Document ID: SEC-2022-1461-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2022-11-10T05:00Z

[Federal Register Volume 87, Number 217 (Thursday, November 10, 2022)]
[Notices]
[Pages 67972-67980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24508]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96242; File No. SR-NYSEARCA-2022-31]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, To Amend Rule 
6.64P-O

November 4, 2022.

I. Introduction

    On May 20, 2022, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
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 
modify NYSE Arca Rule 6.64P-O regarding the automated process for both 
opening and reopening trading in a series on the Exchange's Pillar 
trading platform, as described below. The proposed rule change was 
published for comment in the Federal Register on May 27, 2012.\3\ On 
June 24, 2022, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission extended the time period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
change.\5\ On August 23, 2022, the Commission instituted proceedings 
under Section 19(b)(2)(B) of the Act \6\ to determine whether to 
approve or disapprove the proposed rule change.\7\ On October 25, 2022, 
the Exchange filed Amendment No. 1 to the proposed rule change,\8\ and 
on October 27, 2022, the Exchange filed Amendment No. 2 to the proposed 
rule change,\9\ which replaced and superseded in their entirety both 
the original filing and Amendment No. 1. The Commission has received no 
comments on the proposed rule change.

[[Page 67973]]

The Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 2, from interested 
persons and is approving the proposed rule change, as modified by 
Amendment No. 2, on an accelerated basis.
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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. 94959 (May 23, 
2022), 87 FR 32203 (May 27, 2022).
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 95150 (Jun. 24, 
2022), 87 FR 39141 (Jun. 30, 2022).
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 95581 (Aug. 23, 
2022), 87 FR 52827 (Aug. 29, 2022).
    \8\ Amendment No. 1 is available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2022/SR-NYSEArca-2022-31_Am._1.pdf.
    \9\ Amendment No. 2 is available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2022/SR-NYSEArca-2022-31_Am._2.pdf.
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 2

