
[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Notices]
[Pages 62113-62115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19356]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98278; File No. SR-NYSEARCA-2023-56]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify Rule 
6.91P-O(g)(1)

September 1, 2023.
    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 August 18, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 modify Rule 6.91P-O(g)(1) to expand the 
existing Complex Strategy Limit. 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 6.91P-O(g) regarding risk 
checks of Electronic Complex Orders (or ECOs) to expand the existing 
Complex Strategy Limit.\4\ Specifically, the Exchange proposes to 
impose a limit on complex strategies per underlying symbol, as 
described below.\5\ The Exchange also notes that at least one other 
options exchange likewise may impose a limit on new complex order 
strategies.\6\
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    \4\ Rule 6.91P-O(a)(7) defines an ``Electronic Complex Order'' 
or ``ECO'' to mean any Complex Order, as defined in Rule 6.62P-O 
(f). Rule 6.62P-O(f) (providing a Complex Order is ``any order 
involving the simultaneous purchase and/or sale of two or more 
option series in the same underlying security, for the same account, 
in a ratio that is equal to or greater than one-to-three (.333) and 
less than or equal to three-to-one (3.00) and for the purpose of 
executing a particular investment strategy.'').
    \5\ See proposed Rule 6.91P-O(g)(1) (Complex Strategy Limits). A 
``complex strategy'' means a particular combination of leg 
components and their ratios to one another. New complex strategies 
can be created when the Exchange receives either a request to create 
a new complex strategy or an ECO with a new complex strategy. See 
Rule 6.91P-O(a)(4).
    \6\ See, e.g., Cboe Rule 5.33(a) (providing, in its definition 
of ``complex strategy'' that Cboe ``may limit the number of new 
complex strategies that may be in the [Cboe] System or entered for 
any EFID (which EFID limit would be the same for all Users) at a 
particular time'').
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    Rule 6.91P-O(g) describes the ``ECO Risk Checks,'' which are 
designed to help OTP Holders and OTP Firms (collectively OTPs) to 
effectively manage risk when trading ECOs.\7\ Rule 6.91P-O(g)(1) sets 
forth the ``Complex Strategy Limit,'' which establishes a limit on the 
maximum number of new complex strategies that may be requested to be 
created per Market Participant Identifier or MPID, which limit would be 
announced by Trader Update.\8\ Under current functionality, when an 
MPID reaches the limit on the maximum number of new complex strategies, 
the Exchange rejects all requests to create new complex strategies from 
that MPID for the rest of the trading day.
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    \7\ An Options Trading Permit or ``OTP'' is issued by the 
Exchange for effecting approved securities transactions on the 
Exchange. See Rule 1.1. An ``OTP Holder'' is a natural person, in 
good standing, who has been issued an OTP and an ``OTP Firm'' is a 
sole proprietorship, partnership, corporation, limited liability 
company or other organization in good standing that holds an OTP or 
upon whom an individual OTP Holder has conferred trading privileges 
on the Exchange. See id. The Exchange notes that an OTP may be 
acting as a Market Maker, which market participant is subject to 
heightened requirements. See, e.g., Rule 6.37AP-O(b), (c).
    \8\ Per Rule 1.1, an MPID refers to the identifier assigned to 
the orders and quotes of a single OTP Holder or OTP Firm for the 
execution and clearing of trades on the Exchange by that permit 
holder. An OTP Holder or OTP Firm may obtain multiple MPIDs and each 
such MPID may be associated with one or more sub-identifiers of that 
MPID.'' See id.
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    Notwithstanding the established Complex Strategy Limit, Rule 6.91P-
O(g)(1) also authorizes the Exchange to reject a request to create a 
new complex strategy from any MPID whenever the Exchange determines it 
is necessary in the interests of a fair and orderly market. The 
established Complex Strategy Limit (the ``Strategy Limit''), and the 
Exchange's discretion related thereto, is a system protection tool that 
enables the Exchange to prevent any single MPID from creating more than 
a limited number of complex strategies during the trading day.
    The Exchange proposes to modify Rule 6.91P-O(g)(1) to adopt another 
limit for the number of permissible complex strategies requested to be 
created by an MPID in a trading day, except that the new limit would be 
based on the number of complex strategies in the same underlying symbol 
(the ``Strategy Limit per Symbol''). Like the existing Strategy Limit, 
the proposed Strategy Limit per Symbol would operate as a system 
protection tool that enables the Exchange to prevent any single MPID 
from creating more than a limited number of complex strategies in a 
particular symbol during the trading day.
    The Exchange has observed that the high volume of requests to 
create

[[Page 62114]]

complex strategies in the same underlying symbol can tax Exchange 
resources and result in latency in providing acknowledgements to OTPs 
for all series in that same underlying symbol. As such, the proposed 
Strategy Limit per Symbol would augment and add granularity to the 
existing Complex Strategy Limit by allowing the Exchange to establish 
separate limits based on the underlying symbol. The Exchange believes 
that MPIDs may benefit from this added granularity. For example, an 
MPID that sends a significant number of complex series creation 
requests for a particular underlying symbol may breach the Strategy 
Limit per Symbol for that underlying. However, that MPID would continue 
to have the ability to request complex strategies in other symbols--
unless or until that MPID breaches the Strategy Limit per Symbol in a 
different symbol or--in the aggregate--breaches the Complex Strategy 
Limit. Thus, the Exchange believes that the proposed change would 
benefit all market participants because it would curtail (or remove) 
the latency that has at times resulted from the Exchange receiving a 
significant number of requests for new complex strategies in the same 
underlying.
    To accommodate the proposed change, the Exchange proposes to 
reorganize and re-word certain of the existing text without changing 
functionality. As proposed, Rule 6.91P-O(g)(1) would be re-named (in 
plural) ``Complex Strategy Limits'' (as opposed to a singular ``Complex 
Strategy Limit'') and would state the following:

