
[Federal Register Volume 88, Number 248 (Thursday, December 28, 2023)]
[Notices]
[Pages 89783-89788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28704]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99231; File No. SR-NYSEAMER-2023-66]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify Rule 
900.3NYP

December 22, 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 December 19, 2023, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify Rule 900.3NYP (Orders and 
Modifiers) to adopt electronic Customer Cross Order and Complex 
Customer Cross Order functionality and to amend Rule 900.2NY 
(Definitions) to specify the treatment of certain Professional Customer 
interest. 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 900.3NYP (Orders and 
Modifiers) to adopt electronically-entered Customer Cross (``C2C'') 
Orders and Complex Customer Cross (``Complex C2C'') Orders 
(collectively, ``Customer Cross Orders''). The Exchange also proposes 
to amend the definition of Professional Customer (Rule 900.2NY) to 
specify that, for purposes of proposed Rule 900.3NYP(g)(2) and Rule 
971.1NYP, Professional Customer interest would be treated in the same 
manner as Broker/Dealers (non-Customers).
Proposed Rule 900.3NYP(g)(2): Customer Cross Orders
    Rule 934NY(a) describes Customer-to-Customer Cross orders on the 
Trading Floor wherein ``[a] Floor Broker who holds a Customer order to 
buy and a Customer order to sell the same option contract may cross 
such orders,'' provided that the Floor Broker proceeds in the manner 
set forth in paragraphs (1)-(3) of Rule 934NY(a).\4\ The Exchange 
proposes to adopt rules governing electronically-entered Customer Cross 
Orders, which allow ATP Holders to conduct this type of crossing 
transaction electronically and without having to utilize a Floor 
Broker. Although the proposed Customer Cross Orders are conceptually 
the same as the existing Customer-to-Customer Cross, the latter order 
type differs in that it must adhere

[[Page 89784]]

to Floor-specific open outcry rules.\5\ The Exchange notes that the 
proposed Customer Cross Order types are consistent with customer 
crossing functionality available on another options exchange.\6\
---------------------------------------------------------------------------

    \4\ As discussed infra, Professional Customer volume is not 
eligible to be included on a Customer-to-Customer Cross submitted 
pursuant to Rule 934NY(a). See Rule 900.2NY (providing in relevant 
part that, for purposes of Rule 934NY (Crossing), Professional 
Customers are treated as Broker/Dealers).
    \5\ See, e.g., Rule 934NY(a)(3)(A) and (C) (each of which 
require that the Customer-to-Customer Cross comply with the other 
Exchange open outcry rules).
    \6\ See Cboe Exchange, Inc. (``Cboe'') Rules 5.37(f) and 5.38(f) 
(providing the requirements for Customer-to-Customer AIM/C-AIM 
Immediate Crosses to bypass Cboe's Automated Improvement Mechanism 
(AIM)/Complex Automated Improvement Mechanism (C-AIM), respectively, 
and immediately execute).
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(2) would describe Customer Cross Orders. 
Proposed Rule 900.3NYP(g)(2)(A) would provide that a C2C Order and a 
Complex C2C Order must be comprised of a Customer (but not a 
Professional Customer) order to buy and a Customer (but not a 
Professional Customer) order to sell at the same price and for the same 
quantity. The proposal to limit eligible interest to Customer but not 
Professional Customer interest is consistent with the rules of another 
options exchange.\7\ In addition, as proposed, a C2C Order or Complex 
C2C Order that is not rejected on arrival would immediately trade in 
full at its limit price.\8\ Further, proposed Rule 900.3NYP(g)(2)(A) 
would provide that C2C Orders and Complex C2C Orders would not route 
and may be entered with a Minimum Price Variation (``MPV'') of $0.01 
regardless of the MPV of the options series.\9\ Finally, the proposed 
Rule would specify that Commentary .01 to Rule 935NY would apply to 
Customer Cross Orders, which means that ATP Holders may not utilize 
Customer Cross Orders to increase their economic gain without first 
giving other trading interest on the Exchange an opportunity to 
participate in the trade or to trade at the transaction price when the 
ATP Holder was already bidding or offering at that price.\10\ This 
proposed handling would align with at least one other options exchange 
that offers customer crossing orders.\11\
---------------------------------------------------------------------------