    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 6.64P-O regarding the 
automated process for both opening and reopening trading in a series on 
the Exchange on Pillar as set forth below.\10\ This Amendment No. 2 
supersedes and replaces Amendment No. 1 to the original filing in its 
entirety.\11\
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    \10\ Rule 6.64P-O (the ``Pillar Rule'') covers the opening and 
reopening of option series, which process is identical on the Pillar 
trading platform. As such, the Exchange will simply refer to the 
``opening'' of a series herein. The Exchange completed its migration 
to Pillar on July 28, 2022, as announced here: https://www.nyse.com/trader-update/history#110000440092.
    \11\ This Amendment No. 2 updates information regarding the 
Exchange's completed migration to Pillar and substantively modifies 
the original filing as follows: (i) proposing additional discretion 
for the Exchange to establish what constitutes a Legal Width Quote 
during the Auction Process (ii) adopting a defined term of ``initial 
Auction Process time period''; (iii) adopting functionality to 
cancel, rather than execute in the Auction, certain Limit Orders 
after the ``initial Auction Process time period'' has elapsed; (iv) 
providing the Exchange discretion to modify by Trader Update the 
timing for dissemination of Auction Imbalance Information; and (v) 
removing the specified values for time periods that the Exchange has 
discretion to modify by Trader Update (i.e., MMQ Opening Timers).
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Current Pillar Auction Process
    Rule 6.64P-O(d) sets forth the Auction Process.\12\ Per Rule 6.64P-
O(d)(1), once the Exchange receives the Auction Trigger for a 
series,\13\ the Auction Process begins and the Exchange sends a 
Rotational Quote \14\ to both OPRA and proprietary data feeds 
indicating that the Exchange is in the process of transitioning from a 
pre-open state to continuous trading for that series.
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    \12\ ``Auction Process'' refers to the process that begins when 
the Exchange receives an Auction Trigger for a series and ends when 
the Auction is conducted. See Rule 6.64P-O(a)(5).
    \13\ ``Auction Trigger'' refers to the information disseminated 
by the Primary Market in the underlying security that triggers the 
Auction Process for a series to begin. See Rule 6.64P-O(a)(7).
    \14\ ``Rotational Quote'' refers to the highest Market Maker bid 
and lowest Market Maker offer on the Exchange when the Auction 
Process begins and such Rotational Quote will be updated (for price 
and size) during the Auction Process. See Rule 6.64P-O(a)(13).
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    Per Rule 6.64P-O(d)(2), once a Rotational Quote has been sent, the 
Exchange conducts an Auction,\15\ provided ``there is both a Legal 
Width Quote and, if applicable, Market Maker quotes with a non-zero 
offer in the series'' within the Opening Timer(s), per Rule 6.64P-
O(d)(3).\16\ The Exchange deems the Legal Width Quote requirement 
satisfied if the Calculated NBBO (described below) for the series is 
uncrossed, contains a non-zero offer, and has a spread that does not 
exceed a maximum differential that is determined by the Exchange on a 
class basis and announced by Trader Update.\17\ The Calculated NBBO is 
comprised of the highest bid and lowest offer among all Market Maker 
quotes and the ABBO during the Auction Process.\18\ A Calculated NBBO 
does not require both Market Maker quotes and ABBO to be present, and 
may be composed of Market Maker quotes only, of the ABBO only, or a 
combination thereof.
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    \15\ ``Auction'' refers to the opening or reopening of a series 
for trading either with or without a trade. See Rule 6.64P-O(a)(1).
    \16\ See Rule 6.64P-O(d)(2). Rule 6.64P-O(d)(3) specifies the 
parameters of the Opening MMQ Timers, which are designed to 
encourage (but not require) any Market Maker(s) assigned to an 
option series to submit Legal Width Quotes in connection with the 
Auction Process. The Exchange proposes a non-substantive change of 
``30'' to ``thirty'' regarding the Opening MMQ Timer(s), which would 
add clarity and internal consistency to the rule. See proposed Rule 
6.64P-O(d)(3).
    \17\ See Rule 6.64P-O(a)(10)(A)-(C). The maximum spread 
differential for a given series or class of options may be modified 
by a Trading Official. See Rule 6.64P-O(a)(10)(C).
    \18\ See Rule 6.64P-O(a)(8) (defining Calculated NBBO).
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    If the foregoing requirements are met (i.e., per Rule 6.64P-
O(d)(2)), the Exchange will conduct an Auction that will either result 
in a trade or in a quote depending on whether there is (or is not) 
Matched Volume \19\ that can trade at or within the Auction 
Collars.\20\ If there is Matched Volume that can trade at or within the 
Auction Collars, the Auction will result in a trade at the Indicative 
Match Price.\21\ However, if there is no Matched Volume that can trade 
at or within the Auction Collars, the Auction Process will instead 
result in a quote and the Exchange transitions to continuous trading as 
set forth in Rule 6.64P-O(f).\22\
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    \19\ ``Matched Volume'' refers to the number of buy and sell 
contracts that can be matched at the Indicative Match Price, 
excluding IO Orders. See Rule 6.64P-O(a)(11). An Imbalance Offset 
Order (``IO Order'') is a Limit Order that is to be traded only in 
an Auction. See Rule 6.62P-O(c)(3).
    \20\ ``Auction Collar'' refers to the price collar thresholds 
for the Indicative Match Price for an Auction, with the upper 
Auction Collar being the offer of the Legal Width Quote and the 
lower Auction Collar being the bid of the Legal Width Quote, 
provided that if the bid of the Legal Width Quote is zero, the lower 
Auction Collar will be one MPV above zero for the series. And, if 
there is no Legal Width Quote, the Auction Collars will be published 
in the Auction Imbalance Information as zero. See Rule 6.64P-
O(a)(2).
    \21\ See Rule 6.64P-O(d)(2)(A). ``Indicative Match Price'' 
refers to the price at which the maximum number of contracts can be 
traded in an Auction, including the non-displayed quantity of 
Reserve Orders and excluding IO Orders, subject to the Auction 
Collars. If there is no Legal Width Quote, the Indicative Match 
Price included in the Auction Imbalance Information will be 
calculated without Auction Collars. See Rule 6.64P-O(a)(9).
    \22\ See Rule 6.64P-O(d)(2)(B).
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    Finally, per Rule 6.64P-O(d)(4), unless otherwise specified by 
Trader Update, for the first ninety seconds of the Auction Process 
(inclusive of the thirty-second Opening MMQ Timer(s)), if there is no 
Legal Width Quote, the Exchange will not conduct an Auction, even if 
there is Matched Volume, i.e., the series will not open (hereinafter 
referred to as the ``initial Auction Process time period,'' as 
described further below). After the initial Auction Process time 
period, if there is no Matched Volume and the Calculated NBBO is wider 
than the Legal Width Quote, is not crossed, and does not contain a zero 
offer, the Exchange will first cancel any Market Orders and MOO Orders 
and then transition the option series to continuous trading per Rule 
6.64P-O(f).\23\ The Exchange, however, will not open a series and such 
series will remain unopened until the earlier of (i) a Legal Width 
Quote is established and an Auction can be conducted; (ii) the series 
can be opened as provided for in paragraph (d)(4)(A) (i.e., there is no 
Matched Volume and the Calculated NBBO is uncrossed and has a non-zero 
offer); (iii) the series is halted; or (iv) the end of Core Trading 
Hours.\24\ In other words, a series that does not meet the requirements 
of Rule 6.64P-O(d)(4)(A) may be delayed in opening until one of the 
conditions set forth in Rule 6.64P-O(d)(4)(B) occur.
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    \23\ See Rule 6.64P-O(d)(4)(A).
    \24\ See Rule 6.64P-O(d)(4)(B).

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[[Page 67974]]