    The Exchange will establish limits, which will be announced by 
Trader Update, on (A) the maximum number of new complex strategies 
(irrespective of the underlying symbol) that an MPID may request be 
created (the ``Strategy Limit''); and (B) the maximum number of new 
complex strategies in a particular underlying symbol that an MPID 
may request be created (the ``Strategy Limit per Symbol''). When an 
MPID breaches the Strategy Limit, the Exchange will reject for the 
rest of the trading day, all requests from that MPID to create new 
complex strategies. When an MPID breaches the Strategy Limit per 
Symbol in a particular underlying, the Exchange will reject for the 
rest of the trading day all requests from that MPID to create 
complex strategies in that underlying symbol. Notwithstanding the 
established Strategy Limit and Strategy Limit per Symbol, the 
Exchange may reject a request to create a new complex strategy from 
any MPID whenever the Exchange determines it is necessary in the 
interests of a fair and orderly market.\9\
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    \9\ See proposed Rule 6.91P-O(g)(1) (Complex Strategy Limits).

    For example, if the Strategy Limit is 100, an MPID has already 
requested and created 100 complex strategies in a trading day, the 
Exchange will reject any request for the 101st complex strategy for the 
remainder of the trading day. The same logic applies for the Strategy 
Limit per Symbol such that if this limit is 50 and an MPID has already 
requested and created 50 complex strategies in the underlying symbol 
XYZ in a trading day, the Exchange will reject any request for the 51st 
complex strategy in XYZ for the remainder of the trading day.
    The Exchange believes that this proposed modification is merely an 
extension of existing functionality that would help the Exchange add 
granularity to, and better calibrate, its risk settings related to the 
number of Complex Strategies per Symbol for an MPID per trading day and 
is therefore non-controversial.
Implementation
    The Exchange will announce by Trader Update the implementation date 
of the proposed rule change, which implementation will be no later than 
90 days after the effectiveness of this rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\10\ in general, and 
furthers the objectives of Section 6(b)(5),\11\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange has observed that the high volume of requests to 
create complex strategies in the same underlying symbol can tax 
Exchange resources and result in latency in providing acknowledgements 
to OTPs for all series in that underlying symbol. As such, the proposed 
Strategy Limit per Symbol would augment and add granularity to the 
existing Complex Strategy Limit by allowing the Exchange to establish 
separate limits based on the underlying symbol. The Exchange believes 
that MPIDs may benefit from this added granularity. For example, an 
MPID that sends a significant number of complex series creation 
requests for a particular underlying symbol may breach the Strategy 
Limit per Symbol for that underlying. However, that MPID would continue 
to have the ability to request complex strategies in other symbols--
unless or until that MPID breaches the Strategy Limit per Symbol in a 
different symbol or--in the aggregate--breaches the Complex Strategy 
Limit. Thus, the proposed change would 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 
because it would curtail (or remove) the latency that has at times 
resulted from the Exchange receiving a significant number of requests 
for new complex strategies in the same underlying.
    The Exchange believes that the proposed change to expand the limits 
placed on Complex Strategies per MPID would promote just and equitable 
principles of trade because it would modify existing functionality in a 
manner that would enable the Exchange to add granularity to, and better 
calibrate, its risk settings related to the number of Complex 
Strategies in the same underlying symbol requested in a trading day.
    Finally, the proposed rule change would help maintain a fair and 
orderly market because it would enhance an existing system protection 
tool to enable the Exchange to prevent any single MPID from creating 
more than a limited number of complex strategies in the same underlying 
symbol during the trading day.

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 that the proposed rule change would impose any burden on intra-
market competition that is not necessary or appropriate in furtherance 
of the purposes of the Act because the proposed Strategy Limit per 
Symbol would apply equally to all market participants that request new 
complex strategies. As stated herein, the proposed rule change would 
provide the Exchange the ability to better calibrate risk settings 
related to the number of Complex Strategies per Symbol for an MPID per 
trading day, which in turn should benefit all market participants 
because (as described above) it would curtail (or remove) the latency 
that has at times resulted from the Exchange receiving a significant 
number of requests for new complex strategies in the same underlying.

[[Page 62115]]

    The Exchange believes that the proposed rule change would not 
impose a burden on competing options exchanges. The Exchange notes that 
it operates in a highly competitive market in which market participants 
can readily favor competing venues. When an exchange offers enhanced 
functionality (like the proposed Strategy Limit per Symbol) that 
distinguishes it from the competition and participants find it useful, 
it has been the Exchange's experience that competing exchanges will 
move to adopt similar functionality. Thus, the Exchange believes that 
this type of competition amongst exchanges is beneficial to the entire 
marketplace as it can result in enhanced processes, functionality, and 
technologies.

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\ 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.
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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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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-NYSEARCA-2023-56 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-NYSEARCA-2023-56. 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-NYSEARCA-2023-56 and should 
be submitted on or before September 29, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19356 Filed 9-7-23; 8:45 am]
BILLING CODE 8011-01-P