    \7\ See Cboe Rule 5.37(f) and Rule 5.38(f) (providing that each 
side of a ``Customer-to-Customer Immediate Cross,'' for single-leg 
and complex orders, respectively, must be for the account of a 
``Priority Customer''). Cboe defines a Priority Customer as ``a 
person or entity that is a Public Customer and is not a 
Professional.'' See Cboe Rule 1.1.
    \8\ See proposed Rule 900.3NYP(g)(2)(A) (providing, in relevant 
part, that ``[a] C2C Order or Complex C2C Order that is not rejected 
per Rule 900.3NYP(g)(2)(B) [Execution of C2C Orders] or (C) 
[Execution of Complex C2C Orders], respectively, will immediately 
trade in full at its price'').
    \9\ Rule 900.2NY defines ``Minimum Price Variation'' or ``MPV'' 
as the price variations established by the Exchange, which for 
quoting and trading options traded on the Exchange are set forth in 
Rule 960NY.
    \10\ See proposed Rule 900.3NYP(g)(2)(A). See also Rule 935NY, 
Commentary .01.
    \11\ See Cboe Interpretation and Policy .03 to Rules 5.37 and 
5.38 (providing an identical prohibition in each Cboe rule--which 
prohibition is identical to Rule 935NY, Commentary .01 and prevents 
order-senders from using the customer crossing mechanism to increase 
economic gain without first providing an opportunity of eligible 
interest to trade at the transaction price of the cross order).
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(2)(B) provides that a C2C Order that has 
one option leg would be rejected if received when the NBBO is crossed 
or if the C2C would trade at a price that (i) is at the same price as a 
displayed Customer order on the Consolidated Book and (ii) is not at or 
between the NBBO and the Exchange BBO. The Exchange believes that the 
proposal would provide for the efficient entry and execution of C2C 
Orders while continuing to protect same-priced, displayed Customer 
interest (i.e., by ensuring that the C2C Order does not trade ahead of 
displayed Customer interest resting in the Consolidated Book). As noted 
above, the proposed C2C Orders would operate in a manner that is 
consistent with the handling of single-leg customer cross orders on 
another options exchange.\12\
---------------------------------------------------------------------------

    \12\ See Cboe Rule 5.37(f) (stating that Customer-to-Customer 
Immediate Cross comprised of ``Priority Customer'' orders will 
immediately execute provided that the execution (i) is ``at or 
between the BBO and the NBBO'' and (ii) ``is not at the same price 
as any Priority Customer Order resting on the Book.'').
---------------------------------------------------------------------------

    Proposed Rule 900.3NYP(g)(2)(C) would describe the Exchange's 
pricing requirements for a Complex C2C Order. To validate the price of 
a Complex C2C Order, the Exchange would rely on the Derived BBO 
(``DBBO'') as described in Rule 980NYP(a)(5).\13\ If the Exchange is 
not able to calculate the DBBO for a complex strategy because of one of 
the circumstances described in Rule 980NYP(a)(5)(B)-(C), the Exchange 
will not execute an order for that strategy until the circumstance is 
resolved.\14\ Consistent with this handling, the Exchange proposes that 
it would reject a Complex C2C Order if the Exchange is unable to 
calculate the DBBO for a leg of the Complex C2C Order per Rule 
980NYP(a)(5)(B) or (a)(5)(C).\15\
---------------------------------------------------------------------------

    \13\ The DBBO provides for the establishment of a derived 
(theoretical) bid or offer for a particular complex strategy. See 
Rule 980NYP(a)(5) (defining the DBBO and providing that the bid 
(offer) price used to calculate the DBBO on each leg will be the 
Exchange BB (BO) (if available), bound by the maximum allowable Away 
Market Deviation). The Away Market Deviation, as defined in Rule 
980NYP(a)(1), ensures that an ECO does not execute too far away from 
the prevailing market. Rule 980NYP(a)(5) also provides for the 
establishment of the DBBO in the absence of an Exchange BB (BO), or 
ABB(ABO), or both.
    \14\ See proposed Rule 900.3NYP(g)(2)(C). See also Rule 
980NYP(a)(5)(B) (providing that, ``[i]f, for a leg of a complex 
strategy, there is neither an Exchange BBO nor an ABBO, the Exchange 
will not allow the complex strategy to trade until, for that leg, 
there is either an Exchange BB or BO, or an ABB or ABO, on at least 
one side of the market'') and (a)(5)(C) (providing, in relevant part 
that, ``[i]f the best bid and offer prices (when not based solely on 
the Exchange BBO) for a component leg of the complex strategy are 
locked or crossed, the Exchange will not allow an ECO for that 
strategy to execute against another ECO until this condition 
resolves'').
    \15\ See proposed Rule 900.3NYP(g)(2)(B).
---------------------------------------------------------------------------

