Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices 67485 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange adopted Rule 967NY governing 

Trade Collar Protection in 2013. See, Exchange Rule 

967NY (Securities Exchange Act Release No. 70037) 

(July 25, 2013), 78 FR 46399 (July 31, 2013) 

(NYSEMKT–2013–62). 

5The bid-ask differential changes as the price 

increases. Rule 925NY(b)(4) sets the bid-ask 

differential at no more than $0.40 where the bid is 

$2.00 or more but does not exceed $5.00. 

Accordingly, if the NBBO for XYZ is $3.00 bid and 

$3.50 offer, certain orders the Exchange receives 

will be subject to a $0.40 Trading Collar Protection. 

6A Trading Official, as defined by Rule 

900.2NY(82) is an officer or employee of the 

Exchange. Trading Officials are not affiliated with 

ATP Holders. 

7See, Rule 967NY(a)(4)(B). 

8Rule 967NY(a)(4)(C)(iv) states that a new Market 

Order on the same side as a collared order will not 

cause the order subject to Trade Collar Protection 

to be recalculated (but will redisplay with the 

additional size of the new Market Order). 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26816 Filed 11–12–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73544; File No. SR– 

NYSEMKT–2014–14] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing of Proposed 

Rule Change Amending Rule 967NY To 

Enhance the Functionality of the Trade 

Collar Protection Mechanism 

November 6, 2014. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on October 

24, 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 selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend 

Rule 967NY to enhance the 

functionality of the trade collar 

protection mechanism. The text of the 

proposed rule change is available on the 

Exchange’s Web site at www.nyse.com, 

at the principal office of the Exchange, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to amend 

Rule 967NY(a) to clarify and conform 

with the functionality of the trade collar 

protection mechanism in use on the 

Exchange. The Exchange’s amendment 

is to specify (a) how marketable Limit 

Orders behave when received in a wide 

market, (b) how subsequently-arriving 

Market Orders effect collared orders, 

and (c) the values associated with a 

Trading Collar. The Exchange also seeks 

to make non-substantive wording 

changes to Rule 967NY(a). 

Background 

Pursuant to Rule 967NY(a), the 

Exchange applies a ‘‘Trade Collar 

Protection’’ mechanism that prevents 

the immediate execution of certain 

orders at prices outside of a specified 

parameter (referred to as a ‘‘Trading 

Collar’’).4 Pursuant to Rule 967NY(a)(3), 

the Trade Collar Protection mechanism 

is not available for quotes or for orders 

with execution conditions IOC, AON, 

FOK and NOW. 

Trading Collars are determined by the 

Exchange on a class-by-class basis and, 

unless announced otherwise via Trader 

Update, are the same value as the bidask differential guidelines established 

pursuant to Rule 925NY(b)(4), as set 

forth in Rule 967NY(a)(2). For example, 

Rule 925NY(b)(4) sets the bid-ask 

differential for an option priced less 

than $2.00 at $0.25. For any option that 

has a bid less than $2.00, the Trading 

Collar will be $0.25. Accordingly, if the 

National Best Bid and Offer (‘‘NBBO’’) 

for XYZ is $0.75 bid and $1.75 offer, 

certain orders the Exchange receives 

will be subject to a $0.25 Trading 

Collar.5 If necessary to preserve a fair 

and orderly market, the Exchange may, 

with the approval of two Trading 

Officials,6 widen or narrow the Trading 

Collar for one or more option series. 

Trade Collar Protection applies to two 

scenarios. First, pursuant to Rule 

967NY(a)(1)(i), Trade Collar Protection 

prevents executions of certain orders 

when the difference between the 

National Best Offer (‘‘NBO’’) and the 

National Best Bid (‘‘NBB’’) is greater 

than one Trading Collar. Second, 

pursuant to Rule 967NY(a)(1)(ii), Trade 

Collar Protection prevents the execution 

of the balance of an eligible buy order 

if it were to execute at a price that is the 

NBO plus a Trading Collar (or a price 

that is the NBB minus a Trading Collar 

for an eligible sell order). 

Pursuant to Rule 967NY(a)(1)(i), if the 

difference between the NBO and the 

NBB is greater than one Trading Collar, 

the Exchange will prevent execution or 

routing of certain orders. Instead, 

pursuant to Rule 967NY(a)(4)(A), the 

Exchange will display the order at a 

price equal to the NBO minus one 

Trading Collar for sell orders or the NBB 

plus one Trading Collar for buy orders 

(the ‘‘collared order’’). The Exchange 

will then attempt to execute or route the 

collared order to buy (sell) against any 

contra interest priced within one 

Trading Collar above (below) the 

displayed price of the collared order.7

As set forth in Rule 967NY(a)(4)(C)(iii), 

should market conditions prevent the 

order from trading or recalculating for a 

period of one second, the order will 

improve its displayed price by an 

amount equal to an additional Trading 

Collar. 

