[Federal Register Volume 84, Number 57 (Monday, March 25, 2019)]
[Notices]
[Pages 11141-11143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05568]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85363; File No. SR-NYSEARCA-2019-13]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Commentary 
.02 to Rule 6.72-O To Specify That Replacement Issues May Be Added to 
the Penny Pilot Quarterly

March 19, 2019.
    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 March 7, 2019, 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.
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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 Commentary .02 to Rule 6.72-O to 
specify that replacement issues may be added to the Penny Pilot 
(``Pilot'') on a quarterly basis, without altering the expiration date 
of the Pilot, which is June 30, 2019. The proposed rule change is 
available on the Exchange's website 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 11142]]

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 Commentary .02 to Rule 6.72-O, 
regarding the Pilot, to specify that replacement issues may be added to 
the Pilot on a quarterly basis, without altering the expiration date of 
the Pilot, which is June 30, 2019.
    The Exchange recently filed to extend the Pilot until June 30, 2019 
(from December 31, 2018) and also updated the rule text to provide that 
replacement issues may be added to the Pilot on the second trading day 
following January 1, 2019.\4\ The Rule authorizes the Exchange to 
replace any options issues in the Pilot that have been delisted with 
the next most actively traded multiply listed options classes that are 
not yet included in the Program, based on trading activity in the 
previous six months.\5\ The Exchange proposes to modify Commentary .02 
to Rule 6.72-O to allow the Exchange to add replacement issues (for 
Pilot issues that have been delisted) on a quarterly basis. The 
Exchange added replacement issues in January 2019 and would add 
eligible to add eligible replacement issues in April, July and October. 
The Exchange believes this change would allow the Exchange to update 
issues eligible for the Pilot (by replacing delisted issues) on a 
quarterly basis (as opposed to semi-annual) and would enable further 
analysis of the Pilot and a determination of how the Pilot should be 
structured in the future.
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    \4\ See Securities Exchange Act Release No. 84873 (December 19, 
2018), 83 FR 66798 (December 27, 2018) (SR-NYSEArca-2017-96). On 
January 3, 2019, the Exchange added new issues to replace delisted 
Pilot issues, as announced by Trader Update, available here, https://www.nyse.com/publicdocs/nyse/notifications/trader-update/Penny%20Pilot%20Replacements%20January%202018.pdf.
    \5\ See Commentary .02 to Rule 6.72-O.
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    As is the case today, the Exchange will determine replacement 
issues based on trading activity in the previous six months (the ``six 
month lookback'') but will not use the month immediately preceding the 
addition of a replacement to the Pilot. Thus, a replacement class to be 
added on the second trading day following April 1, 2019 would be 
identified based on The Option Clearing Corporation's trading volume 
data from August 1, 2018 through February 28, 2019.\6\ Although the 
Exchange proposes to add new issues to the Pilot on a quarterly basis, 
it will continue to use the six-month lookback to determine the most 
active issues for Pilot eligibility. The Exchange believes the six 
month lookback is appropriate because this time period would help 
reduce the impact of unusual trading activity as a result of unique 
market events, such as a corporate action (i.e., it would result in a 
more reliable measure of average daily trading volume than would a 
shorter period).
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    \6\ The Rule continues to obligate the Exchange to announce the 
replacement issues by Trader Update. See id.
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    This filing does not propose any substantive changes to the Pilot: 
All classes currently participating will remain the same and all 
minimum increments will remain unchanged. The Exchange believes the 
benefits to public customers and other market participants who will be 
able to express their true prices to buy and sell options have been 
demonstrated to outweigh the increase in quote traffic.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5),\8\ 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system.
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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 the proposal to allow the addition of 
replacement issues the Pilot on a quarterly basis would result in the a 
more current list of Pilot-eligible issues and would enable further 
analysis of the Pilot, including for a determination of how the Pilot 
should be structured in the future. Further, the Exchange believes the 
six month lookback is appropriate because this time period would help 
reduce the impact of unusual trading activity as a result of unique 
market events, such as a corporate action (i.e., it would result in a 
more reliable measure of average daily trading volume than would a 
shorter period). Thus, the Exchange believes this proposal would 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and remove impediments to and perfect the mechanisms of a 
free and open market and a national market system.
    The Exchanges notes that it not making any other substantive 
changes to the Pilot, other than modifying the timing for replacement 
issues and therefore the Exchange will continue to participate in a 
program that has been viewed as beneficial to traders, investors and 
public customers and viewed as successful by the other options 
exchanges participating in it.
    The Exchange believes that the Pilot would continue to promote just 
and equitable principles of trade by enabling public customers and 
other market participants to express their true prices to buy and sell 
options to the benefit of 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. Specifically, the Exchange 
believes that allowing the Exchange to add replacement issues to the 
Pilot on a quarterly basis would make the list of Pilot-eligible issues 
more current and would enable further analysis of the Pilot, including 
for a determination of how the Pilot should be structured in the 
future. In doing so, the proposed rule change will also serve to 
promote regulatory clarity and consistency, thereby reducing burdens on 
the marketplace and facilitating investor protection. The Pilot Program 
is an industry-wide initiative supported by all other option exchanges. 
The Exchange believes that the proposed change would allow for 
continued competition between Exchange market participants trading 
similar products as their counterparts on other exchanges, while at the 
same time allowing the Exchange to continue to compete for order flow 
with other exchanges in option issues trading as part of the Pilot.

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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
Because the

[[Page 11143]]

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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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission 
may 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 proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The change will allow 
the Exchange to add classes to the pilot that are actively traded at 
the start of the second quarter (i.e., in April 2019) and replace those 
that have been delisted and are no longer trading on a more frequent 
basis. This will help ensure that the top 363 most actively traded, 
multiply-listed classes are included in the Pilot, which will enable 
further analysis of the Pilot.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the operative delay for this 
proposal, 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 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-NYSEARCA-2019-13 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-NYSEARCA-2019-13. 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 (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 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2019-13 and should be submitted 
on or before April 15, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05568 Filed 3-22-19; 8:45 am]
 BILLING CODE 8011-01-P