    In addition, proposed Rule 900.3NYP(g)(2)(C) provides that no 
option leg of a Complex C2C Order will trade at a price worse than the 
Exchange BBO and such order would be rejected if it fails to meet the 
following requirements:
     the transaction price must be at or between the DBBO and 
may not equal the DBBO if the DBBO is calculated using the Exchange BBO 
and the Exchange BBO of any component of the complex strategy on either 
side of the market includes displayed Customer interest. If the DBB 
(DBO) includes a displayed Customer interest on the Exchange, the 
transaction price must improve the DBB (DBO) by at least one cent 
($0.01). This proposed requirement is consistent with price parameters 
applied to complex customer cross orders on another options exchange; 
\16\ and
---------------------------------------------------------------------------

    \16\ See Cboe Rule 5.38(f)(i) (providing, in relevant part, that 
the transaction price of a Complex Customer Cross Order must be ``at 
or between the SBBO [Synthetic Bid or Offer] and may not equal 
either side of the SBBO if the BBO of any component of the complex 
strategy represents a Priority Customer''). Cboe's concept of the 
SBBO is analogous to the Exchange's concept of the DBBO. See Cboe 
Rule 5.33.
---------------------------------------------------------------------------

     the transaction price must be at or between the best-
priced Complex Orders to buy and sell in the complex strategy and may 
not equal the price of a resting Customer Complex Order, which proposed 
requirement is consistent with price parameters required for complex 
customer cross orders on another options exchange.\17\
---------------------------------------------------------------------------

    \17\ See Cboe Rule 5.38(f)(ii) (providing, in relevant part, 
that the transaction price of a Complex Customer Cross Order must be 
``at or between the best-priced complex orders in the complex 
strategy'' on Cboe ``and may not equal the price of a Priority 
Customer complex order'' resting on either side of the COB'').
---------------------------------------------------------------------------

    The Exchange also proposes a conforming change to Rule 980NYP(b)(1) 
to include Complex Customer Cross Orders among the type of Electronic 
Complex Orders available for trading on the Exchange, which change 
would add clarity, transparency, and internal consistency to Exchange 
rules.\18\
---------------------------------------------------------------------------

    \18\ See proposed Rule 980NYP(b)(1) (providing that Electronic 
Complex Orders ``may be entered as Limit Orders, Limit Orders 
designated as Complex Only Orders, Complex QCCs, or as Complex 
Customer Cross Orders) (emphasis added).

---------------------------------------------------------------------------

[[Page 89785]]

Rule 900.2NY: Definitions of Customer and Professional Customer
    Rule 900.2NY defines a ``Customer'' as ``an individual or 
organization that is not a Broker/Dealer; when not capitalized, 
`customer' refers to any individual or organization whose order is 
being represented, including a Broker/Dealer.'' Rule 900.2NY defines a 
``Professional Customer'' as ``an individual or organization that (i) 
is not a Broker/Dealer in securities, and (ii) places more than 390 
orders in listed options per day on average during a calendar month for 
its own beneficial account(s).'' \19\ Included in the definition of 
Professional Customer is a list of Exchange Rules, including Rule 934NY 
(Crossing), for purposes of which Professional Customers are treated in 
the same manner as Broker/Dealers (or non-Customers).\20\ Accordingly, 
Professional Customers are treated as Broker/Dealers (or non-Customers) 
for purposes of Crossing Orders executed pursuant to Rule 934NY. As 
such, Professional Customer volume is not eligible to be executed as 
part of a Customer-to-Customer Cross executed on the Trading Floor per 
Rule 934NY(a).
---------------------------------------------------------------------------

