Federal Register / Vol. 82, No. 208 / Monday, October 30, 2017 / Notices 50205 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4A Specialist is ‘‘an individual or entity that has 

been deemed qualified by the Exchange for the 

purpose of making transactions on the Exchange in 

accordance with the provisions of Rule 920NY 

[Market Makers], and who meets the qualification 

requirements of Rule 927NY(b) [Specialists]. Each 

Specialist must be registered with the Exchange as 

a Market Maker. Any ATP Holder registered as a 

Market Maker with the Exchange is eligible to be 

qualified as a Specialist. See Rule 900.2NY(76). 

Rule 923NY(b) also provides that ‘‘[t]he Exchange 

may designate e-Specialists in an option class in 

accordance with Rule 927.4NY [e-Specialists].’’ See 

Rule 923NY(b). 

5The term ‘‘System’’ refers to the Exchange’s 

electronic order delivery, execution and reporting 

system through which orders and quotes for listed 

options are consolidated for execution and/or 

display. See Rule 900.2NY (48) (defining ‘‘Exchange 

System’’ or ‘‘System’’). 

6The Specialist Pool refers to the aggregated size 

of the best bid and best offer, in a given series, 

amongst the Specialist and e-Specialists that match 

in price. See Rule 900.2NY(75). 

7See Rule 964.2NY(b)(2). 

8See Rule 964.2NY(b)(3)(A). 

9The Exchange may modify how it calculates the 

Additional Weighting, which calculation would be 

announced by Trader Update. See Rule 

964.2NY(b)(3)(A). See, e.g., September 27, 2012 

Trader Update, available here, https://

www.nyse.com/publicdocs/nyse/notifications/ 

trader-update/NYSE%20AMEX%20OPTIONS%20

Trader%20Update%20Primary%20Specialist%20

Implementation%209-27-12%20FINALtw.pdf; and 

December 21, 2012 Trader Update, available here, 

https://www.nyse.com/publicdocs/nyse/ 

notifications/trader-update/NYSE%20AMEX%20

OPTIONS%20Trader%20Update%20Primary%20

Specialist%20Implementation%20010213

%20%20%20.pdf. 

10See proposed Rule 964.2NY(b)(3)(A) 

(providing, in part, that the ‘‘Primary Specialist’s 

size pro-rata participation in the Specialist Pool 

will receive additional weighting, as determined by 

the Exchange, and announced via Trader Update; 

provided, however, that if all participants in the 

Specialist Pool are quoting the same size, this 

additional weighting will be no greater than 662⁄3% 

if there is only one e-Specialist, and no greater than 

50% if there are two or more e-Specialists’’). The 

Exchange also proposes to capitalize the ‘‘s’’ in the 

defined term ‘‘e-Specialist.’’ See id. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2017–23487 Filed 10–27–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81928; File No. SR– 

NYSEAMER–2017–23] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify Rule 964.2NY 

Regarding the Participation 

Entitlement Formula for Specialists 

and e-Specialists 

October 24, 2017. 

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 

10, 2017, NYSE American LLC (the 

‘‘Exchange’’ or ‘‘NYSE American’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify 

Rule 964.2NY regarding the 

participation entitlement formula for 

Specialists and e-Specialists. 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the filing is to modify 

Rule 964.2NY regarding the 

participation entitlement of Specialists 

and e-Specialists.4

Rule 964NY sets forth the priority for 

the allocation of incoming orders to 

resting interest at a particular price in 

the System,5 which includes the 

allocation to the Specialist Pool.6 Rule 

964.2NY sets forth the participant 

entitlement formula applicable to the 

Specialist Pool and provides that, on a 

quarterly basis, the Exchange will 

determine a Primary Specialist from 

among the Specialists e-Specialists [sic] 

in each option class. 

Generally, the Specialist Pool is 

entitled to 40% of the remaining 

balance of an order after any orders on 

behalf of Customers in the Consolidated 

Book are satisfied.7 Rule 

964.2NY(b)(3)(A) provides that 

Specialists and e-Specialists quoting at 

the NBBO will share in the Specialist 

Pool participation entitlement on a size 

pro rata basis and provides that the 

Primary Specialist’s size pro rata 

participation will receive additional 

weighting, as determined by the 

Exchange and announced by Trader 

Update (the ‘‘Additional Weighting’’). 

Pursuant to the current Rule, this 

Additional Weighting afforded to the 

Primary Specialist is capped at 662⁄3% 

if there is only one e-Specialist, and at 

50% if there are two or more 

e-Specialists (the ‘‘Cap’’).8

Currently, the Exchange applies the 

Additional Weighting as follows: When 

an inbound order is allocated against 

the Specialist Pool, the Primary 

Specialist’s quoted size is treated as if 

it were double (i.e., two (2) times the 

number of contracts being quoted) and 

this doubled size is then used in the 

calculation (as shown in the examples 

below) to determine the allocation to 

both the Primary Specialist as well as 

the other participants in the Specialist 

Pool.9 When there is only one 

e-Specialist and both the Specialist and 

e-Specialist are quoting the same size, 

this Additional Weighting will not be 

greater than 662⁄3%. When there is more 

than one e-Specialist and the Specialist 

and e-Specialists are all quoting the 

same size, this Additional Weighting 

will not be greater than 50%. 

