
[Federal Register Volume 79, Number 13 (Tuesday, January 21, 2014)]
[Notices]
[Pages 3431-3434]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71294; File No. SR-NYSEMKT-2014-05]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Its Rules in Order To Clarify the 
Applicability and Functionality of Certain Order Types on the Exchange

January 14, 2014.
    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 January 8, 2014, 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

[[Page 3432]]

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 its rules in order to clarify the 
applicability and functionality of certain order types on the Exchange. 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 900.3NY (Orders Defined) by 
revising the definitions of certain order types. The Exchange is not 
proposing to change or alter any obligations, rights, policies or 
practices enumerated within its rules. Rather, this proposal is 
designed to reduce any potential investor confusion as to the 
functionality and applicability of certain order types presently 
available on NYSE Amex Options.
Background
    In September 2008, NYSE Euronext acquired the American Stock 
Exchange LLC (``Amex'').\4\ In conjunction with that acquisition, the 
options business of the Amex was rebranded NYSE Amex Options. NYSE Amex 
Options operates a hybrid market, with all option classes available for 
trading both electronically on the NYSE Amex System (``System''), or in 
open-outcry on the options trading floor. Rule 900.3NY was adopted as 
part of the new rule set governing NYSE Amex Options \5\ and contains 
the definitions of order options types available on the Exchange.
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    \4\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-62 and SR-NYSE-
2008-60).
    \5\ See Securities Exchange Act Release No. 34-59472 (February 
27, 2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14).
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    In reviewing its rules, the Exchange has determined that some of 
the order type definitions are outdated and need revising, while others 
do not fully explain the functionality and applicability of the order 
type they are attempting to define. Accordingly, the Exchange now 
proposes to amend such definitions so as to reduce any potential 
investor confusion as to the functionality and applicability of certain 
order types available on NYSE Amex Options.
Proposed Changes to Order Type Definitions
    Rule 900.3NY(a) Market Order. A Market Order is an order to buy or 
sell a stated number of options contracts and is to be executed at the 
best price obtainable when the order reaches the Exchange. The order 
may be executed at the best possible price at the Exchange or by 
routing the order to another Exchange displaying the best price. If a 
Market Order is entered in a particular series and there is no National 
Best Bid (``NBB'') and no National Best Offer (``NBO'') (collectively 
``NBBO'') for that series at the time the order is received, an 
execution cannot take place. The lack of an NBBO means there is no 
trading interest on any exchange where that series is listed, which 
could be indicative of a systems issue, or some other unusual activity. 
If this occurs during Core Trading Hours,\6\ the Exchange believes that 
it is preferable to reject the order back to the submitting ATP Holder 
instead of having the order remain unexecuted for an indeterminable 
amount of time. Currently, a Market Order that gets rejected back to a 
submitting ATP Holder contains a message code explaining the reason for 
the reject. The rejection of unexecutable Market Orders was implemented 
in December 2010 and announced to ATP Holders via a Trader Update.\7\
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    \6\ See NYSE MKT Rule 900.2NY(15).
    \7\ See NYSE Amex Trader Update December 30, 2010. http://www.nyse.com/pdfs/Market%20Order%20Rejects.pdf.
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    Additionally, the Exchange proposes amending Rule 900.3NY(a) in 
order to describe what occurs when the Exchange receives a Market Order 
to buy (sell) and there is an NBB (NBO) but no NBO (NBB) being 
disseminated by OPRA. Unlike the lack of an NBBO as described above, 
the dissemination of just an NBB or just a NBO is not necessarily 
indicative of unusual activity, therefore the Exchange will not reject 
orders in these situations. Instead, the order will be processed 
pursuant to Rule 967NY(a)--Trade Collar Protection. By processing using 
collar protection, the Market Order is afforded an execution 
opportunity with price protection.
    The Exchange now proposes to codify in Rule 900.3NY(a) that: (1) If 
there is no NBBO (no NBB and no NBO) being disseminated at the time a 
Market Order is received by the Exchange, the order will be rejected, 
and (2) if the Exchange receives a Market Order to buy (sell) and there 
is an NBB (NBO) but no NBO (NBB) being disseminated at the time, the 
order will be processed pursuant to Rule 967NY(a)--Trade Collar 
Protection.
    In addition, the Exchange proposes to codify that those Market 
Orders that are entered before the opening of trading will be eligible 
for trading during the Opening Auction Process.
    Rule 900.3NY(c) Inside Limit Order. An Inside Limit Order is an 
order type designed to route away to the market participant or 
participants with the best displayed price. Any unfilled portion of the 
order will not be routed to the next best price level until all quotes 
at the current best bid or offer are exhausted.
    Due to a lack of demand for Inside Limit Orders, the Exchange 
proposes to discontinue functionality supporting the order type. The 
Exchange does not intend to re-introduce it at any time in the future. 
Accordingly, the Exchange proposes to delete Rule 900.3NY(c) and 
reserve the rule number for future use.
    Rule 900.3NY(d)(1)-(2) Stop Orders and Stop Limit Orders. A Stop 
Order is an order that becomes a Market Order when the market for a 
particular option contract reaches a specified price. A Stop Limit 
Order is an order that becomes a Limit Order when the market for a 
particular option contract reaches a specified price (also known as the 
``triggering event''). Stop Orders and Stop Limit Orders (collectively 
``Stop Orders'') track the price of an option and are generally used to 
limit losses as prices move up, or down. ``Sell'' Stop Orders may be 
triggered as the price falls, and ``buy'' Stop Orders may be triggered 
as the price rises. Accordingly, the specified price for a ``buy'' Stop 
Order must be above the price the option is trading at the time the 
order is entered, and the specified priced for a ``sell'' Stop Order 
must be at a price less than the option is trading at the time the 
order is entered. Currently, Stop Orders entered with a specified price 
above (below) the price the option is trading for at the time of entry 
are

