[Federal Register Volume 89, Number 157 (Wednesday, August 14, 2024)]
[Notices]
[Pages 66150-66152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18072]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100674; File No. SR-NYSEAMER-2024-46]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify Rule 
971.2NYP To Clarify the Definition of CUBE BBO

August 8, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on July 24, 2024, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 modify Rule 971.2NYP to clarify the 
definition of CUBE BBO. 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.

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 modify Rule 971.2NYP to clarify the 
definition of CUBE BBO.
    In October 2023, the Exchange completed its transition to its 
Pillar trading technology platform (``Pillar'').\4\ In May 2024, the 
Exchange adopted Rule 971.2NYP (the ``Rule''), which describes the 
operation of its Complex Customer Best Execution (``CUBE'') Auction on 
Pillar (``Auction'').\5\ On June 10, 2024, the Exchange deployed the 
Complex CUBE Auction functionality.\6\ The Exchange proposes to amend 
the Rule to clarify the definition of CUBE BBO, which would add 
transparency and alleviate potential investor confusion.
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    \4\ See Trader Update, NYSE American Options: NYSE Pillar Final 
Migration Tranche, dated October 30, 2023, available here: https://www.nyse.com/trader-update/history#110000748137 (announcing the last 
phase of the Pillar migration).
    \5\ See Securities Exchange Act Release No. 100033 (April 25, 
2024) 89 FR 35270 (May 1, 2024) (SR-NYSEAMER-2024-24) (immediately 
effectiveness filing to adopt Rule 971.2NYP regarding the Complex 
CUBE Auction on Pillar). See generally Rule 971.2NYP (Complex 
Electronic Cross Transactions).
    \6\ See Trader Update, NYSE American Options: Complex CUBE 
Available June 10, 2024, dated May 13, 2024, available here: https://www.nyse.com/trader-update/history#110000748137 https://www.nyse.com/trader-update/history#110001076051 (announcing 
implementation of Complex CUBE Auctions on Pillar effective June 10, 
2024).
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    The Complex CUBE Auction is a paired auction, with a price 
improvement mechanism, for Electronic Complex Orders. The Rule sets 
forth the definitions applicable to the Auction as well as the 
requirements for initiating an Auction. In particular, the Rule 
specifies that, to initiate an Auction, ``the net price of a Complex 
CUBE Order to buy (sell) must be equal to or higher (lower) than the 
CUBE BB (BO).'' \7\
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    \7\ See Rule 971.2NYP(a)(2) (Initiation of Auction).
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    Per the Rule, the CUBE BBO refers to the CUBE BB and the CUBE BO 
and the CUBE BBO is comprised of higher of the Complex BBO \8\ or DBBO 
\9\ as follows.
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    \8\ See Rule 971.2NYP(a)(1)(A)(i) (defining Complex BBO as ``the 
best-priced complex order(s) in the same complex strategy to buy 
(sell)'' and providing that ``[t]he Complex BB cannot exceed the DBO 
and the Complex BO cannot exceed the DBB'').
    \9\ See Rule 971.2NYP(a)(1)(A)(ii) (specifying that the DBBO has 
the meaning set forth in Rule 980NYP(a)(5). Rule 980NYP described 
Complex Order Trading on the Exchange.
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    The CUBE BB for a Complex CUBE Order to buy is comprised of the 
higher of: the Complex BB or the Complex BB plus one cent ($0.01) if 
there is a Customer Complex Order on the Complex BB; or the DBB or the 
DBB plus one cent ($0.01) if there is displayed Customer interest on 
the Exchange BBO and the DBB is calculated using the Exchange BBO. The 
CUBE BO for a Complex CUBE Order to sell is comprised of the lower of: 
the

[[Page 66151]]