    \19\ See Rule 900.2NY (defining a Professional Customer).
    \20\ See supra note 4 (citing Rule 900.2NY, which specifies that 
for purposes Rule 934NY(Crossing) Professional Customer interest 
will be treated in the same manner as a Broker/Dealer (or non-
Customer) interest). See id. (defining Professional Customer).
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 900.2NY to include proposed 
Rule 900.3NYP(g)(2) in the list of Exchange Rules pursuant to which 
Professional Customers are treated in the same manner as Broker/Dealers 
(or non-Customers).\21\ This proposed handling of non-Customer interest 
for purposes of the proposed Customer Cross Orders would align with the 
handling of such interest for purposes of Customer-to-Customer Cross 
Orders executed on the Trading Floor per Rule 934NY(a) and would 
therefore promote internal consistency in Exchange rules. In addition, 
excluding Professional Customer orders from being eligible to trade as 
part of the proposed Customer Cross Orders would put the Exchange on 
equal footing with at least one other options exchange that likewise 
disallows such Professional interest from being executed as part of 
customer cross orders.\22\
---------------------------------------------------------------------------

    \21\ See proposed Rule 900.2NY (including proposed Rule 
900.3NYP(g)(2) (Customer Cross Orders and Complex Customer Cross 
Orders) among the list of Exchange Rule pursuant to which 
Professional Customer interest is treated in the same manner as a 
Broker/Dealer (or non-Customer) interest).
    \22\ As noted supra, only ``Priority Customers'' on Cboe may 
participate in ``Customer-to-Customer Immediate Cross.'' See Cboe 
Rules 5.37(f) and Rule 5.38(f).
---------------------------------------------------------------------------

    Finally, the Exchange believes this proposed change would add 
clarity, transparency, and internal consistency to Exchange rules.
Professional Customers in the Customer Best Execution (``CUBE'') 
Auctions
    As noted above, Rule 900.2NY defines ``Professional Customer'' as 
``an individual or organization that (i) is not a Broker/Dealer in 
securities, and (ii) places more than 390 orders in listed options per 
day on average during a calendar month for its own beneficial 
account(s).'' \23\ Included in the definition of Professional Customer 
is a list of Exchange Rules pursuant to which Professional Customers 
are treated in the same manner as Broker/Dealers (or non-Customers). 
Among the rules on this list is Rule 971.1NY, which means that for 
purposes of single-leg CUBE Auctions, Professional Customer interest is 
treated as Broker/Dealer (non-Customer) interest.\24\ The Exchange 
recently migrated to the Pillar trading platform and Rule 971.1NY no 
longer applies to CUBE Auctions; instead, CUBE Auctions on Pillar are 
governed by Rule 971.1NYP (``the Pillar CUBE Rule'').\25\
---------------------------------------------------------------------------

    \23\ See Rule 900.2NY (defining a Professional Customer).
    \24\ See Trader Update, NYSE American Options: NYSE Pillar Final 
Migration Tranche, dated October 30, 2023, available here: https://www.nyse.com/trader-update/history#110000748137 (announcing the last 
phrase of the Pillar migration).
    \25\ Compare Rule 971.1NY with the Pillar CUBE Rule. See also 
Securities Exchange Act Release No. 97938 (July 18, 2023), 88 FR 
47536 (July 24, 2023) (NYSEAmer-2023-35) (adopting Pillar Rule 
971.1NYP (Single-Leg Electronic Cross Transactions) on an 
immediately effective basis).
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 900.2NY to treat Professional 
Customer interest submitted to CUBE Auctions pursuant to the Pillar 
CUBE Rule in the same manner as such interest was handled when 
submitted to CUBE Auctions pursuant to Rule 971.1NY.\26\ The Exchange 
believes that this proposal would ensure consistent handling of 
Professional Customer interest in the CUBE Auction prior to and after 
the Exchange's migration to Pillar and would continue to afford 
Customer interest priority over non-Customer interest for purposes of 
the Exchange's price improvement auction. The Exchange notes that at 
least one other options exchange likewise treats Professional Customer 
interest as Broker/Dealer (non-Customer) interest for purposes of their 
price improvement auction.\27\
---------------------------------------------------------------------------