The collared order will re-price before 

the expiration of one second as a result 

of certain changes in the market. 

Pursuant to Rule 967NY(a)(4)(C)(i), an 

update to the NBBO (based on another 

market center or a quote or order on the 

Exchange) that improves the same side 

of the market as the collared order will 

cause the collared order to be 

redisplayed at the same price as the 

updated NBBO. In accordance with Rule 

967NY(a)(4)(C)(ii), a Limit Order (which 

is not an IOC Order, AON Order, FOK 

Order or NOW Order) on the same side 

of the market priced better than one 

Trading Collar from the collared order 

will also become subject to Trade Collar 

Protection and will cause the collared 

order to improve by one Trading Collar 

(which will redisplay at the new price 

and additional size of the new Limit 

Order).8


tkelley on DSK3SPTVN1PROD with NOTICES
67486 Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices 

9Rule 967NY(a)(4)(C)(ii) and 967NY(b) explain 

two scenarios where marketable Limit Orders might 

not immediately execute: (1) When there is already 

a collared order or (2) when the Limit Order is 

priced significantly through the contra-side BBO. 

As set forth in Rule 967NY(a)(1)(ii), 

when the difference between the NBB 

and NBO is within the bid-ask 

differential guidelines, orders execute 

against the NBB or NBO, but Trade 

Collar Protection prevents execution of 

the balance of certain order at prices 

that are a Trading Collar above the NBO 

for buy orders (or at prices that are a 

Trading Collar below the NBB for sell 

orders). Essentially, the Exchange will 

permit the immediate execution of a 

Market Order or a marketable Limit 

Order (together a ‘‘marketable order’’) 

up to a Trading Collar away from the 

NBBO. Pursuant to Rule 967NY(a)(5), 

the balance of the partially executed 

order will be subject to Trade Collar 

Protection and will display at the last 

sale price. However, if there is an 

opportunity for trading within one 

Trading Collar of the last sale price, the 

order will continue to be displayed at 

the NBB (NBO) established at the time 

of the initial execution. Once subject to 

Trade Collar Protection, the order will 

follow the re-pricing mechanism 

described above. 

Proposed Change 

The Exchange seeks to clarify and 

correct Rule 967NY so as to conform to 

current functionality. Pursuant to the 

language of Rule 967NY(a)(1)(i), the 

Exchange will prevent the immediately 

[sic] execution of ‘‘Market Orders or 

marketable Limit Orders’’ if the width of 

the bid-ask differential of the NBBO is 

greater than one Trading Collar. 

However, during wide market 

conditions, the Exchange only prevents 

the immediate execution of Market 

Orders. Orders with limit prices that are 

executable against the NBB or NBO, 

regardless of the width of the bid-ask 

differential of the NBBO, immediately 

execute.9 The Exchange believes that 

Market Orders need this additional level 

of protection as such orders do not 

suggest that the submitting market 

participant is aware of the market (or 

the dislocation associated therewith). 

Conversely, the Exchange believes that 

an order with a limit price evidences 

specific interest at which the submitting 

market participant is willing to trade. 

While marketable Limit Orders are 

immediately executable in situations 

where the bid-ask differential of the 

NBBO is greater than one Trading 

Collar, they nonetheless remain subject 

to the protections of the Limit Order 

Filter of 967NY(b). 

The Exchange also seeks to delete 

967NY(a)(4)(C)(iv), which states that a 

Market Order that arrives while another 

order is being displayed due to Trade 

Collar Protection will join the collared 

order and display at the same price. 

While the Exchange believes this 

behavior beneficial to the market, it has 

not yet deployed the functionality. 

While it intends to incorporate such an 

enhancement in the near future, the 

Exchange is deleting (a)(4)(C)(iv) in 

order for its rules to comply with 

current functionality. Market Orders 

that arrive while another order is 

displayed due to Trade Collar Protection 

will behave in the same manner as laterarriving marketable Limit Orders. 

Specifically, the later-arriving Market 

Order will join the already collared 

order and both will display at a price 

one Trading Collar above (below) the 

previous displayed price. The Exchange 

intends to make another filing to reestablishing the language of (a)(4)(C)(iv) 

once the functionality is available. 

