
[Federal Register Volume 80, Number 5 (Thursday, January 8, 2015)]
[Notices]
[Pages 1055-1057]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00049]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73976; File No. SR-NYSEMKT-2014-117]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Extending Its Program 
That Allows Transactions To Take Place at a Price That Is Below $1 per 
Option Contract Until January 5, 2016

January 2, 2015.
    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 December 30, 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 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 extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract until January 5, 2016. 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,

[[Page 1056]]

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 purpose of this filing is to extend the Pilot Program \4\ under 
Rule 968NY to allow accommodation transactions (``Cabinet Trades'') to 
take place at a price that is below $1 per option contract for one 
additional year. The Exchange proposes to extend the program, which is 
due to expire on January 5, 2015, until January 5, 2016.
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    \4\ See Securities Exchange Act Release No. 63475 (December 8, 
2010), 75 FR 77932 (December 14, 2010) (SR-NYSE Amex-2010-114).
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    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless and typically not 
actively traded. Cabinet trading is generally conducted in accordance 
with the Exchange Rules, except as provided in Exchange Rule 968NY 
Accommodation Transactions (Cabinet Trades), which sets forth specific 
procedures for engaging in cabinet trades. Rule 968NY currently 
provides for cabinet transactions to occur via open outcry at a cabinet 
price of a $1 per option contract in any options series open for 
trading in the Exchange, except that the Rule is not applicable to 
trading in option classes participating in the Penny Pilot Program. 
Under the procedures, bids and offers (whether opening or closing a 
position) at a price of $1 per option contract may be represented in 
the trading crowd by a Floor Broker or by a Market Maker or provided in 
response to a request by a Trading Official, a Floor Broker or a Market 
Maker, but must yield priority to all resting orders in the Cabinet 
(those orders held by the Trading Official, and which resting cabinet 
orders may be closing only). So long as both the buyer and the seller 
yield to orders resting in the cabinet book, opening cabinet bids can 
trade with opening cabinet offers at $1 per option contract.
    The Exchange has temporarily amended the procedures through January 
5, 2015 to allow transactions to take place in open outcry at a price 
of at least $0 but less than $1 per option contract. These lower-priced 
transactions are permitted to be traded pursuant to the same procedures 
applicable to $1 cabinet trades, except that (i) bids and offers for 
opening transactions are only permitted to accommodate closing 
transactions in order to limit use of the procedure to liquidations of 
existing positions, and (ii) the procedures are also made available for 
trading in option classes participating in the Penny Pilot Program.\5\ 
The Exchange believes that allowing a price of at least $0 but less 
than $1 better accommodates the closing of options positions in series 
that are worthless or not actively traded, particularly in the event 
where there has been a significant move in the price of the underlying 
security that results in a large number of series being out-of-the-
money. For example, a market participant might have a long position in 
a put series with a strike price of $30 and the underlying stock might 
be trading at $100. In such an instance, there might not otherwise be a 
market for that person to close-out the position even at the $1 cabinet 
price (e.g., the series might be quoted no bid).
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    \5\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
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    As with other accommodation liquidations under Rule 968NY, 
transactions that occur for less than $1 will not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 968NY the transactions will be 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 955NY Order Format and System Entry 
Requirements. However, the Exchange will maintain quotation, order and 
transaction information for the transactions in the same format as the 
COATS data is maintained. In this regard, all transactions for less 
than $1 must be reported to the Exchange following the close of each 
business day.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \7\ in 
particular in that it is designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. The Exchange believes that allowing 
for liquidations at a price less than $1 per option contract will 
better facilitate the closing of options positions that are worthless 
or not actively trading, especially in Penny Pilot issues where Cabinet 
Trades are not otherwise permitted.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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. The proposed rule change is 
to extend an established pilot program for one additional year and 
continue to facilitate ATP Holders ability to close positions in 
worthless or not actively traded series.

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 rule 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 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, provided that the self-regulatory organization 
has given 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,\8\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \8\ The Exchange has satisfied this requirement.
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6) of the Act,\11\ the proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Exchange has requested that 
the Commission waive the 30-day

[[Page 1057]]

operative delay period after which a proposed rule change under Rule 
19b-4(f)(6) becomes operative so that the pilot may continue without 
interruption. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because it will allow the pilot to continue 
uninterrupted, thereby avoiding any potential investor confusion that 
could result from a temporary interruption in the pilot and allowing 
members to continue to benefit from the program. Based on the 
foregoing, the Commission hereby waives the 30-day operative delay and 
designates the proposal operative upon filing.\12\
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    \11\ Id.
    \12\ For purposes only of waiving the operative delay, 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 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 will institute proceedings to 
determine whether the proposed rule change 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-2014-117 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-117. 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 will also be available 
for inspection and copying at the NYSE's principal office and on its 
Internet Web site at www.nyse.com. 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-2014-117 and should be submitted on or before 
January 29, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00049 Filed 1-7-15; 8:45 am]
BILLING CODE 8011-01-P


