would 
not impose a competitive burden on any participant. The Exchange does 
not believe that the proposed enhancement to the existing risk 
limitation mechanism would impose a burden on competing options 
exchanges. Rather, the availability of this mechanism may foster more 
competition. Specifically, the Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
favor competing venues. When an exchange offers enhanced functionality 
that distinguishes it from the competition and participants find it 
useful, it has been the Exchange's experience that competing exchanges 
will move to adopt similar functionality. Thus, the Exchange believes 
that this type of competition amongst exchanges is beneficial to the 
market place [sic] as a whole as it can result in enhanced processes, 
functionality, and technologies.

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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \18\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the 
Commission to 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 Exchange can implement the proposal without delay. The Exchange 
believes that waiver of the operative delay would be consistent with 
the protection of investors and the public interest because it would 
enable the Exchange to implement without delay the proposed optional 
functionality, which the Exchange believes may, in turn, encourage more 
ATP Holders to utilize the optional risk settings for orders. Thus, the 
Exchange believes waiver of the operative delay would protect investors 
by enabling the Exchange to provide greater flexibility to its Risk 
Limitation Mechanisms for orders, which may result in increased usage 
of the risk settings to the benefit of all market participants. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest because it 
will provide ATP Holders with the flexibility to exclude IOC orders 
from consideration by a trade counter, which, the Exchange believes, 
could encourage additional ATP Holders to use the risk limitation 
settings. As noted above, the risk limitation settings are designed to 
assist ATP Holders in managing risk related to submitting orders during 
periods of increased and significant trading activity. Under the 
proposal, the ability to exclude IOC orders from consideration by a 
trade counter is optional; thus, an ATP Holder that utilizes the risk 
limitation settings and wishes to continue to have its IOC orders 
considered by a trade counter will be able to do so. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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 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

[[Page 45656]]

to determine whether the proposed rule change 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-NYSEAMER-2017-10 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-NYSEAMER-2017-10. 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-NYSEAMER-2017-10, and should 
be submitted on or before October 20, 2017.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20891 Filed 9-28-17; 8:45 am]
 BILLING CODE 8011-01-P