Document ID: SEC-2014-1704-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-10-07T04:00Z

[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Notices]
[Pages 60553-60555]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23839]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73280; File No. SR-NYSEMKT-2014-81]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Rule 902.1NY To Authorize the Exchange To 
Share Any User-Designated Risk Settings in Exchange Systems With the 
Clearing Member That Clears Transactions on Behalf of the User

October 1, 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 September 19, 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 902.1NY (Admission to the 
System) to authorize the Exchange to share any User-designated risk 
settings in Exchange systems with the Clearing Member that clears 
transactions on behalf of the User. The text of the

[[Page 60554]]

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 proposes to amend Rule 902.1NY (Admission to the 
System) to authorize the Exchange to share any User-designated risk 
settings in Exchange systems with the Clearing Member that clears 
transactions on behalf of the User.
    Rule 902.1NY states that ``[u]nless otherwise provided in the 
Rules, no one but a User shall effect any transaction on the System.'' 
\4\ ``System'' refers to the Exchange System facility.\5\ The Exchange 
proposes to amend the current rule by adding the following sentence: 
``The Exchange may share any User-designated risk settings in the 
System with the Clearing Member that clears transactions on behalf of 
the User.'' \6\ A ``User'' is ``any ATP Holder that is authorized to 
obtain access to the System pursuant to Rule 902.1NY.'' \7\
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    \4\ See Rule 902.1NY.
    \5\ See Rule 900.1NY.
    \6\ See proposed Rule 902.1NY.
    \7\ See Rule 900.2NY(87).
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    Each User that transacts through a Clearing Member on the Exchange 
executes a Clearing Letter of Consent, which ``shall be deemed a letter 
of guarantee, letter of authorization, or notice of consent pursuant to 
NYSE MKT Rules and may be relied upon by NYSE Amex Options, the 
[National Securities Clearing Corporation], the [Options Clearing 
Corporation], and their respective members.'' \8\ The Exchange believes 
that because Clearing Members that execute a Clearing Letter of Consent 
guarantee all transactions of those Users, and therefore bear the risk 
associated with those transactions, it is appropriate for Clearing 
Members to have knowledge of what risk settings a User may utilize 
within Exchange systems.
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    \8\ See NYSE Amex Options ATP Application, Section 8 (Clearing 
Letter of Consent), available here, https://www.nyse.com/publicdocs/nyse/markets/amex-options/ATP_Application.pdf.
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    At this time, the risk settings covered by this proposal are set 
forth in Rule 6.40 [sic] (Risk Limitation Mechanism).\9\ Pursuant to 
Rule 928NY(b)-(d), Users may set certain risk control thresholds in the 
Risk Limitation Mechanism, which are designed to mitigate the potential 
risks of multiple executions against a User's trading interest that, in 
today's highly automated and electronic trading environment, can occur 
simultaneously across multiple series and multiple option classes. As 
proposed, the Exchange may share a User's Risk Limitation Mechanism 
settings with the Clearing Member that guarantees the User's 
transactions on the Exchange, and therefore has a financial interest in 
understanding the risk tolerance of the User.
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    \9\ The Exchange may adopt additional rules providing for User-
enabled risk settings that would be covered under this proposal. The 
Exchange will announce via Trader Update any additional risk 
settings (i.e., other than Rule 928NY(b)-(d)) that are adopted and 
covered by proposed Rule 902.1NY.
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    Because the Clearing Letter of Consent codifies relationships 
between each User and Clearing Member, the Exchange is on notice of 
which Clearing Members have relationships with which Users. The 
proposed rule change would simply provide the Exchange with authority 
to directly provide Clearing Members with information that may 
otherwise be available to such Clearing Members by virtue of their 
relationship with the respective Users.
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 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.
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    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market by 
codifying that the Exchange can directly furnish to Clearing Members 
that guarantee that User's transactions on the Exchange the User-
designated risk settings in OX, including Risk Limitation Mechanism 
settings, which are designed to mitigate the potential risks of 
multiple executions against a User's trading interest that, in today's 
highly automated and electronic trading environment, can occur 
simultaneously across multiple series and multiple option classes. The 
Exchange believes that the proposal is consistent with the protection 
of investors and the public interests because it will permit Clearing 
Members with a financial interest in a User's risk settings to better 
monitor and manage the potential risks assumed by Users with whom the 
Clearing Member has entered into a Clearing Letter of Consent, thereby 
providing Clearing Members with greater control and flexibility over 
setting their own risk tolerance and exposure.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues, but would provide 
authority for the Exchange to directly share risk settings with 
Clearing Members regarding the Users with whom the Clearing Member has 
executed a Clearing Letter of Consent so the Clearing Member can better 
monitor and manage the potential risks assumed by these Users, thereby 
providing them with greater control and flexibility over setting their 
own risk tolerance and exposure. Nonetheless, the proposal does not 
pose an undue burden on non-Clearing Members because, unlike Clearing 
Members, non-Clearing Members do not guarantee the execution of the 
User transactions on the Exchange. The proposal is structured to offer 
the same enhancement to all Clearing Members, regardless of size, and 
would not impose a competitive burden on any participant.

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

[[Page 60555]]

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-2014-81 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-NYSEMKT-2014-81. 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-2014-81, and should 
be submitted on or before October 28, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23839 Filed 10-6-14; 8:45 am]
BILLING CODE 8011-01-P