Proposed Change to Auction Process
    First, the Exchange proposes to codify existing rule text 
(contained in paragraph (d)(4) of the Rule) into the defined phrase the 
``initial Auction Process time period'' in proposed Rule 6.64P-
O(a)(5)(i).\25\ As proposed, the initial Auction Process time period 
would mean, ``an Exchange-determined time period after the commencement 
of the Auction Process as specified by Trader Update.\26\ Given that 
the Exchange has discretion to modify the ``ninety second'' time period 
referenced in Rule 6.64P-O(d)(4)--and has modified this time period 
since adopting the Pillar Rule--the Exchange proposes to remove 
reference to a specific time period, which would add clarity and 
transparency to the Auction Process.\27\ Consistent with this change, 
the Exchange likewise proposes to modify Rule 6.64P-O(d)(3), to remove 
reference to ``30 seconds'' which is the default value for the length 
of each MMQ Opening Timer, ``[u]nless otherwise specified by Trader 
Update.'' \28\ Given that the Exchange has modified this time period 
since adopting the Pillar Rule, the Exchange believes that removing 
reference to a specific time period would add clarity and transparency 
to the Auction Process.\29\
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    \25\ See Rule 6.64P-O(d)(4) (providing that ``[u]nless otherwise 
specified by Trader Update, for the first ninety seconds of the 
Auction Process . . . .'' and ``[n]inety seconds after the Auction 
Process begins:''). Consistent with the proposed defined term of 
``initial Auction Process time period,'' the Exchange proposes to 
remove the references to ninety (90) seconds.
    \26\ See proposed Rule 6.64P-O(a)(5)(i) (defining ``initial 
Auction Process time period'').
    \27\ On August 19, 2002 [sic], the Exchange announced by Trader 
Update that, effective August 22, 2022, ``the Exchange will reduce 
the time period after the start of the Auction Process when the 
Exchange may open a series on a quote without requiring a Legal 
Width Quote (provided there is no crossing interest) to 15 seconds, 
from the current 90 seconds,'' available here: https://www.nyse.com/trader-update/history#110000462552 (the ``Opening Timer Update'').
    \28\ See proposed Rule 6.64P-O(d)(3) (providing that ``[e]ach 
Opening MMQ Timer will be an Exchange-determined period that is 
announced by Trader Update'').
    \29\ See Opening Timer Trader Update, supra note 27 (announcing 
that, effective August 22, 2022, each Opening MMQ Timer will be 
reduced to 5 seconds, from the current value of 30 seconds). The 
Exchange proposes the non-substantive change to re-organize the 
existing text for clarity purposes (i.e., moving the clause ``[e]ach 
opening MMQ Timer'' to the beginning of the proposed rule). See id.
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    Next, the Exchange proposes to modify Rule 6.64P-O(a)(10)(C) to 
clarify the Exchange's discretion to determine the presence of a Legal 
Width Quote. Rule 6.64P-O(a)(10)(C) provides that, to be deemed a Legal 
Width Quote, the spread of the Calculated NBBO may not exceed a maximum 
differential that is determined by the Exchange on a class basis and 
announced by Trader Update (herein referred to as the ``Maximum 
Calculated NBBO Spread'').\30\ The Exchange proposes to clarify that 
the Exchange has authority to modify the Maximum Calculated NBBO Spread 
during the Auction Process and that any such modifications (like the 
Exchange-determined Maximum Calculated NBBO Spread) would likewise be 
announced by Trader Update.\31\ This proposed clarification, which is 
consistent with its existing authority under Rule 6.64P-O(a)(10), would 
add specificity and transparency to the Auction Process to the benefit 
of all market participants. The Exchange notes that other options 
exchanges likewise specify that their discretion to modify the opening 
parameters for each option series applies during the opening auction 
process and likewise includes the requirement that each such change is 
announced to their market participants.\32\
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    \30\ See Rule 6.64P-O(a)(10)(C) (which also provides a Trading 
Official may establish maximum differentials for one or more series 
or classes of options, which differ from those established by the 
Exchange). To qualify as a Legal Width Quote, the Calculated NBBO 
must also be uncrossed and must contain a non-zero offer, which 
requirements are not being modified by this rule change. See Rule 
6.64P-O(a)(10)(A)-(B).
    \31\ See proposed Rule 6.64P-O(a)(10)(C). See Rule 6.64P-
O(a)(10)(A)-(B).
    \32\ See, e.g., Cboe Options Exchange, Inc. (``Cboe'') Rule 
5.31(a) (definitions of Maximum Composite Width and Opening Collar, 
each of which the exchange ``may modify during the opening auction 
process (which modifications the Exchange disseminates to all 
subscribers to the Exchange's data feeds that deliver opening 
auction updates)''); Cboe EDGX Options Exchange, Inc. (``EDGX'') 
Rule 21.7(a) (same); Cboe BZX Options Exchange, Inc. (``BZX'') Rule 
21.7(a) (definitions of Maximum Composite Width and Opening Collar); 
Cboe C2 Exchange Inc. (``C2'') Rule 6.11(a) (same)).
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    The Exchange proposes to modify Rule 6.64P-O(d)(4) to provide that, 
after the initial Auction Process time period has elapsed, the Exchange 
may open a series when the Calculated NBBO is wider than the Legal 
Width Quote, is not crossed, and does not contain a zero offer (the 
``wide Calculated NBBO'') provided the Exchange first cancels certain 
interest.\33\ Specifically, before the Exchange can open a series, with 
a quote, and transition to continuous trading (per Rule 6.64P-O(f)) 
based on a wide Calculated NBBO, the Exchange must first cancel Market 
Orders, MOO Orders, and Limit Orders to buy (sell) priced equal to or 
higher (lower) than the Indicative Match Price.\34\ The Exchange 
believes that the proposed cancellation of such executable Limit Orders 
would help prevent executions at potentially extreme prices. Consistent 
with this change, the Exchange proposes to add a caveat to Rule 6.64P-
O(d)(2)(A)--which provides for the trading of certain executable 
interest at the Indicative Match Price--to make clear that the trading 
behavior set forth in this provision is subject to proposed Rule 6.64P-
O(d)(4).\35\ Although the functionality set forth in Rule 6.64P-O(d) is 
designed to allow the affected series to open on a quote (and not a 
trade), the Exchange acknowledges the possibility that such series may 
open on a trade because orders or quotes may arrive as the Exchange is 
evaluating trading interest and whether such interest qualifies as a 
Legal Width Quote.\36\
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    \33\ See proposed Rule 6.64P-O(d)(4). Consistent with the 
proposed definition of the ``initial Auction Process time period'' 
and its use in the proposed rule, the Exchange proposes to delete 
reference to ``ninety seconds'' regarding the Auction Process. See 
id.
    \34\ See proposed Rule 6.64P-O(d)(4). The Exchange proposes to 
re-locate the text regarding the potential race condition resulting 
in a trade from Rule 6.64P-O(d)(4)(A) to proposed Rule 6.64P-O(d)(4) 
and to replace reference to ``Auction'' with ``Auction Process'' for 
the sake of clarity as well as to delete current paragraph (d)(4)(A) 
of the Pillar Rule as obsolete because the text describing the wide 
Calculated NBBO is contained in proposed Rule 6.64P-O(d)(4) and the 
transition to continuous trading is no longer dependent upon the 
presence of Matched Volume under the proposed functionality. See id.
    \35\ See proposed Rule 6.64P-O(d)(2)(A). As is the case today--
which behavior remains unchanged by proposed Rule 6.64P-O(d), the 
Exchange will open on a quote and transition to continuous trading 
(per Rule 6.64P-O(f)) in the absence of executable interest (i.e., 
there is no Matched Volume that can trade at or within the Auction 
Collars). See Rule 6.64P-O(d)(2)(B).
    \36\ See proposed Rule 6.64P-O(d)(4) (regarding the potential 
race condition resulting in a trade).
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    The proposed cancellation of Market Orders and MOO Orders before 
opening a series is consistent with the current Pillar Rule and thus 
would continue to protect Market Orders and MOO Orders from being 
executed before transitioning to continuous trading, per paragraph (f) 
of the Pillar Rule when there is a wide Calculated NBBO.\37\ The 
proposed cancellation of Limit Orders to buy (sell) priced equal to or 
higher (lower) than the Indicative Match Price, is new. The Indicative 
Match Price refers to the opening price for a series and represent the 
price at which the maximum number of contracts can be traded in an 
Auction. Thus, the proposal to cancel Limit Orders to buy (sell) priced 
equal to or higher (lower) than the Indicative