The Exchange also proposes to amend 

Rule 967NY(a) to add language that 

clarifies the current operation of the 

trading collar mechanism. In particular, 

the Exchange proposes to delete the 

reference to Rule 925NY(b)(4) and 

instead codify the values of the Trading 

Collar directly in Rule 967NY(a). Rule 

925NY(b)(4) sets the bid-ask 

differentials based exclusively on the 

bid price. The trading collar mechanism 

employs the same values for 

determining the Trading Collar. 

However, while those values are based 

upon the NBB for buy orders, the value 

of the Trading Collar for sell orders is 

based upon the NBO. The Exchange 

uses the NBB for buy orders because it 

believes that a market participant who 

is looking to buy would derive its price 

off of what other market participants are 

willing to pay (i.e. the prevailing bid). 

Similarly, the Exchange uses the NBO 

for sell orders because it believes that a 

market participant who is looking to sell 

would derive its price off of what other 

market participants are willing to sell 

(i.e. the prevailing offer). Accordingly, 

the Exchange proposes new sections 

(a)(2)(A) and (a)(2)(B) to Rule 967NY, 

which specifies the values based upon 

whether the order subject to Trade 

Collar Protection is to buy or sell. 

As an example, the NBBO for XYZ is 

$1.00 bid and $6.00 offer. Based upon 

Rule 967NY’s reference to Rule 

925NY(b)(4), it could be interpreted that 

the Trading Collar would be $0.25 

regardless of whether the Exchange 

received an order to buy or sell (based 

upon the bid being less than $2.00). 

However, collared sell orders currently 

derive their Trading Collar and display 

price from the NBO. Accordingly, a 

Market Order to buy would display at 

$1.25 (i.e., the $1.00 NBB plus the $0.25 

Trading Collar (based upon the NBB 

being less than $2.00)) and would 

attempt to execute against any contra 

interest (on any market) priced $1.50 or 

less (i.e., $1.25 bid plus the $0.25 

Trading Collar). However, a Market 

Order to sell would display at $5.50 

(i.e., the $6.00 NBO minus the $0.50 

Trading Collar (based upon the NBO 

being more than $5.00 but does not 

exceed $10.00)) and would attempt to 

execute against any contra interest (on 

any market) priced $5.00 or greater (i.e., 

$5.50 offer minus the $0.50 Trading 

Collar). 

As a further example, the NBBO for 

XYZ is $1.45 × 200 bid and $2.10 × 200 

offer with a $0.05 MPV. If the Exchange 

receives a market order to buy 100 

contracts, the Trading Collar would be 

$0.25 (pursuant to new section 

(a)(2)(B)(i)). Accordingly, the order will 

be displayed at $1.70 (i.e., $1.45 bid 

plus the $0.25 Trading Collar). For a 

period of one second, the Exchange will 

attempt to execute the buy order against 

any contra interest (on any market) 

priced $1.95 or less (i.e., $1.70 plus the 

$0.25 Trading Collar). Under Rule 

967NY(a)(4)(C)(iii), at the expiration of 

one second, the Exchange will attempt 

to redisplay the market buy order 

subject to Trade Collar Protection at 

$1.95 (i.e., $1.70 plus the $0.25 Trading 

Collar). However, since the $2.10 NBO 

represents contra interest priced $2.20 

or less (i.e. $1.95 plus the $0.25 Trading 

Collar), the market buy order would 

execute its 100 contracts against the 

NBO at $2.10. In comparison, in the 

same market for XYZ, if the Exchange 

receives a market order to sell 100 

contracts, the Trading Collar would be 

$0.40 (pursuant to new section 

(a)(2)(B)(ii)). Accordingly, the Exchange 

will attempt to display the market sell 

order at $1.70 (i.e., $2.10 offer minus the 

$0.40 Trading Collar). However, since 

the $1.45 NBB represents contra interest 

priced $1.45 or greater, (i.e. $1.70 minus 

the $0.25 Trading Collar), the market 

sell order would execute its 100 

contracts against the NBB at $1.45. 

The Exchange also proposes to amend 

Rule 967NY(a) to strike the extraneous 

term ‘‘inbound’’ from the rule, which 

could cause confusion as to when Trade 

Collar Protection is available because 

the trade collar mechanism continues to 

apply to resting orders. In addition, the 

Exchange proposes to delete the 

reference in 967NY(a)(3) to the 

cancellation of IOC Orders, AON 

Orders, FOK Orders and NOW Orders if 

not immediately executed, as such is 

not the behavior of AON Orders. The 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices 67487 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78k–1(a)(1). 

