Document ID: SEC-2014-0364-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-03-05T05:00Z

[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12553-12554]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04798]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71630; File No. SR-NYSEMKT-2014-05]

Self-Regulatory Organizations; NYSE MKT LLC; Order Granting 
Approval of Proposed Rule Change Amending Its Rules in Order To Clarify 
the Applicability and Functionality of Certain Order Types on the 
Exchange

February 27, 2014.

I. Introduction

    On January 8, 2014, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend its rules in order to clarify the applicability and functionality 
of certain option order types on the Exchange. The proposed rule change 
was published for comment in the Federal Register on January 21, 
2014.\3\ The Commission received no comment letters regarding the 
proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71294 (January 14, 
2014), 79 FR 3431 (``Notice'').
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II. Description of the Proposal

    The Exchange has proposed to amend Rule 900.3NY in order to clarify 
the applicability and functionality of certain option order types. The 
Exchange states that it is not proposing to change or alter any 
obligations, rights, policies or practices enumerated within its rules. 
Rather, according to the Exchange, this proposal is designed to reduce 
the potential for investor confusion as to the functionality and 
applicability of certain option order types presently available on NYSE 
Amex Options.\4\
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    \4\ See Notice, 79 FR at 3432.
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    The Exchange's proposed revisions to Rule 900.3NY would provide 
greater detail as to the existing functionality of certain order types, 
including:
     Rule 900.3NY(a)--Market Order. The Exchange has proposed 
to amend Rule 900.3NY(a) to specify that: (1) Market Orders entered 
before the opening of trading will be eligible for trading during the 
Opening Auction Process; (2) Market Orders entered during Core Trading 
Hours will be rejected if, at the time the order is received, there is 
no National Best Bid (``NBB'') and no National Best Offer (``NBO'') 
(collectively, ``NBBO'') disseminated by the Options Pricing Reporting 
Authority (``OPRA'') for the relevant option series; and (3) if at the 
time the Exchange receives a Market Order to buy (sell) there is an NBB 
(NBO) but no NBO (NBB) being disseminated, the Market Order will be 
processed pursuant to Rule 967NY(a).\5\
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    \5\ See proposed Rule 900.3NY(a); see also Notice, 79 FR at 
3432.
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     Rule 900.3NY(d)(1)-(2)--Stop Orders and Stop Limit Orders. 
The Exchange has proposed to amend Rule 900.3NY(d)(1)-(2) to specify 
that it will reject Stop Orders and Stop Limit Orders to buy entered 
with a stop price below the bid at the time the order is entered and 
Stop Orders and Stop Limit Orders to sell entered with a stop price 
above the offer at the time the order is entered.\6\
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    \6\ See proposed Rule 900.3NY(d)(1)-(2); see also Notice, 79 FR 
at 3432-33. The Commission notes that proposed Rule 900.3NY(d)(1)-
(2) accurately sets forth this additional specification, but the 
Exchange's description of this rule change in the purpose section of 
its filing refers to stop prices above the bid or below the offer 
(instead of below the bid or above the offer) triggering rejection.
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     Rule 900.3NY(o)--NOW Order. The Exchange has proposed to 
clarify that a NOW Order that is not marketable against the NBBO when 
submitted to the Exchange will be rejected.\7\
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    \7\ See proposed Rule 900.3NY(o); see also Notice, 79 FR at 
3433.
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    The Exchange's additional proposed revisions to Rule 900.3NY would 
be three-fold. First, the Exchange has proposed to specify in Rules 
900.3NY(g) and 900.3NY(i) that One-cancels-the-other Orders and Single 
Stock Future/Option Orders, respectively, are only eligible for open 
outcry trading.\8\ Second, the Exchange has proposed to decommission 
the functionality supporting the Inside Limit Order defined in Rule 
900.3NY(c) and the Tracking Order defined in Rule 900.3NY(d)(5) due to 
a lack of demand for these order types. The Exchange states that it 
does not intend to re-introduce these order types in the future, and 
thus proposes to delete the text of these rules.\9\ Third, the Exchange 
has proposed to correct typographical errors in the definition of the 
Opening Only Order in Rule 900.3NY(q).\10\
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    \8\ See proposed Rules 900.3NY(g) and 900.3NY(i); see also 
Notice, 79 FR at 3433.
    \9\ See Notice, 79 FR at 3432-33.
    \10\ See proposed Rule 900.3NY(q); see also Notice, 79 FR at 
3433.
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    The Exchange has stated that it plans to issue a Trader Update 
announcing the changes proposed by this rule filing upon approval of 
the filing.\11\
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    \11\ See Notice, 79 FR at 3433.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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; and are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is consistent 
with, and would further the objectives of, Section 6(b)(5) of the Act 
because it

[[Page 12554]]

would add transparency and clarity to the Exchange's rules by enhancing 
the descriptions of certain order type functionality, deleting obsolete 
or outdated rules, and correcting inaccurate language. The Exchange 
also believes that the proposal 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 the Exchange's 
rulebook and better understand the order types available for trading on 
the Exchange.
    Specifically, the Exchange believes that clarifying the definitions 
of Market Orders, Stop Orders, and NOW Orders removes impediments to 
and perfects the mechanism of a free and open market by helping to 
ensure that investors better understand the functionality of these 
order types. Additionally, the Exchange believes that specifying that 
Single Stock Future/Option Orders and One-cancels-the-other Orders are 
only eligible for open outcry trading will help to protect investors 
and the public interest by reducing the potential for confusion when 
routing orders to the Exchange. Lastly, the Exchange believes that 
deleting the definitions applicable to Inside Limit Orders and Tracking 
Orders provides clarity to Exchange rules by eliminating outdated and 
obsolete functionality.
    The Commission notes that the instant proposal does not add any new 
functionality but instead enhances and clarifies the descriptions of 
the option order type functionality currently available on the 
Exchange. The Exchange's proposed revisions would provide greater 
detail as to the operation of certain option order types, including the 
circumstances in which certain order types are rejected, order types 
and modifiers that are compatible or incompatible with each other, and 
the eligibility of certain order types for only open outcry trading. 
Further, the Exchange proposes to update its rules by deleting obsolete 
order type provisions. The Commission believes that these proposed 
changes are reasonably designed to provide greater specificity, clarity 
and transparency with respect to the order type functionality available 
on the Exchange, and therefore should help to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general, protect 
investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NYSEMKT-2014-05) be, and it 
hereby is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04798 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P