    \26\ See proposed Rule 900.2NY (providing in relevant part, that 
for purposes of Rule 971.1NYP (Single-Leg Electronic Cross 
Transactions), ``[a] Professional Customer will be treated in the 
same manner as a Broker/Dealer (or non-Customer) in securities'') 
(emphasis added).
    \27\ See Cboe Rule 5.38(e) (providing that ``Priority Customer'' 
interest executes first with the Agency Order submitted to the price 
improvement auction, followed by non-Priority Customer interest).
---------------------------------------------------------------------------

Implementation
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update, which, subject to effectiveness of this proposed rule 
change, is anticipated to be in the first quarter of 2024.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934,\28\ in general, and furthers the 
objectives of Section 6(b)(5),\29\ 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.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed Customer Cross Orders (for 
single-leg and complex interest) would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because the proposed rules would allow market participants to 
electronically trade these types of crossing orders on the Exchange. 
The proposed functionality would benefit investors and the public 
interest because it would enhance and automate each order entry firms' 
ability to submit two-sided Customer orders--i.e., Customer Cross 
Orders (both single-leg and complex). As such, the proposed rule change 
would provide market participants with an efficient means of executing 
their Customer orders. In addition, the proposed Customer Cross Orders 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because market participants 
would be given an additional way to execute single-leg and Complex 
Orders on the Exchange. As noted herein, at least one other competing 
options exchange--Cboe--offers substantially similar customer crossing 
orders for single-leg and complex trading

[[Page 89786]]

interest.\30\ With this proposal, market participants would likewise 
have an additional venue on which to execute two-sided Customer orders 
electronically--i.e., Customer Cross Orders. As such, the proposed 
order types may attract additional Customer order flow (both two-sided 
and single-sided) to the Exchange, which may, in turn, result in 
greater liquidity available for trading on the Exchange.
---------------------------------------------------------------------------

    \30\ See Cboe Rules 5.37(f) and 5.38(f) (describing the 
analogous requirements for Cboe's single-leg and Complex Customer-
to-Customer Immediate Crosses, respectively).
---------------------------------------------------------------------------

    Regarding the proposed single-leg C2C Order type, the Exchange 
believes that the adoption of this order type would provide for the 
efficient entry and execution of C2C Orders while continuing to protect 
same-priced, displayed Customer interest (i.e., by ensuring that the 
C2C Order does not trade ahead of displayed Customer interest resting 
in the Consolidated Book). Further, as noted herein, the proposed order 
type is not new or novel because each C2C Order would operate in a 
manner that is consistent with single-leg customer cross orders that 
are available on another options exchange.\31\
---------------------------------------------------------------------------

    \31\ See Cboe Rule 5.37(f) (describing the analogous 
requirements for Cboe's single-leg Customer-to-Customer Immediate 
Cross).
---------------------------------------------------------------------------

    The proposed Complex C2C Order would protect investors and the 
public interest by assuring that these orders comply with the existing 
priority and allocation rules applicable to the processing and 
execution of Complex Orders per Rule 980NYP. In particular, the 
proposed Complex C2C Orders would continue to protect same-priced, 
displayed Customer interest and would ensure that Complex C2C Orders do 
not trade ahead of such displayed Customer interest, whether in the leg 
markets or as Customer Complex Orders. The Exchange believes the 
proposed Complex C2C Orders would promote just and equitable principles 
of trade because (as discussed herein) the proposed orders--which are 
not new or novel--would operate in a manner that is consistent with 
complex customer cross orders that are available on another options 
exchange.\32\
---------------------------------------------------------------------------

    \32\ See Cboe Rule 5.38(f) (describing the analogous 
requirements for Cboe's Complex Customer-to-Customer Immediate 
Cross).
---------------------------------------------------------------------------

    Finally, the proposed change to the definition of Professional 
Customer to make clear that Professional Customers are treated as 
Broker/Dealers (or non-Customers) for purposes of the proposed Customer 
Crosses Orders and Single-Leg Electronic Cross Transactions, per Rule 
971.1NYP would remove impediments to and perfect the mechanism of a 
free and open market and a national market system and would protect 
investors and the public interest because such changes would ensure 
consistent handling of Professional Customer interest in the CUBE 
Auction prior to and after the Exchange's migration to Pillar and would 
align Exchange rules with the rules of another options exchange that 
likewise differentiates the treatment of Professional Customer interest 
from Customer interest for purposes of customer crossing orders and for 
price improvement auctions, where Customers (but not Professional 
Customers) are afforded first priority to trade in the auction.\33\
---------------------------------------------------------------------------