Exchange also proposes to capitalize the 

term ‘‘limit order’’ as used in Rule 

967NY(a)(4)(D) to conform with its use 

in the rest of the rule. Finally, the 

Exchange proposes to make nonsubstantive changes to Rule 

967NY(a)(4)(C)(i) and (ii) to better 

clarify behavior in situations where 

there already exists an already collared 

order. 

2. Statutory Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’), in general, and furthers the 

objectives of Section 6(b)(5) 10 which 

requires the rules of an exchange to 

promote just and equitable principles of 

trade, 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. The 

proposed rule change also is designed to 

support the principles of Section 

11A(a)(1) 11 of the Act in that it seeks to 

assure fair competition among brokers 

and dealers and among exchange 

markets. The Exchange believes that the 

proposed rule amendments relating to 

the behavior of Limit Orders in a wide 

market and the effect on Market Orders 

on already collared orders assist with 

the maintenance of fair and orderly 

markets and protects investors by 

correcting inaccurate language and 

clarifying existing functionality so that 

market participants better understand 

how the Exchange handles certain 

orders in times of market dislocation. 

The Exchange also believes that it 

promotes just and equitable principles 

of trade to allow marketable Limit 

Orders received in a wide market to 

immediately execute against contra-side 

interest before receiving Trade Collar 

Protection because Limit Orders provide 

evidence of prices for which market 

participants are willing to trade. 

Accordingly, to the extent contra-side 

interest exists at the NBBO, the 

Exchange believes it is appropriate to 

permit such executions before providing 

Trade Collar Protection for potential 

subsequent executions at inferior prices. 

Furthermore, the Exchange believes that 

it assists in the fair and orderly market 

to have Market Orders advance an 

already collared order in the same 

fashion as marketable Limit Orders as 

both are subsequent orders representing 

executable interest. The Exchange 

believes that its proposal to clarify that 

Trading Collar values are based upon 

the NBB for buy orders and the NBO for 

sell orders removes impediments to and 

perfects the mechanism of a free and 

open market by basing the Trading 

Collar upon the benchmark from which 

a market participant would most likely 

derive its price. The Exchange 

recognizes that there could be potential 

market conditions that result in 

different Trading Collar values 

depending on whether the order 

submitted is to buy or sell. However, the 

Exchange believes that any such 

differences are outweighed by meeting 

the expectations of market participants 

who submit buy orders based upon the 

price of the prevailing NBB and sell 

orders based upon the price of the 

prevailing NBO. Further, the Exchange 

believes that clearly setting forth these 

benchmarks removes impediments to 

and perfects the mechanism of a free 

and open market by ensuring that 

market participants better understand 

the functionality of the trade collar 

mechanism on the Exchange and the 

execution opportunities afforded their 

orders in certain market conditions. The 

Exchange also believes that making nonsubstantive wording changes enhances 

the description of Trade Collar 

Protection will add transparency and 

clarity to the Exchange’s rules. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes the proposal will 

provide market participants with clarity 

relating to how the Exchange systems 

provides protection from anomalous 

executions. Thus, the Exchange does not 

believe the proposal creates any 

significant impact on competition. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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–2014–14 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–2014–14. 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 such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEMKT–2014–14, and should be 

submitted on or before December 4, 

2014. 


tkelley on DSK3SPTVN1PROD with NOTICES
67488 Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices 

12 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange adopted Rule 6.60 governing 

Trade Collar Protection in 2013. See, Exchange Rule 

6.60 (Securities Exchange Act Release No. 70038) 

(July 25, 2013), 78 FR 46392 (July 31, 2013) 

(NYSEArca-2013–72). 

5The bid-ask differential changes as the price 

increases. Rule 6.37(b)(1) sets the bid-ask 

differential at no more than $0.40 where the bid is 

$2.00 or more but does not exceed $5.00. 

Accordingly, if the NBBO for XYZ is $3.00 bid and 

$3.50 offer, certain orders the Exchange receives 

will be subject to a $0.40 Trading Collar Protection. 

6A Trading Official, as defined by Rule 6.1(b)(34) 

is an officer or employee of the Exchange. Trading 

Officials are not affiliated with OTP Holders. 

7See, Rule 6.60(a)(4)(B). 