[[Page 67975]]

Match Price when the Calculated NBBO is wider than the Legal Width 
Quote would allow the Exchange to help ensure that potentially 
executable Limit Orders would be cancelled rather than execute at 
potentially extreme prices before the Exchange transitions to 
continuous trading.\38\ The Exchange believes that this proposed 
handling would likewise allow the Exchange to proceed with a timely 
opening of each series--which opening would have otherwise been delayed 
until market conditions changed per the current Pillar Rule.\39\
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    \37\ See Rule 6.64P-O(d)(4)(A)(i) (providing that Market Orders 
and MOO Orders are cancelled ``[a]ny time a series is opened or 
reopened when there is no Legal Width Quote''). The Exchange 
believes this proposed change is non-substantive as it simply 
relocates existing text in the more streamlined proposed rule.
    \38\ The Exchange notes that ``[i]f there is no Legal Width 
Quote, the Indicative Match Price included in the Auction Imbalance 
Information will be calculated without Auction Collars.'' See Rule 
6.64P-O(a)(9).
    \39\ See, e.g., Rule 6.64P-O(d)(4)(A) and (B). The Exchange 
notes that any Auction interest that is not cancelled in series that 
open per proposed Rule 6.64P-O(d)(4) would be handled in the same 
manner as all other Auction interest that is present when the 
Exchange transitions from the Auction Process to continuous trading 
per Rule 6.64P-O(f)(1)-(3).
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    Because the proposed change to Rule 6.64P-O(d)(4) would allow any 
series that has not opened by the end of the initial Auction Process 
time period the ability to open on a quote based on a wide Calculated 
NBBO, the Exchange proposes to eliminate as unnecessary Rule 6.64P-
O(d)(4)(B), which paragraph contemplates a series not being able to 
open because the Calculated NBBO is wider than--and thus does not 
qualify as--a Legal Width Quote. The Exchange believes these proposed 
conforming changes are necessary given that the proposed changes to 
Rule 6.64P-O(d)(4) render paragraph (d)(4)(B) of the Rule unnecessary.
    In addition, the Exchange proposes to modify Rule 6.64P-O(c), which 
provides that ``Auction Imbalance Information is updated at least every 
second until the Auction is conducted, unless there is no change to the 
information,'' to authorize the Exchange to modify the time within 
which it updates this information and to announce any such changes by 
Trader Update.\40\ Given the proposed change to allow the Exchange to 
open certain series after the initial Auction Process time period after 
first cancelling certain interest, the Exchange anticipates that it may 
not be necessary to update the Auction Imbalance Information at least 
every second. The Exchange seeks flexibility in the frequency for 
imbalance publication as it plans to monitor the impact of the proposed 
change after which it will be in a position to better assess the 
appropriate frequency for publication of the Auction Imbalance 
Information. In addition, this proposed discretion, which is consistent 
with other options exchanges, would afford the Exchange flexibility, 
including to respond to market conditions.\41\
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    \40\ See proposed Rule 6.64P-O(c) (providing that ``[u]nless 
otherwise provided by Trader Update, Auction Imbalance Information 
is updated at least every second until the Auction is conducted, 
unless there is no change to the information'').
    \41\ See, e.g., Nasdaq Options Market (``NOM'') Section 8(b)(3) 
(providing that ``Nasdaq shall disseminate by electronic means an 
Order Imbalance Indicator every 5 seconds beginning between 9:20 and 
9:28, or a shorter dissemination interval as established by the 
Exchange, with the default being set at 9:25 a.m. The start of 
dissemination, and a dissemination interval, shall be posted by 
Nasdaq on its website.'').
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    Finally, the Exchange also proposes to modify the requirements to 
open a series during the initial Auction Process time period for option 
series with two or more assigned Market Makers, per Rule 6.64P-
O(d)(3)(C). Per Rule 6.64P-O(d)(3)(C)(i), if there are two or more 
Market Makers assigned to a series, the Exchange will conduct the 
Auction, without waiting for the Opening MMQ Timer to end, as soon as 
there is both a Legal Width Quote and at least two assigned Market 
Makers have submitted a quote with a non-zero offer. Per Rule 6.64P-
O(d)(3)(C)(ii), if at least two Market Makers assigned to a series have 
not submitted a quote with a non-zero offer by the end of the Opening 
MMQ Timer, the Exchange will begin a second Opening MMQ Timer. The 
Exchange proposes to modify these provisions to provide that the 
Exchange would require that at least two quotes with non-zero offers be 
submitted during the Opening MMQ Timer, which quotes may be sent by one 
or more Market Makers.\42\
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    \42\ See proposed NYSE Arca Rule 6.64P-O(d)(2) (providing that 
``[o]nce a Rotational Quote has been sent, the Exchange will conduct 
an Auction when there is both a Legal Width Quote and, if 