Because current Rule 

964.2NY(b)(3)(A) does not specify the 

circumstances under which the Primary 

Specialist’s allocation in the Specialist 

Pool is subject to the Cap, the Exchange 

proposes to make clear that the Cap only 

applies if ‘‘all participants in the 

Specialist Pool are quoting the same 

size.’’ 10 When all participants in the 

Specialist Pool are not quoting the same 

size, the Primary Specialist may receive 

up to the entirety of the Specialist Pool’s 

participation allocation. However, for 

this scenario to occur, the Primary 

Specialist’s quoted size would need to 

be disproportionately larger than the 

other participants in the Specialist Pool 

such that the allocation to which the 

other participant(s) in the Specialist 

Pool is entitled is less than one contract 

(i.e., a fractional share). For example, if 

the Primary Specialist is quoting 300 

contracts and the other eSpecialist in 


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50206 Federal Register / Vol. 82, No. 208 / Monday, October 30, 2017 / Notices 

11See Rule 964.2NY(b)(1)(iv). 

12See generally Rule 964NY(b). 

13The Exchange notes that when a participant in 

the Specialist Pool would fare better based on its 

pro rata share, rather than its share of the Specialist 

Pool guaranteed participation, the pro rata share 

allocation will be applied. See Rule 

964.2NY(b)(1)(iv). 14 15 U.S.C. 78f(b). 

the Specialist Pool is quoting 1 contract 

[sic]. 

Pursuant to Rule 964.2NY(b)(1)(iv), 

each participant in the Specialist Pool 

would ‘‘be allocated a number of 

contracts equal to the greater of their 

share in the Specialist Pool guaranteed 

participation or their ‘size pro rata’ 

allocation as provided in Rule 

964NY(b)(3), but in either case, no 

greater than the size of the Specialist’s 

disseminated size.’’ 11 Thus, it may be 

possible that the Primary Specialist 

receives its allocation based on its share 

of the Specialist Pool, while other 

participants in the Pool receive a pro 

rata allocation, because the latter 

allocation is more favorable to that 

participant (i.e., provides a ‘‘greater 

share’’) to that participant. In this 

regard, because the Exchange maximizes 

the allocation to each participant in the 

Specialist Pool, certain non-Specialist 

participants (at the same price) may be 

allocated fewer contracts than their pro 

rata share.12

Below are examples of how the 

Exchange applies the Additional 

Weighting in circumstances where the 

Specialist Pool participation guarantee 

entitles each participant to a more 

favorable allocation than size pro rata: 13

Example 1 to illustrate application of 

662⁄3% cap: 

Primary Specialist quoting 60 contracts 

Only one other participant in the 

Specialist Pool also quoting 60 

contracts 

Other non-customer interest resting on 

the Consolidated Book for 500 

contracts 

An inbound order arrives for 200 

contracts 

Allocation Results: 

The Specialist Pool is entitled to a 40% 

allocation of the inbound order (80 

contracts). 

The Primary Specialist is entitled to an 

allocation of (2 × 60)/[60 + (2 × 60)] 

= 662⁄3% of the 80 contracts allocated 

to the Specialist Pool. The Primary 

Specialist will receive 53 contracts. 

The other participant in the Specialist 

Pool is entitled to an allocation of 60/ 

[60 + (2 × 60)] = 33 1⁄3% of the 80 

contracts allocated to the Specialist 

Pool. The e-Specialist will receive 27 

contracts. 

Example 2 to illustrate application of 

50% cap: 

Primary Specialist quoting 60 contracts 

Two other participants in the Specialist 

Pool each quoting 60 contracts 

Other non-customer interest resting on 

the Consolidated Book for 500 

contracts 

An inbound order arrives for 200 

contracts 

Allocation Results: 

The Specialist Pool is entitled to a 40% 

allocation of the inbound order (80 

contracts). 

The Primary Specialist is entitled to an 

allocation of (2 × 60)/[60 + 60 + (2 × 

60)] = 50% of the 80 contracts 

allocated to the Specialist Pool. The 

Primary Specialist will receive 40 

contracts. 

Each other participant in the Specialist 

Pool is entitled to an allocation of 60/ 

[60 + 60 + (2 × 60)] = 25% of the 80 

contracts allocated to the Specialist 

Pool. Each other participant in the 

Specialist Pool will receive 20 

contracts. 

Example 3 to illustrate allocation (i.e., 

no cap) when all are not quoting the 

same size: 

Primary Specialist quoting 60 contracts 

Only one other participant in the 

Specialist Pool also quoting 30 

contracts 

Other non-customer interest resting on 

the Consolidated Book for 500 

contracts 

An inbound order arrives for 200 

contracts 

Allocation Results: 

The Specialist Pool is entitled to a 40% 

allocation of the inbound order (80 

contracts). 

The Primary Specialist is entitled to an 

allocation of (2 × 60)/[30 + (2 × 60)] 

= 80% of the 80 contracts allocated to 

the Specialist Pool. The Primary 

Specialist is entitled to 64 contracts, 

which exceeds the size of their quote. 