Complex BO or the Complex BO minus one cent ($0.01) if there is a 
Customer Complex Order on the Complex BO; or the DBO or the DBO minus 
one cent ($0.01) if there is displayed Customer interest on the 
Exchange BBO and the DBO is calculated using the Exchange BBO.\10\
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    \10\ See Rule 971.2NYP(a)(1)(A)(i)-(ii).
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    Thus, to initiate an Auction, a Complex CUBE Order must be priced 
at least equal to the best priced interest on the Exchange, unless the 
best-priced interest represents Customer interest, in which case such 
interest must be price improved. In instances where the DBB (DBO) 
represents the best-priced interest on the Exchange, the rule text 
specifies that the DBO (DBB) must be improved by one cent ($0.01) ``if 
there is displayed Customer interest on the Exchange BBO'' and the DBB 
(DBO) ``is calculated using the Exchange BBO.'' \11\
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    \11\ See id.
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    The Exchange believes that, while accurate, the Rule could be more 
transparent regarding what interest on the DBBO (i.e., side of market) 
must be price improved when there is Customer interest at the DBBO and 
the CUBE BBO is based on the DBBO. Thus, as proposed, the modified Rule 
would specify that the DBB (DBO) must be price improved when there is 
displayed Customer interest on the Exchange BBO and the DBB (DBO) is 
calculated using the price of that displayed Customer interest.\12\ The 
proposed modification also would help clarify the circumstance under 
which price improvement is not required, e.g., the CUBE BB (when based 
on the DBB) is not impacted when both component legs of a Complex Order 
are buying and, for one of the component legs, there is displayed 
Customer interest at the Exchange BO.
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    \12\ See proposed Rule 971.2NYP(a)(1)(A)(i)-(ii).
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Example
Trading interest on the Exchange when Complex CUBE Order is submitted
    MM1 Leg A: 10 x 10 @0.85 x 1.05
    Firm1 Leg A to sell 4 @1.00 (Limit Order)
    MM1 Leg B: 10 x 40 @0.10 x 0.30
    Cust1 Leg B: buy [email protected] (Limit Order)
cCUBE to buy {5A-7B{time}  40 @4.32 x cContra to sell {5A-7B{time}  
@4.10
    --The complex strategy to Auction is buy 5 LegA and sell 7 LegB
    --The Complex Contra Order specifies an automatch limit price
DBBO for {5A-7B{time} : 2.15 x 4.30
    DBB = 4.25 - 2.10 = 2.15
    Calculation: Sum of (best bid of each buy leg * leg ratio) (0.85 x 
5) - Sum of (best offer of each sell leg * leg ratio) (0.30 x 7)
    4.25 - 2.10 = 2.15
    DBO = 5.00 - 0.70 = 4.30
    Calculation: Sum of (best offer of each buy leg * leg ratio)
    (1.00 x 5) - Sum of (best bid of each sell leg * leg ratio) (0.10 x 
7)
CUBE BBO: 2.15 x 4.29
    For purposes of the CUBE BBO, the DBO (calculated at 4.30) must be 
improved by one cent (down to 4.29) because the DBO contains Customer 
interest on the leg market (i.e., LegB bid @0.10)

    To initiate the Auction, the price of the cCUBE @4.32 is adjusted 
to @4.29 (to be on the CUBE BBO).

    RFR announcing the Auction @4.29 is disseminated.

    During Auction, only one RFR Response is received:

    Firm2 Complex GTX Order to sell {5A-7B{time}  5 @4.10

    The allocation of the cCUBE Order at the conclusion of Auction, is 
as follows:

    Trades 5 with Firm2 @4.10; then
    Trades 5 with cContra @4.10;
    Trades 30 (i.e., the balance) with cContra @4.29

    As shown in this example, because there is displayed Customer 
interest at the Exchange BB, which is used to calculate the DBO for the 
strategy (i.e., a Customer order to buy LegB @0.10), the CUBE BO must 
price improve such interest by one cent. Also illustrated is the fact 
that, to initiate the Auction, the price of the Complex CUBE Order must 
be priced (back) to comply with the CUBE BBO requirements. This 
existing (and clarified) Auction functionality is designed to ensure 
that displayed Customer interest (in this case on the leg markets) is 
not disadvantaged by the Auction.
    The Exchange believes this proposed rule change would add clarity 
and transparency to Exchange rules making them easier to navigate and 
comprehend to the benefit of investors.
2. Statutory Basis
    For the reasons set forth above, the Exchange believes the proposed 
rule change is consistent with Section 6(b) of the Act in general, and 
furthers the objectives of Section 6(b)(5) of the Act, in that it is 
designed to promote just and equitable principles of trade,remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system and would protect investors and the public 
interest because it would elucidate what interest on the DBBO (i.e., 
side of market) must be price improved when there is Customer interest 
at the DBBO, and thus improve the accuracy and comprehensibility of the 
Rule.

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 is not 
designed to impact competition but is instead designed to improve the 
clarity (and thus enhance the accuracy) of the Rule by making more 
explicit the pricing requirements to initiate a Complex CUBE Auction. 
The Exchange does not believe that the proposed rule changes would 
impact intra-market competition as the proposed rule changes would be 
applicable to all similarly-situated ATP Holders that trade on the 
Exchange. To the extent that this improved clarity encourages ATP 
Holders to utilize the Auction, all market participants stand to 
benefit from additional liquidity being directed to the Exchange.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues who offer similar functionality. To the extent that the proposed 
clarification leads to an increase in Exchange volume, this increase 
should allow the Exchange to better compete against other options 
markets that already offer similar price improvement mechanisms and for 
this reason the proposal does not create an undue burden on intermarket 
competition.

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 foregoing 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 after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the

[[Page 66152]]

public interest, it has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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, along 
with a brief description and 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. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ 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 proposed 
rule change may become operative upon filing. The Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would 
clarify the definition of the CUBE BBO and the circumstances under 
which price improvement over displayed Customer interest is required, 
thus improving the accuracy and comprehensibility of the Rule, without 
undue delay. For these reasons, and because the proposal does not raise 
any new or novel issues, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2024-46 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-NYSEAMER-2024-46. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2024-46 and should 
be submitted on or before September 4, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18072 Filed 8-13-24; 8:45 am]
BILLING CODE 8011-01-P