[Federal Register Volume 86, Number 158 (Thursday, August 19, 2021)]
[Notices]
[Pages 46746-46749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17757]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92668; File No. SR-NYSEAMER-2021-36]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 952NY To Provide an Option for ATP Holders To Instruct the 
Exchange To Cancel Marketable Orders if a Series Is Not Opened Within a 
Specified Time Period

August 13, 2021.
    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 August 10, 2021, NYSE American LLC (``NYSE American'' 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 Rule 952NY (Opening Process) to 
provide an option for ATP Holders to instruct the Exchange to cancel 
Marketable orders if a series is not opened within a specified time 
period. 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 amend Rule 952NY (Opening Process) to 
provide an option for ATP Holders to instruct the Exchange to cancel 
Marketable \4\ orders if a series is not opened within a specified time 
period.
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    \4\ The term ``Marketable'' is defined in Rule 900.2NY(39) to 
mean, for a Limit Order, the price matches or crosses the NBBO on 
the other side of the market and that market orders are always 
considered marketable.
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    Rule 952NY sets forth the Exchange's process for opening and 
reopening a series for trading. Rule 952NY(b) provides that the 
Exchange will accept market and limit orders for inclusion in the 
opening auction process (``Auction Process'') until such time as the 
Auction Process is initiated in that option series. As further provided 
for in Rule 952NY(b), once the primary market for the underlying 
security disseminates a quote and a trade that is at or within the 
quote, the Exchange will open the related option series automatically 
based on the principles and procedures set forth in paragraphs (A)-(F) 
of Rule 952NY(b). However, as described in Rule 952NY(b)(D), the 
Exchange will not conduct an Auction Process if the bid-ask 
differential for that series is not within an acceptable range, i.e., 
is not within the bid-ask differential guidelines established in Rule 
925NY(b)(4). Because Rule 952NY(b)(D) cross-references the bid-ask 
differential requirement of Rule 925NY(b)(4), which relates to the 
obligations of Market Makers in appointed classes, the Exchange will 
not open a series for trading if Market Makers have not entered 
quotations in a series that are within such bid-ask differentials. If a 
series does not open for trading, market and limit orders entered in 
advance of the Auction Process will remain in the Consolidated Book and 
will not be routed, even if another exchange opens that series for 
trading and such orders become Marketable against an away market NBBO.
    The Exchange proposes to amend Rule 952NY to provide ATP Holders

[[Page 46747]]