Rule 964.2NY(b)(1)(iv), the Primary 

Specialist will receive no more than 

60 contracts, so their allocation does 

not exceed their quoted size. 

The other participant in the Specialist 

Pool is entitled to an allocation of 30/ 

[30 + (2 × 60)] = 20% of the 80 

contracts allocated to the Specialist 

Pool. The other participant in the 

Specialist Pool is entitled to 16 

contracts and will receive 20 

contracts, which represent the 

remaining of the Specialist Pool 

allocation. In this case, the other 

participant in the Specialist Pool is 

granted the balance of its share in the 

Specialist Pool guaranteed 

participation, as it is greater than the 

contracts to which it is entitled per 

Rule 964.2NY(1)(iv) [sic]. 

Example 4 to illustrate allocating 

each Specialist the ‘‘greater of’’ their 

share in either the Specialist Pool or size 

pro rata: 

Primary Specialist quoting 90 contracts 

Other participant in the Specialist Pool 

quoting 200 contracts 

Market Maker quoting 200 contracts 

An inbound order arrives for 100 

contracts 

Allocation Results: 

The Specialist Pool is entitled to a 40% 

allocation of the inbound order (40 

contracts). 

The Primary Specialist is entitled to an 

allocation of (2 × 90)/[200 + (2 × 90)] 

= 47.37% of the 40 contracts allocated 

to the Specialist Pool (19 contracts). 

The Primary Specialist pro rata 

allocation would be 90/(200 + 200 + 

90) = 18.37% of the 100 contracts of 

the inbound order (18 contracts). 

Since the 19-contract Specialist Pool 

allocation is greater than the 18- 

contract pro rata allocation, the 

Primary Specialist will receive 19 

contracts. 

The other participant in the Specialist 

Pool is entitled to an allocation of 

200/[200 + (2 × 90)] = 52.63% of the 

40 contracts allocated to the Specialist 

Pool (21 contracts). 

The other participant in the Specialist 

Pool would also be entitled to a pro 

rata allocation 200/(200 + 200) = 50% 

of the remaining 81 contracts of the 

inbound order (41 contracts). Since 

the 41-contract pro rata allocation of 

the balance is greater than the 21- 

contract Specialist Pool allocation, the 

other participant in the Specialist 

Pool will receive 41 contracts, 

pursuant to Rule 964.2NY(1)(iv) [sic]. 

The Market Maker will receive the 

remaining 40 contracts. 

* * * * * 

The Exchange believes the proposed 

change, which does not alter current 

functionality, would provide additional 

specificity regarding how orders are 

allocated and the circumstances under 

which the Cap would apply to the 

Primary Specialist allocation, which 

adds clarity and transparency to 

Exchange rules to the benefit of all 

market participants. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with the 

requirements of the Securities Exchange 

Act of 1934 (the ‘‘Act’’) and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the 

Act.14 In particular, the proposal is 


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Federal Register / Vol. 82, No. 208 / Monday, October 30, 2017 / Notices 50207 

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

16 15 U.S.C. 78s(b)(3)(A)(iii). 

17 17 CFR 240.19b–4(f)(6). 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, 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. 

18 17 CFR 240.19b–4(f)(6). 

19 17 CFR 240.19b–4(f)(6)(iii). 

20For 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). 21 17 CFR 200.30–3(a)(12). 

consistent with Section 6(b)(5) of the 

Act 15 because it is designed promote 

[sic] just and equitable principles of 

trade, [sic] foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 

and to remove impediments to, and 

perfect the mechanisms [sic] of, [sic] a 

free and open market and a national 

market system. 

The proposed rule change would 

promote just and equitable principles of 

trade as it is intended to provide 

additional specificity regarding the 

circumstances under which the Primary 

Specialist’s allocation would be subject 

to a Cap, which adds clarity and 

transparency to Exchange rules 

regarding order allocation. The 

Exchange believes that the proposed 

change promotes just and equitable 

principles of trade, fosters cooperation 

and coordination among persons 

engaged in facilitating securities 

transactions, and removes impediments 

to and perfects the mechanism of a free 

and open market by ensuring that 

members, regulators and the public can 

more easily navigate and better 

understand the Exchange’s rulebook. 

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 

proposed rule change is not designed to 

address any competitive issues. Rather, 

the proposed change is designed to 

provide ATP Holders and the investing 

public with additional specificity and 

transparency regarding the 

circumstances under which the Primary 

Specialist’s allocation would be subject 

to a Cap, which in turn adds clarity and 

transparency to Exchange rules. 

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)(iii) of the Act 16 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.17

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 18 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 19

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. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest as it 

will allow the Exchange to immediately 

provide greater clarity to market 

participants concerning order allocation 

on the Exchange. Accordingly, the 

Commission hereby waives the 

operative delay and designates the 

proposal operative upon filing.20

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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 

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–2017–23 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–2017–23. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing 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–2017–23 and 

should be submitted on or before 

November 20, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23475 Filed 10–27–17; 8:45 am] 

BILLING CODE 8011–01–P 


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