
[Federal Register Volume 79, Number 63 (Wednesday, April 2, 2014)]
[Notices]
[Pages 18601-18603]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07352]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71817; File No. SR-NYSEMKT-2014-23]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 900.3NY 
To Specifically Address the Number and Size of Contra-Parties to a 
Qualified Contingent Cross Order

March 27, 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 March 19, 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 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 Rule 900.3NY (Orders Defined) to 
specifically address the number and size of contra-parties to a 
Qualified Contingent Cross Order (``QCC Order''). 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.

[[Page 18602]]

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

1. Purpose
    The purpose of this rule filing is to amend Rule 900.3NY to 
specifically address the number and size of contra-parties to a QCC 
Order. The proposed rule change, which mirrors a recently adopted rule 
by the International Securities Exchange (``ISE'') \4\, is intended to 
accommodate multiple contra-parties, so long as each contra-side order 
meets the minimum size requirements as discussed below.
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    \4\ See Securities Exchange Act Release No. 71182 (December, 24, 
2013), 78 FR 79721 (December 31, 2013) (SR-ISE-2013-71).
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    The Exchange adopted the QCC Order type on March 17, 2011.\5\ Under 
current Rule 900.3NY(y), a QCC Order must be comprised of an order to 
buy or sell at least 1,000 contracts \6\ that is identified as being 
part of a qualified contingent trade,\7\ coupled with a contra-side 
order to buy or sell an equal number of contracts. As Qualified 
Contingent Cross Trades, QCC Orders are automatically executed upon 
entry provided that the execution (i) is not at the same price as a 
Customer Order in the Consolidated Book and (ii) is at or between the 
NBBO.\8\ In addition, QCC Orders that cannot be executed when entered 
will automatically cancel.\9\ Finally, QCC Orders may only be entered 
in the regular trading increments applicable to the options class under 
Rule 960NY (Trading Differentials).
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    \5\ See Securities Exchange Act Release No. 64085 (March 17, 
2011), 76 FR 16024 (March 22, 2011) (SR-NYSEAmex-2011-14).
    \6\ In the case of mini options, the minimum size is 10,000 
contracts.
    \7\ A ``qualified contingent trade'' must meet the following 
conditions: (i) At least one component must be an NMS Stock; (ii) 
all the components must be effected with a product price contingency 
that either has been agreed to by all the respective counterparties 
or arranged for by a broker-dealer as principal or agent; (iii) the 
execution of one component must be contingent upon the execution of 
all other components at or near the same time; (iv) the specific 
relationship between the component orders (e.g., the spread between 
the prices of the component orders) must be determined by the time 
the contingent order is placed; (v) the component orders must bear a 
derivative relationship to one another, represent different classes 
of shares of the same issuer, or involve the securities of 
participants in mergers or with intentions to merge that have been 
announced or cancelled; and (vi) the transaction must be fully 
hedged (without regard to any prior existing position) as a result 
of other components of the contingent trade. In addition, ATP 
Holders must demonstrate that the transaction is fully hedged using 
reasonable risk-valuation methodologies. See supra n.5 (citing 
Securities Exchange Act Release No. 57620 (April 4, 2008), 73 FR 
19271 (April 9, 2008)).
    \8\ See Rule 985NY (Qualified Contingent Cross Trade).
    \9\ Id.
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    As discussed above, to remain competitive with other options 
exchanges,\10\ the Exchange proposes to amend its rules to provide that 
a QCC Order must involve a single order for at least 1,000 contracts on 
the originating side, but that the contra-side order may be comprised 
of multiple orders, which in the aggregate equal the size of the 
originating order, so long as each of the contra-side orders is for at 
least 1,000 contracts.\11\
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    \10\ See supra n. 4.
    \11\ In the case of mini options, the minimum size is 10,000 
contracts.
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    For instance, as proposed, a 5,000 contract originating QCC Order 
to buy could, be coupled with a contra-side order comprised of two 
different sell orders of 2,500 contracts each. Similarly, as proposed, 
a 5,000 contract originating QCC Order to buy could be coupled with a 
contra-side order comprised of two different sell orders, one for 4,000 
contracts and one for 1,000 contracts. In the above examples, each sell 
(contra-side) order needs to be for a minimum of 1,000 contracts, 
provided that the total of all sell (contra-side) orders equals the 
size of the originating order and that originating order is at least 
1,000 contracts.
    Accordingly, the Exchange is proposing to amend the definition of 
QCC Order, as contained in current Rule 900.3NY(y), to provide that an 
originating order to buy or sell at least 1,000 contracts coupled with 
a contra-side order or orders totaling an equal number of contracts is 
permitted, so long as each contra-side order is for at least 1,000 
contracts.
2. Statutory Basis
    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. Specifically, 
because the proposal provides that a QCC Order permits multiple contra-
parties, it should afford members and participants more certainty and, 
therefore, provide more opportunity to participate in QCC trades, 
consistent with the key principles behind the QCC Order.
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(8) of the Act, as it will enable the Exchange to compete 
with other options exchanges, including the ISE,\12\ for QCC Orders 
involving multiple parties, including where there are multiple contra-
parties. The Exchange believes that this would be beneficial to 
participants because allowing multiple contra-parties of at least 1,000 
contracts should foster competition for filling one side of a QCC Order 
and thereby result in potentially better prices, as opposed to only 
allowing one contra-party and, thereby requiring that contra-party to 
do a larger size order which could result in a worse price for the 
trade.
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    \12\ See supra n.4.
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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. In fact, the proposal is 
intended to relieve a burden on competition, which results from 
different exchanges interpreting their rules differently. Among the 
options exchanges, the Exchange believes that the proposal to allow 
multiple contra-parties of at least 1,000 contracts should foster 
competition for filling the contra-side of a QCC order and thereby 
result in potentially better prices for such orders. In addition, the 
proposal will enable the Exchange to more effectively compete with 
other option exchanges like the ISE that have already implement similar 
rule changes.\13\
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    \13\ Id.
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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, it has become effective 
pursuant to 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) \15\ 
thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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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[[Page 18603]]

    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 to 
determine whether the proposed rule 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2014-23 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-23. 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-2014-23 and should 
be submitted on or before April 23, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07352 Filed 4-1-14; 8:45 am]
BILLING CODE 8011-01-P