with an option to instruct the Exchange to cancel their Marketable 
orders if an option series has not been opened within a specified time 
period. As proposed, new subparagraph (d) to Rule 952NY \5\ would 
provide that an ATP Holder may instruct the Exchange to cancel all 
Marketable orders in a series, including GTC Orders, if that series has 
not opened within a designated time period after the Exchange receives 
notification that the primary market for the underlying security has 
disseminated a quote and a trade that is at or within the quote. This 
proposed change is designed to provide ATP Holders that electronically 
enter orders before Core Trading Hours \6\ begin in a multitude of 
option series with an optional risk protection mechanism for the 
Exchange to automatically cancel Marketable orders on their behalf. ATP 
Holders could submit requests to cancel such orders themselves, but 
would have to monitor which series have been opened on the Exchange. 
The proposed optional functionality would reduce operational risk for 
ATP Holders that sent orders in multiple series by providing them with 
a bulk cancel feature that would instruct the Exchange to cancel orders 
on their behalf if a series has not been opened by a specified time. 
Specifically, rather than have Marketable orders remain unexecuted on 
the Consolidated Book if the option series has not opened on the 
Exchange within a specified time period, ATP Holders would have the 
option to instruct the Exchange to cancel such orders back to the ATP 
Holder. Once cancelled back, the ATP Holder could choose to re-enter 
such orders on an exchange that has opened that series for trading.
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    \5\ The Exchange proposes a non-substantive amendment to Rule 
952NY to renumber current subparagraph (d) to that Rule as 
subparagraph (e).
    \6\ The term ``Core Trading Hours'' is defined in Rule 
900.2NY(15) to mean the regular trading hours for business set forth 
in the rules of the primary markets underlying those option classes 
listed on the Exchange.
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    The Exchange further proposes to provide that the Exchange would 
not cancel any Marketable orders received after the designated time 
period ends, even if the series has not yet opened. The Exchange 
believes that if an ATP Holder sends an order in an option series to 
the Exchange after Core Trading Hours begin, and more than the 
designated time period after the primary market for the underlying 
security has opened (i.e., the series open trigger), such ATP Holder 
should be aware that the Exchange has not opened that series for 
trading when it sends the order to the Exchange, and therefore intends 
for such order to be sent to the Exchange even though it has not yet 
opened that series for trading.
    Proposed Rule 952NY(d) would also provide that the designated time 
period would be two minutes, unless determined otherwise by the 
Exchange and announced to ATP Holders via Trader Update, in which case 
the designated time period would not be greater than five minutes. The 
Exchange believes that a two-minute period would provide time for 
Market Makers to update their quotes after the Exchange receives the 
series open trigger so that the bid-ask differential in an option 
series can be within an acceptable range and therefore the series can 
open for trading on the Exchange. Specifically, the Exchange has 
observed that on a typical trading day, nearly 98% of all series are 
opened by 9:32 a.m. Eastern Time, and nearly 99% of all series are 
opened by 9:35 a.m. Eastern Time. By waiting two minutes before 
cancelling orders, the Exchange believes that the majority of series 
would be opened, thereby minimizing the number of series where there 
would be a bulk cancel of Marketable orders. In addition, ATP Holders 
that want to cancel orders less than two minutes after the series open 
trigger would still be able to submit requests to cancel individual 
orders. The Exchange further believes that it is appropriate to provide 
the Exchange with the ability to adjust the designated time period via 
Trader Update to no more than five minutes because it would provide 
additional flexibility for the Exchange to respond to the needs of ATP 
Holders to implement the instruction to cancel Marketable orders on a 
different time basis. The Exchange believes that a cap of five minutes 
would be reasonable because very few series remain unopened five 
minutes after the series open trigger. The Exchange notes that this is 
an optional instruction, and therefore no ATP Holder is required to use 
this proposed new risk feature. The Exchange further notes that 
Exchange flexibility in connection with designating time periods for 
risk limitation measures is consistent with current Exchange rules.\7\
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    \7\ See, e.g., Commentary .03 to Rule 928NY (Risk Limitation 
Mechanism) (providing that the Exchange will ``specify via Trader 
Update any applicable time period(s) for the Risk Limitation 
Mechanisms; provided, however, that the Exchange will not specify a 
time period of less than 100 milliseconds, inclusive of the duration 
of any trading halt occurring within that time''). The Exchange also 
provides for flexibility in its rules for other risk mechanism 
parameters. See, e.g., Rule 967NY(b) (``Unless determined otherwise 
by the Exchange and announced to ATP Holders via Trader Update, the 
specified percentage shall be as follows: 100% for the contra-side 
NBB or NBO priced at or below $1.00; and 50% for the contra-side NBB 
or NBO priced above $1.00.'')
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    Finally, proposed Rule 952NY(d) would provide that this instruction 
would not be available for orders entered by Floor Brokers via the 
Electronic Order Capture System.\8\ The current EOC provider could not 
systemically apply the proposed optional instruction on a firm-by firm 
basis and therefore it would not be available to individual Floor 
Brokers. The Exchange believes that because of the unique role of Floor 
Brokers on the Exchange to provide manual, high-touch services on 
behalf of customers, Floor Brokers should not need this optional 
feature. Specifically, unlike an off-Floor ATP Holder that may be 
relying on an algorithm to send orders in a multitude of series, a 
Floor Broker that provides high-touch services would be present on the 
Trading floor and in a position to monitor whether the Exchange has 
opened a series, and if not, whether to cancel an order that becomes 
Marketable.
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    \8\ As defined in Rule 900.2NY(20), the term ``Electronic Order 
Capture System'' or ``EOC'' means the Exchange's electronic audit 
trail and order tracking system that provides an accurate time-
sequenced record of all orders and transactions on the Exchange. As 
further defined, the EOC includes the electronic communications 
interface between EOC booth terminals and the Floor Broker Hand Held 
applications and also contains an electronic order entry screen.
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    The Exchange will announce via Trader Update when this proposed 
optional feature will be available, which, subject to effectiveness of 
this proposed rule change, the Exchange anticipates will be in early 
August 2021.
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 \9\ in general, 
and furthers the objectives of Sections 6(b)(4) and (5) of the Act,\10\ 
in that it is designed to promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system and, in general, to protect 
investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it is designed to provide ATP Holders 
with an optional risk protection mechanism to instruct the Exchange to 
cancel Marketable orders in an option series on their behalf if that 
series has not opened on the Exchange within a

