[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