applicable, Market Maker quotes with a non-zero offer in the series 
(subject to the Opening MMQ Timer(s) requirements in paragraph 
(d)(3) of this Rule''), and NYSE Arca Proposed Rules 6.64P-
O(d)(3)(C)(i) (providing that ``[t]he Exchange will conduct the 
Auction, without waiting for the Opening MMQ Timer to end, as soon 
as there is both a Legal Width Quote and at least two quotes with a 
non-zero offer submitted by assigned Market Maker(s)'') and 
(d)(3)(C)(ii) (providing that ``[i]f the Exchange has not received 
at least two quotes with a non-zero offer from any Market Maker(s) 
assigned to a series by the end of the Opening MMQ Timer, the 
Exchange will begin a second Opening MMQ Timer'').
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    The Exchange believes that the proposed change continues to 
encourage (but not require) Market Makers to participate at the open, 
which may increase the availability of Legal Width Quotes in more 
series, thereby allowing more series to open in a timely manner. The 
Exchange believes that expanding the opportunities for each Market 
Maker to enter the market--whether by each Market Maker submitting one 
quote or a single Market Maker submitting two quotes--could result in 
the depth of liquidity that market participants have come to expect in 
options with multiple assigned Market Makers, and a more stable trading 
environment. The Exchange believes the proposed rule change would 
provide more flexibility in terms of how market depth is achieved 
(i.e., based on quotes from a single Market Maker as opposed to two) 
and may result in a more timely and efficient opening process. Further, 
the proposed change may increase the availability of Legal Width Quotes 
in more series and would add clarity and transparency to Exchange 
rules.
Other Exchange Rules: Proposed Non-Substantive or Clarifying Changes
    The Exchange also proposes to make several clarifying or non-
substantive changes to certain of its rules. First, the Exchange 
proposes to modify paragraph (c) of Rule 6.37-O (Obligations of Market 
Makers) regarding ``Unusual Conditions--Auctions'' to add an open 
parenthesis in the cross reference to Rule 6.64P-O(a)(10).\43\ The 
Exchange believes this proposed change would correct an inadvertent 
omission and would add clarity and transparency to Exchange rules.
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    \43\ See proposed Rule 6.37-O(c).
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    Next, the Exchange proposes to correct several cross-references in 
Rule 6.62P-O (Orders and Modifiers). The Exchange proposes to update 
the reference in Rule 6.62P-O(e)(3)(C)(ii) regarding Day ISO ALO Orders 
to correctly cross-reference paragraphs (e)(2)(C)-(F) (rather than to 
paragraphs (e)(2)(C)-(G)) to cover the processing of such ALO Orders 
once resting.\44\ The proposed change would correct an inadvertent 
error adding clarity and transparency to Exchange rules. Similarly, the 
Exchange proposes to update the reference in Rule 6.62P-O(h)(6)(B) to 
correctly cross-reference the defined term Complex Order, which is set 
forth in Rule 6.62P-O(f) (rather than paragraph (e)).\45\ The proposed 
change would correct an inadvertent error adding clarity and 
transparency to Exchange rules.
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    \44\ See proposed Rule 6.62P-O(e)(3)(C)(ii).
    \45\ See proposed Rule 6.62P-O(h)(6)(B).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\46\ in general, and 
furthers the

[[Page 67976]]

objectives of Section 6(b)(5),\47\ 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.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Proposed Change to Pillar Auction Process
    Overall, the Exchange believes the proposed changes to its Auction 
Process would promote a fair and orderly market by mitigating the 
potential for extreme executions when a series opens in a wide market 
and improving the speed and efficiency of the Exchange's opening 
process without impairing price discovery. The Exchange believes the 
proposed change should result in better and more consistent prices on 
Auction executions and facilitate a fair and orderly transition to 
continuous trading.
    The Exchange believes the proposal to amend Rule 6.64P-O to remove 
specific values or time periods when the Exchange is authorized to 
change (and in some cases has changed) such values/timers by Trader 
Update would add clarity and transparency to the rule and alleviate 
potential confusion resulting from stale values remaining in rule text. 
As such, this proposed change would 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 Exchange believes the proposed change to make clear that the 
Exchange's discretion to modify the Maximum Calculated NBBO Spread that 
would qualify as a Legal Width Quote during the Auction Process would 
promote just and equitable principles of trade to the benefit of 
investors because such change would add clarity and transparency to the 
rule and help avoid potential investor confusion. The proposed change 
would also align the Exchange's rule text with that of Cboe and its 
affiliates with regard to the specific discretion applying during the 
Auction Process.\48\
---------------------------------------------------------------------------