    \33\ See Cboe Rule 5.37(e)-(f) and 5.38(e)-(f) (regarding the 
handling of Priority Customer interest for purposes of priority and 
allocation in Cboe's C-AIM Auction and for inclusion on customer 
crossing orders).
---------------------------------------------------------------------------

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. Specifically, the Exchange's 
proposal to adopt a new electronically-entered crossing order type 
(i.e., the Customer Cross Order) would not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. The Exchange believes that the proposed change would not 
impose a burden on intramarket competition because the proposed order 
types would provide all market participants on the Exchange with the 
option of utilizing another means of executing two-side Customer 
interest--both single-leg and Complex Orders on the Exchange. The 
proposed change would also benefit investors by providing another venue 
(i.e., in addition to Cboe) on which Customer Cross Orders may be 
submitted electronically.
    The Exchange believes that the proposed change would enhance inter-
market competition by enabling the Exchange to compete for this type of 
order flow with at least one other options exchange that has similar 
rules and functionalities in place (i.e., Cboe).\34\ The Exchange 
believes that adopting Customer Cross Orders would promote competition 
as it would afford market participants another venue on which to 
execute two-sided Customer orders for single-leg and complex trading 
interest. Further, the Exchange anticipates that this proposal will 
create new opportunities for the Exchange to attract new business to 
the Exchange. As such, the Exchange believes that this proposal does 
not create an undue burden on intermarket competition. Rather, the 
Exchange believes that the proposed rule would bolster intermarket 
competition by promoting fair competition among individual markets.
---------------------------------------------------------------------------

    \34\ See Cboe Rules 5.37(f) and 5.38(f) (describing the 
analogous requirements for Cboe's single-leg and Complex Customer-
to-Customer Immediate Crosses, respectively.)
---------------------------------------------------------------------------

    The Exchange does not believe the proposed amendment to the 
definition of Professional Customer to include proposed Rule 
900.3NYP(g)(2) among the rules pursuant to which Professional Customer 
interest is treated as Broker/Dealer (non-Customer) interest would 
impose any undue burden on intramarket or intermarket competition as 
all market participants on the Exchange would be subject to the updated 
definition. In addition, the proposal to limit the availability of 
Customer Cross Orders to interest submitted on behalf of Customers 
would align the Exchange with at least one other options exchange that 
had adopted a similar limitation.\35\
---------------------------------------------------------------------------

    \35\ See id.
---------------------------------------------------------------------------

    Similarly, the proposal to treat Professional Customer interest as 
Broker/Dealer (non-Customer) interest for purposes of the Pillar CUBE 
Rule would not impose any undue burden on intramarket or intermarket 
competition as use of the CUBE Auction, per the Pillar CUBE Rule, is 
optional. For those market participants that choose to utilize CUBE 
Auctions on Pillar (per Pillar Rule 971.1NYP), the proposed definition 
applies equally to all similarly-situated investors. In addition, all 
investors that opt to use the CUBE Auction would be subject to the same 
(amended) definition--which is consistent with the definition that 
applied to pre-Pillar Rule 971.1NY--and would also align the Exchange 
with at least one other options exchange that likewise affords priority 
in price improvement auctions to ``Priority Customers'' but not to 
Professional Customers.\36\
---------------------------------------------------------------------------

    \36\ See Cboe Rule 5.37(e)-(f) and 5.38(e)-(f) (regarding the 
handling of Priority Customer interest for purposes of priority and 
allocation in Cboe's C-AIM Auction).
---------------------------------------------------------------------------

    In addition, the proposed conforming change to include Complex 
Customer Cross Orders among the list of available Electronic Complex 
Orders set forth in Rule 980NYP(b)(1) would not impose an undue burden 
on intramarket or intermarket competition but would instead add 
clarity, transparency, and

[[Page 89787]]

internal consistency to Exchange rules.\37\
---------------------------------------------------------------------------

    \37\ See proposed Rule 980NYP(b)(1) (providing that Electronic 
Complex Orders (ECOs) ``may be entered as Limit Orders, Limit Orders 
designated as Complex Only Orders, Complex QCCs, or as Complex 
Customer Cross Orders) (emphasis added).
---------------------------------------------------------------------------