8Rule 6.60(a)(4)(C)(iv) states that a new Market 

Order on the same side as a collared order will not 

cause the order subject to Trade Collar Protection 

to be recalculated (but will redisplay with the 

additional size of the new Market Order). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26841 Filed 11–12–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73543; File No. SR– 

NYSEArca-2014–14] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Amending Rule 6.60 To 

Enhance the Functionality of the Trade 

Collar Protection Mechanism 

November 6, 2014. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on October 

24, 2014, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend 

Rule 6.60 to enhance the functionality 

of the trade collar protection 

mechanism. The text of the proposed 

rule change is available on the 

Exchange’s Web site at www.nyse.com, 

at the principal office of the Exchange, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to amend 

Rule 6.60(a) to clarify and conform with 

the functionality of the trade collar 

protection mechanism in use on the 

Exchange. The Exchange’s amendment 

is to specify (a) how marketable Limit 

Orders behave when received in a wide 

market, (b) how subsequently-arriving 

Market Orders effect collared orders, 

and (c) the values associated with a 

Trading Collar. The Exchange also seeks 

to make non-substantive wording 

changes to Rule 6.60(a) and fix a 

typographical error in Rule 6.37(b)(1)(E). 

Background 

Pursuant to Rule 6.60(a), the 

Exchange applies a ‘‘Trade Collar 

Protection’’ mechanism that prevents 

the immediate execution of certain 

orders at prices outside of a specified 

parameter (referred to as a ‘‘Trading 

Collar’’).4 Pursuant to Rule 6.60(a)(3), 

the Trade Collar Protection mechanism 

is not available for quotes or for orders 

with execution conditions IOC, AON, 

FOK and NOW. 

Trading Collars are determined by the 

Exchange on a class-by-class basis and, 

unless announced otherwise via Trader 

Update, are the same value as the bidask differential guidelines established 

pursuant to Rule 6.37(b)(1), as set forth 

in Rule 6.60(a)(2). For example, Rule 

6.37(b)(1) sets the bid-ask differential for 

an option priced less than $2.00 at 

$0.25. For any option that has a bid less 

than $2.00, the Trading Collar will be 

$0.25. Accordingly, if the National Best 

Bid and Offer (‘‘NBBO’’) for XYZ is 

$0.75 bid and $1.75 offer, certain orders 

the Exchange receives will be subject to 

a $0.25 Trading Collar.5 If necessary to 

preserve a fair and orderly market, the 

Exchange may, with the approval of two 

Trading Officials,6 widen or narrow the 

Trading Collar for one or more option 

series. 

Trade Collar Protection applies to two 

scenarios. First, pursuant to Rule 

6.60(a)(1)(i), Trade Collar Protection 

prevents executions of certain orders 

when the difference between the 

National Best Offer (‘‘NBO’’) and the 

National Best Bid (‘‘NBB’’) is greater 

than one Trading Collar. Second, 

pursuant to Rule 6.60(a)(1)(ii), Trade 

Collar Protection prevents the execution 

of the balance of an eligible buy order 

if it were to execute at a price that is the 

NBO plus a Trading Collar (or a price 

that is the NBB minus a Trading Collar 

for an eligible sell orders). 

Pursuant to Rule 6.60(a)(1)(i), if the 

difference between the NBO and the 

NBB is greater than one Trading Collar, 

the Exchange will prevent execution or 

routing of certain orders. Instead, 

pursuant to Rule 6.60(a)(4)(A), the 

Exchange will display the order at a 

price equal to the NBO minus one 

Trading Collar for sell orders or the NBB 

plus one Trading Collar for buy orders 

(the ‘‘collared order’’). The Exchange 

will then attempt to execute or route the 

collared order to buy (sell) against any 

contra interest priced within one 

Trading Collar above (below) the 

displayed price of the collared order.7

As set forth in Rule 6.60(a)(4)(C)(iii), 

should market conditions prevent the 

order from trading or recalculating for a 

period of one second, the order will 

improve its displayed price by an 

amount equal to an additional Trading 

Collar. 

The collared order will re-price before 

the expiration of one second as a result 

of certain changes in the market. 

Pursuant to Rule 6.60(a)(4)(C)(i), an 

update to the NBBO (based on another 

market center or a quote or order on the 

Exchange) that improves the same side 

of the market as the collared order will 

cause the collared order to be 

redisplayed at the same price as the 

updated NBBO. In accordance with Rule 

6.60(a)(4)(C)(ii), a Limit Order (which is 

not an IOC Order, AON Order, FOK 

Order or NOW Order) on the same side 

of the market priced better than one 

Trading Collar from the collared order 

will also become subject to Trade Collar 

Protection and will cause the collared 

order to improve by one Trading Collar 

(which will redisplay at the new price 

and additional size of the new Limit 

Order).8


tkelley on DSK3SPTVN1PROD with NOTICES