    \48\ See supra note 32 (citing the discretion of Cboe and its 
affiliates to modify the opening auction parameters during the 
opening process).
---------------------------------------------------------------------------

    The Exchange believes the proposal to amend Rule 6.64P-O(d)(4) to 
allow the Exchange to conduct an Auction on a wide Calculated NBBO once 
it has cancelled certain trading interest would promote just and 
equitable principles of trade and remove impediments to and perfect the 
mechanism of a free and open market and a national market system and 
protect investors. In particular, the Exchange believes that the 
proposed change would improve the speed and efficiency of the 
Exchange's opening process without impairing price discovery, which 
should result in better and more consistent prices on Auction 
executions. The proposed cancellation of Market Orders, MOO Orders, and 
Limit Orders to buy (sell) priced equal to or higher (lower) than the 
Indicative Match Price, would allow the Exchange to proceed with a 
timely opening of each series while preventing extreme executions for 
series opened based on a wide Calculated NBBO. The proposal to cancel 
Limit Orders to buy (sell) priced equal to or higher (lower) than the 
Indicative Match Price when the Calculated NBBO is wider than the Legal 
Width Quote, which functionality is new, would allow the Exchange to 
help ensure that potentially executable Limit Orders would be cancelled 
rather than execute at potentially extreme prices before the Exchange 
transitions to continuous trading (in a wide market). As such, the 
Exchange believes that providing for the cancellation of potentially 
executable interest (Market Orders, MOOs and Limit Orders alike) would 
protect investors as it would continue to limit the risk of execution 
of orders at extreme prices.
    The Exchange believes its proposed conforming change to eliminate 
as unnecessary Rule 6.64P-O(d)(4)(B) given the changes to Rule 6.64P-
O(d)(4) (to allow any series that has not opened by the end of the 
initial Auction Process time period the ability to open based on a wide 
Calculated NBBO after cancelling executable interest) would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and protect investors because it would allow 
the Exchange to proceed with a more timely opening of each series--
which opening may have otherwise been delayed per the current Pillar 
Rule until market conditions changed. Further, the Exchange believes 
this conforming change would add clarity, specificity, transparency, 
and internal consistency to the proposed rule making it easier for 
market participants to navigate and comprehend.
    The Exchange proposes to modify Rule 6.64P-O(c) to authorize the 
Exchange to modify the time within which it updates Auction Imbalance 
Information and to announce any such changes by Trader Update would 
promote just and equitable principles of trade and remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system and protect investors because the Exchange anticipates 
that as a result of its proposed changes to the Auction Process that 
updates the Auction Imbalance Information may not be required as 
frequently as is set forth in the current rule. The Exchange believes 
that the flexibility afforded by the proposed change would enable it to 
monitor client feedback and to then determine the appropriate frequency 
of the publication of the Auction Imbalance Information. In addition, 
consistent with the rules of other options exchanges, it would afford 
the Exchange flexibility, including to respond to market 
conditions.\49\
---------------------------------------------------------------------------

    \49\ See supra note 41 (regarding NOM's discretion to establish 
intervals for its dissemination of an Order Imbalance Indicator and 
to post such interval(s) to NOM's website, per Section 8(b)(3)).
---------------------------------------------------------------------------

    The Exchange believes its proposal to modify the requirements to 
open a series for option series that have two or more assigned Market 
Makers would promote just and equitable principles of trade and remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and protect investors because it would 
continue to provide Market Makers assigned to such series the 
opportunity to submit a quote while potentially promoting a more timely 
opening once at least two quotes (even if from a single Market Maker) 
have been submitted and would add clarity and transparency to Exchange 
rules. The Exchange believes the proposed rule change would provide 
more flexibility in terms of how market depth in the affected series is 
achieved (i.e., based on quotes from a single Market Maker as opposed 
to two) and may result in a more timely and efficient opening process. 
Further, the proposed change may increase the availability of Legal 
Width Quotes in more series and would add clarity and transparency to 
Exchange rules. Improving the validity of the opening price benefits 
all market participants and also benefits the reputation of the 
Exchange as being a venue that provides accurate price discovery. To 
the extent that this proposed rule change results in an option series 
opening sooner, which, in turn would increase the times during which 
investors may conduct trading in these options, this proposed change 
would benefit investors and the investing public.

[[Page 67977]]

    The Exchange believes that the proposed non-substantive and 
conforming changes to Rule 6.64P-O (including to delete paragraph 
(d)(4)(B)) would promote just and equitable principles of trade because 
such changes would streamline Rule 6.64P-O, thus adding clarity to the 
Auction Process making it easier to comprehend and navigate to the 
benefit of market participants and would promote transparency and 
internal consistency within Exchange rules making them easier to 
comprehend and navigate.
Additional Proposed Non-Substantive or Clarifying Changes to Exchange 
Rules
    The Exchange believes that the proposed non-substantive and 
clarifying changes that update/correct inaccurate references would 
promote transparency and internal consistency within Exchange rules 
making them easier to comprehend and navigate.\50\
---------------------------------------------------------------------------

    \50\ See supra notes 43-45.
---------------------------------------------------------------------------