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

    Pursuant to Section 19(b)(3)(A) of the Act \38\ and Rule 19b-
4(f)(6) \39\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.\40\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(3)(A).
    \39\ 17 CFR 240.19b-4(f)(6).
    \40\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \41\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. Exchange Rule 934NY(a) 
currently provides for the trading of Customer-to-Customer Cross orders 
on the floor of the Exchange. The Exchange proposes to adopt Exchange 
Rule 900.3NYP(g)(2) to provide for the electronic trading of C2C and 
Complex C2C Orders. The proposed C2C and Complex C2C Orders, which must 
be comprised of a Customer (but not a Professional Customer) order to 
buy and a Customer (but not a Professional Customer) order to sell at 
the same price and for the same quantity, will trade immediately in 
full at their limit prices, provided that they satisfy the requirements 
in proposed Exchange Rule 900.3NYP(g)(2)(B) or (C), as applicable.\42\ 
The Exchange states that the proposed C2C and Complex C2C Orders would 
allow the Exchange to make available to market participants without 
delay an additional and more efficient means of executing Customer 
orders on the Exchange, and an additional venue for electronically 
trading two-sided Customer single-leg and complex orders.
---------------------------------------------------------------------------

    \41\ 17 CFR 240.19b-4(f)(6)(iii).
    \42\ See proposed Exchange Rule 900.3NYP(g)(2)(A). Proposed 
Exchange Rule 900.3NYP(g)(2)(B) provides, among other things, that a 
C2C Order will be rejected if it would trade at a price that is (i) 
at the same price as displayed Customer interest on the Consolidated 
Book; or (ii) not at or between the NBBO and the Exchange BBO. 
Proposed Exchange Rule 900.3NYP(g)(2)(C) provides, among other 
things, that no option leg of a Complex C2C Order will trade at a 
price that is worse than the Exchange BBO and that the transaction 
price must be at or between the DBBO and may not equal the DBBO if 
the DBBO is calculated using the Exchange BBO and the Exchange BBO 
for any component of the complex strategy on either side of the 
market includes displayed Customer interest.
---------------------------------------------------------------------------

    As discussed above, the proposed C2C and Complex C2C Orders are 
consistent with the customer-to-customer immediate cross and complex 
customer-to-customer immediate cross functionality available on another 
options exchange and do not raise new or novel regulatory issues.\43\ 
Waiver of the operative delay will allow the Exchange to immediately 
provide market participants with an additional venue for electronically 
trading single-leg and complex customer cross orders. The proposal to 
amend Exchange Rule 900.2NY to add proposed Exchange Rule 
900.3NYP(g)(2) to the list of Exchange rules pursuant to which 
Professional Customers are treated as Broker/Dealers (or non-Customers) 
will help to align the Exchange's rules with the rules of at least one 
other options exchange that limits its customer cross functionality to 
Priority Customer orders.\44\ In addition, the definition of 
Professional Customer in Exchange Rule 900.2NY currently includes the 
CUBE Auction provided in Exchange Rule 971.1NY. The proposal to add the 
CUBE Auction in Exchange Rule 971.1NYP to the definition of 
Professional Customer will provide for consistent treatment of 
Professional Customer orders in the CUBE Auctions prior to and after 
the Exchange's migration to the Pillar trading platform. The proposal 
to add Complex Customer Cross Orders to Exchange Rule 980NYP(b)(1) will 
help to ensure that Exchange Rule 980NYP(b)(1) provides a complete and 
accurate list of the ECOs available on the Exchange. For these reasons, 
the Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\45\
---------------------------------------------------------------------------

    \43\ See Cboe Rules 5.37(f) and 5.38(f).
    \44\ See id. As discussed above, Professional Customers also are 
treated as Broker/Dealers (or non-Customers) for purposes of the 
Customer-to-Customer Cross orders traded on the Exchange's floor 
pursuant to Exchange Rule 934NY(a).
    \45\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.

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-NYSEAMER-2023-66 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-2023-66. 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

[[Page 89788]]

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-NYSEAMER-2023-66 and should be submitted on or before January 18, 
2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-28704 Filed 12-27-23; 8:45 am]
BILLING CODE 8011-01-P