[[Page 46748]]

specified time period. The Exchange does not open a series if Market 
Makers have not quoted within the acceptable range of bid-ask 
differentials as specified in Rule 925NY(b)(4). However, it is possible 
that another exchange, with different opening process rules, could have 
opened that series for trading even if the Exchange does not. If an 
order that an ATP Holder sent to the Exchange before Core Trading Hours 
begins becomes Marketable on another exchange before the Exchange opens 
that series for trading, such ATP Holder could choose to cancel the 
order and then send it to the other exchange. By providing ATP Holders 
with an option to instruct the Exchange to cancel their Marketable 
orders in a series under the specified circumstances, the Exchange 
would perform this monitoring function on behalf of ATP Holders, 
thereby reducing their operational risk.
    The Exchange believes that it would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system to provide that such instructions would not be applicable to 
Marketable orders received after the designated time period ends 
because the Exchange believes that ATP Holders that send orders to the 
Exchange more than a specified period after series open trigger should 
be aware that the Exchange has not yet opened that series for trading. 
Therefore, any orders sent after that designated time period ends were 
likely purposefully directed to the Exchange even though the Exchange 
has not yet opened that series for trading.
    The Exchange believes that the proposed designated time period of 
two minutes would remove impediments to and perfect the mechanism of a 
free and open market and a national market system because it is 
designed to provide time for Market Makers to update their quotes so 
that the bid-ask differential in an option series is within an 
acceptable range and therefore the series can open for trading on the 
Exchange. The Exchange believes that the proposed two-minute period is 
reasonable because on a typical trading day, approximately 98% of all 
series that trade on the Exchange are open. ATP Holders that want to 
cancel orders less than two minutes after the series open trigger would 
still be able to submit requests to cancel individual orders. The 
Exchange further believes that providing the Exchange with flexibility 
to change the designated time period via Trader Update, provided that 
it would never be longer than five minutes, would enable the Exchange 
to respond to the needs of ATP Holders to implement the instruction to 
cancel Marketable orders on a different time basis. The Exchange 
believes that the proposed cap of five minutes would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system because on a typical day, approximately 99% of all series 
are opened by 9:35 a.m. Eastern Time. The Exchange further notes that 
this proposed risk mechanism would be optional, and therefore ATP 
Holders would not be required to request that the Exchange cancel 
unexecuted Marketable orders on their behalf if a series has not opened 
within the designated time period. In addition, Exchange flexibility in 
connection with designating time periods for risk limitation measures 
is consistent with current Exchange rules.\11\
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    \11\ See supra note 7.
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    Finally, the Exchange believes that the proposal that the optional 
instruction would not be available for orders entered by Floor Brokers 
via the EOC would remove impediments to and perfect the mechanism of a 
free and open market and a national market system because the current 
EOC provider could not systemically apply the proposed optional 
instruction on a firm-by firm basis. The instruction could therefore 
not be segregated by individual Floor Brokers that each use the EOC. 
The Exchange believes that because of the unique role of Floor Brokers 
on the Exchange to provide manual, high-touch services on behalf of 
customers, Floor Brokers should not need this optional bulk-cancel 
feature. Specifically, unlike an off-Floor ATP Holder that may be 
relying on an algorithm to send orders in a multitude of series, a 
Floor Broker that provides high-touch services would be present on the 
Trading floor and in a position to monitor whether the Exchange has 
opened a series, and if not, whether to cancel an order that becomes 
Marketable.

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 Exchange does not 
believe the proposed rule change would impose any burden on intermarket 
competition, as the proposed rule change is designed to provide an 
option for ATP Holders to instruct the Exchange to cancel Marketable 
orders if an option series does not open on the Exchange within a 
designated time period. The Exchange believes that the proposed rule 
change would promote intermarket competition because if the Exchange 
cancels such orders on the instruction of an ATP Holder, such ATP 
Holder could then choose to route such orders to another exchange that 
has opened the option series for trading.
    The Exchange does not believe that the proposed rule change would 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed rule change provides for optional functionality. ATP Holders 
would not be required to use this functionality. In addition, the 
Exchange believes that because of the unique role of Floor Brokers on 
the Exchange to provide manual, high-touch services on behalf of 
customers, Floor Brokers should not need this optional bulk-cancel 
feature and it would not impose any undue burden on intramarket 
competition not to provide this optional feature to Floor Brokers. 
Specifically, unlike an off-Floor ATP Holder that may be relying on an 
algorithm to send orders in a multitude of series, a Floor Broker that 
provides high-touch services would be present on the Trading floor and 
in a position to monitor whether the Exchange has opened a series, and 
if not, whether to cancel an order that becomes Marketable.

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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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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[[Page 46749]]

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposed rule change may become operative prior to 30 days after 
the date of the filing. The Exchange states that waiver of the 
operative delay would be consistent with the protection of investors 
and the public interest because the proposed rule change, as described 
above, would offer ATP Holders an additional, and optional, risk 
limitation feature to instruct the Exchange to cancel their Marketable 
orders if the Exchange does not open an option series within a 
designated time frame. The Exchange further states that the technology 
supporting the proposed rule change will be available prior to 30 days 
after the date of the filing, and the Exchange seeks to implement the 
proposed rule change without delay. For these reasons, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission also 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 shall 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-NYSEAMER-2021-36 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-2021-36. 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-NYSEAMER-2021-36, and should be 
submitted on or before September 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17757 Filed 8-18-21; 8:45 am]
BILLING CODE 8011-01-P