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 Exchange operates in a 
competitive market and regularly competes with other options exchanges 
for order flow. The Exchange does not believe that the proposed rule 
change would impose any burden on intra-market competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because all market participants may trade in any series that opens 
subject to the proposed (modified) opening process.
    The Exchange believes that the proposed change to the Auction 
Process, which would allow certain unopened series to open in a wide 
market after the Exchange first cancelled potentially executable 
interest, would not impose any burden on intermarket competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act because it is designed to open series on the Exchange in a fair, 
orderly and timely manner while at the same time mitigating the 
potential for extreme executions. Further, the Exchange does not 
believe that the proposed rule change will impose any burden on intra-
market competition that is not necessary or appropriate in furtherance 
of the purposes of the Act, as all market participants that participate 
in the opening process may benefit equally from the proposal, as the 
rules of the Exchange apply equally to all market participants.
    The Exchange does not believe that the proposed change to open 
those series with more than one assigned Market Maker based on two 
quotes regardless of the source would result in an undue burden on 
competition. Market Makers are encouraged but not required to quote in 
their assigned series at the open regardless of whether a Market Maker 
is one of several assigned to a series or is the only one. As such, 
this proposal would not subject any Market Maker to additional 
obligations. Thus, the Exchange does not believe this proposed change 
would result in an undue burden on intra-market competition as it would 
apply equally to all similarly-situated Market Makers regarding their 
assigned series. The Exchange believes that the proposal to allow a 
series with more than one assigned Market Maker to open based on two 
quotes regardless of the source would continue to encourage 
participation of Market Makers at the open, may increase the 
availability of Legal Width Quotes in more series, thereby allowing 
more series to open (sooner). Improving the validity of the opening 
price benefits all market participants and also benefits the reputation 
of the Exchange as being a venue that provides accurate price 
discovery. With respect to inter-market competition, the Exchange notes 
that most options exchanges do not require Market Makers to quote 
during the opening.\51\
---------------------------------------------------------------------------

    \51\ See, e.g., Cboe and its affiliated exchanges.
---------------------------------------------------------------------------

    Additionally, the non-substantive changes proposed by the Exchange, 
including removing reference to specific values or time periods where 
the Exchange has discretion to modify such values/timers by Trader 
Update, provide additional clarity and detail in the Exchange's rules, 
reduce the potential for investor confusion, and are not changes made 
for any competitive purpose.

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. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 2, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\52\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 2, is consistent 
with Section 6(b)(5) of the Act,\53\ 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 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, and that the rules of a 
national securities exchange not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \52\ 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).
    \53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Proposed Change to the Pillar Auction Process
    The Commission believes that the proposal to define the term 
``initial Auction Process time period'' \54\ is consistent with the 
Exchange's discretion, under current NYSE Arca Rule 6.64P-O(d)(4), to 
modify the ninety second time period referenced in NYSE Arca Rule 
6.64P-O(d)(4), provided that any such changes are announced by Trader 
Update.\55\ The Exchange represents that it has modified this time 
period by Trader Update since adopting the Pillar Rule.\56\ Similarly, 
the proposed change to remove reference to ``30 seconds'' as the 
default value for the length of each MMQ Opening Timer \57\ is 
consistent with the Exchange's discretion to modify this value, as 
specified by Trader Update, under current NYSE Arca Rule 6.64P-O(d)(3). 
The Exchange represents that it has modified this time period since 
adopting the Pillar Rule.\58\ The proposed

[[Page 67978]]

changes would thus update and align Exchange rules with current 
Exchange-specified time periods under current NYSE Arca Rule 6.64-P-
O(d)(4) and NYSE Arca Rule 6.64P-O(d)(3), thereby enhancing 
transparency to and promoting a fair and orderly Auction Process.
---------------------------------------------------------------------------

    \54\ See Proposed NYSE Arca Rule 6.64P-O(a)(5)(i).
    \55\ See NYSE Arca Rule 6.64P-O(d)(4).
    \56\ See supra note 27 and accompanying text (describing how, on 
August 19, 2002, the Exchange announced by Trader Update that, 
effective August 22, 2022, ``the Exchange will reduce the time 
period after the start of the Auction Process when the Exchange may 
open a series on a quote without requiring a Legal Width Quote 
(provided there is no crossing interest) to 15 seconds, from the 
current 90 seconds,'' available at https://www.nyse.com/trader-update/history#110000462552.
    \57\ See Proposed NYSE Arca Rule 6.64P-O(d)(3).
    \58\ See supra note 29 and accompanying text (describing how, on 
August 19, 2022, the Exchange announced by Trader Update that 
effective August 22, 2022, each Opening MMQ Timer will be reduced to 
5 seconds, from the current value of 30 seconds).
---------------------------------------------------------------------------

    The Commission believes that the proposal to specify that the 
maximum allowable spread between the Calculated NBBO that is determined 
by the Exchange for each option contract on a class basis may be 
modified by the Exchange during the Auction Process, and that such 
maximum differentials, including any modifications thereto, will be 
announced by Trader Update \59\ would, consistent with current NYSE 
Arca Rule 6.64P-O(a)(10), clarify that the Exchange has discretion to 
modify such maximum differentials during the Auction Process, and that 
any modifications to such maximum differentials would be announced by 
Trader Update, consistent with the current NYSE Arca rule.\60\ The 
Commission thus believes that this proposal would add greater 
specificity to the current rule text, thereby enhancing clarity and 
transparency for and to the benefit of all market participants.\61\
---------------------------------------------------------------------------