[[Page 3433]]

rejected back to submitting ATP Holder with message code explaining the 
reason for the reject.
    The Exchange now proposes to add clarifying text to Rules 900.3NY 
(d)(1) and (2) stating that Stop and Stop Limit Orders with a specified 
price above the bid (below the offer) in the option series at the time 
the order is entered will be rejected.
    Rule 900.3NY(d)(5) Tracking Order. A Tracking Order is an 
undisplayed Limit Order that is eligible for execution after the 
Display Order Process against orders equal to or less than the size of 
the Tracking Order. A Tracking Order is only executable at a price 
matching the NBBO. If a Tracking Order is executed but not exhausted, 
the remaining portion of the order shall be cancelled, without routing 
the order to another market center or market participant. A Tracking 
Order shall not trade-through the NBBO. Tracking Orders only have 
standing if contra-side interest in the System would otherwise be 
routed to another market center at the NBBO.
    Due to a lack of demand for Tracking Orders, the Exchange proposes 
to discontinue functionality supporting the order type. The Exchange 
does not intend to re-introduce it at any time in the future. 
Accordingly, the Exchange proposes to delete Rule 900.3NY(d)(5).
    Rule 900.3NY(g) One-cancels-the-other (``OCO'') Order. An OCO 
consists of two or more orders treated as a unit. The execution of any 
one of the orders causes the others to be cancelled. Currently, because 
this order type is not supported by Exchange systems, this instruction 
is available only for a Floor Broker when handling multiple orders for 
a single ATP Holder. The Exchange proposes to amend Rule 900.3NY(g) to 
clarify that OCOs are only available for open outcry trading.
    Rule 900.3NY(i) Single Stock Future (``SSF'')/Option Order. An SSF/
Option Order is an order to buy or sell a stated number of units of a 
single stock future or a security convertible into a single stock 
future (``convertible SSF'') coupled with a purchase or sale of options 
overlying the same security as the SSF. SSF/Option Orders are handled 
by Floor Brokers who execute the options portion of the order in open 
outcry on the floor of the Exchange and routes an SSF order to a third-
party broker for execution on a futures exchange. The Exchange proposes 
to amend Rule 900.3NY(i) to clarify that SSF/Option Orders are only 
available for open outcry trading.
    Rule 900.3NY(o) Now Order. A Now Order is a Limit Order that is to 
be executed in whole or in part on the Exchange, and the portion not so 
executed shall be routed pursuant to Rule 964NY(c)(2)(E) only to one or 
more NOW Recipients for immediate execution. NOW Orders that are not 
marketable when submitted to NYSE Amex Options, are cancelled.
    NOW Orders are determined to be marketable if an execution can take 
place either on the Exchange or by routing the order to an away market 
center that is at the NBBO. The Exchange now proposes to amend Rule 
900.3NY(o) to clarify that a NOW Order that is not marketable against 
the NBBO (which would be inclusive of the NYSE Amex Options and other 
markets) will be rejected.
    Rule 900.3NY(q) Opening Only Order. The Exchange proposes to 
correct minor typographical errors in the rule text but make no 
substantive changes to the rule itself.
    The Exchange plans to issue a Trader Update announcing the changes 
to order types proposed by this rule filing. The Trader Update will be 
distributed to all ATP Holders upon the operative date of the rule 
change.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ in particular, in that, deleting obsolete and/or 
outdated rules, correcting inaccurate language, and enhancing the 
descriptions as to the functionality of certain order types will add 
transparency and clarity to the Exchange's rules.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that clarifying the definitions 
of Market Orders, Stop Orders and NOW Orders removes impediments to and 
perfects the mechanism of a free and open market by helping to ensure 
that investors better understand the functionality of certain orders 
types available for trading on the Exchange. Additionally, the Exchange 
believes that specifying that SSF/Option Orders and OCO Orders are only 
for trading in open outcry will help to protect investors and the 
public interest by reducing potential confusion when routing orders to 
the Exchange. Lastly, the Exchange believes that deleting definitions 
applicable to Inside Limit Orders and Tracking Orders provides clarity 
to Exchange rules by eliminating outdated and obsolete functionality.
    The Exchange further believes that the proposal removes impediments 
to and perfects the mechanism of a free and open market by ensuring 
that members, regulators and the public can more easily navigate the 
Exchange's rulebook and better understand the order types available for 
trading on the Exchange.

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 change is not 
designed to address any competitive issue but rather revise incomplete 
or inaccurate rule text or remove language pertaining to unavailable 
functionality in the Exchange's rulebook, thereby reducing confusion 
and making the Exchange's rules easier to understand and navigate.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2014-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission,

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100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-05. 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 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; 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-2014-05 and should 
be submitted on or before February 11, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00983 Filed 1-17-14; 8:45 am]
BILLING CODE 8011-01-P