    \59\ See Proposed NYSE Arca Rule 6.64P-O(a)(10)(C).
    \60\ See NYSE Arca Rule 6.64P-O(a)(10)(C) (providing that, a 
``Legal Width Quote'' is a Calculated NBBO that, among other 
requirements, has a spread between the Calculated NBBO for each 
option contract that does not exceed a maximum differential that is 
determined by the Exchange on a class basis and announced by Trader 
Update, provided that a Trading Official may establish differences 
other than the above for one or more series or classes of options).
    \61\ Other options exchange rules specify that the exchange has 
discretion to modify the opening parameters for each option series 
during the opening auction process, provided each such change is 
announced to market participants. See, e.g., Cboe Options Exchange, 
Inc. (``Cboe'') Rule 5.31(a) (defining the term ``Maximum Composite 
Width); Cboe EDGX Options Exchange, Inc. (``EDGX'') Rule 21.7(a).
---------------------------------------------------------------------------

    The Commission believes that the proposal to provide that the 
Exchange may open a series that has not opened by the end of the 
initial Auction Process time period when the spread of the Calculated 
NBBO is wider than that required to constitute a Legal Width Quote, 
provided that the Exchange cancels potentially executable interest 
before proceeding to continuous trading under NYSE Arca Rule 6.64P-
O(f),\62\ would allow the Exchange to timely open an option series in 
such instances, while protecting such canceled auction interest from 
potentially executing at unexpectedly extreme prices.\63\
---------------------------------------------------------------------------

    \62\ See Proposed NYSE Arca Rule 6.64P-O(d)(4). The proposed 
rule also requires, among other things, a Calculated NBBO that is 
not crossed and that does not contain a zero offer. See id.
    \63\ Consistent with this change, the Exchange proposes to add a 
caveat to NYSE Arca Rule 6.64P-O(d)(2)(A)--which provides for the 
trading of certain executable interest at the Indicative Match 
Price--to make clear that the trading behavior set forth in this 
provision is subject to Proposed NYSE Arca Rule 6.64P-O(d)(4). The 
Exchange notes that, although the functionality set forth in NYSE 
Arca Rule 6.64P-O(d) is designed to allow the affected series to 
open on a quote (and not a trade), the Exchange acknowledges the 
possibility that such series may open on a trade because orders or 
quotes may arrive as the Exchange is evaluating trading interest and 
whether such interest qualifies as a Legal Width Quote. See, e.g., 
supra Section II; Proposed NYSE Arca Rules 6.64P-O(d)(2)(A), 6.64P-
O(d)(4).
---------------------------------------------------------------------------

    As proposed in Amendment No. 2, before the Exchange can open a 
series with a quote and transition to continuous trading when the 
spread of the Calculated NBBO is wider than the Legal Width Quote, the 
Exchange must first cancel Market Orders, MOO Orders, and Limit Orders 
to buy (sell) priced equal to or higher (lower) than the Indicative 
Match Price.\64\ The Commission believes that this proposed measure to 
cancel potentially executable interest \65\ before the Exchange 
proceeds to continuous trading, with the Auction resulting in a quote, 
is reasonably designed to remove impediments to the timely opening of a 
series while also protecting investors and the public interest by 
protecting potentially executable auction interest from potentially 
executing at unexpectedly extreme prices before transitioning to 
continuous trading pursuant to NYSE Arca Rule 6.64P-O(f). Therefore, 
the Commission believes that the proposed rule change, as modified by 
Amendment No. 2, is consistent with the Act.
---------------------------------------------------------------------------

    \64\ See Proposed NYSE Arca Rule 6.64P-O(d)(4). In a related 
change, the Exchange is also proposing to re-locate the text 
regarding the potential race condition resulting in a trade from 
Rule 6.64P-O(d)(4)(A) to Proposed NYSE Arca Rule 6.64P-O(d)(4) and 
to replace reference to ``Auction'' with ``Auction Process'' in NYSE 
Arca Rule 6.64P-(O)(d)(4) for the sake of clarity. As a conforming 
change, the Exchange is also proposing to delete current paragraph 
(d)(4)(A) of the Pillar Rule as obsolete because the text describing 
the opening based on a wide Calculated NBBO is contained in Proposed 
NYSE Arca Rule 6.64P-O(d)(4), and the transition to continuous 
trading is no longer dependent upon the presence of Matched Volume 
under the proposed rules. See, e.g., NYSE Arca Rule 6.65P-
O(d)(4)(A); Proposed NYSE Arca Rule 6.64(d)(4).
    \65\ The Exchange represents that, pursuant to NYSE Arca Rule 
6.64P-O(f)(1)-(3), Auction interest that is not cancelled in the 
particular series that open per Proposed NYSE Arca Rule 6.64P-
O(d)(4) would be handled in the same manner as all other Auction 
interest that is present when the Exchange transitions from the 
Auction Process to continuous trading under Exchange rules. See 
supra note 39 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that proposed conforming changes to delete 
NYSE Arca Rule 6.64P-O(d)(4)(B) as unnecessary would provide greater 
clarity and promote internal consistency among Exchange rules because 
proposed changes to NYSE Arca Rule 6.64P-O(d)(4) would render such rule 
obsolete.\66\
---------------------------------------------------------------------------

    \66\ See supra Section II (describing how proposed changes to 
NYSE Arca Rule 6.64P-O(d)(4), which would allow any series that has 
not opened by the end of the initial Auction Process time period the 
ability to open on a quote, provided that the Exchange cancels 
potentially executable interest before proceeding to continuous 
trading, based on a wide Calculated NBBO, would render NYSE Arca 
Rule 6.64P-O(d)(4)(B) obsolete because it contemplates a series not 
being able to open because the spread of the Calculated NBBO is 
wider than, and thus does not qualify as, a Legal Width Quote).
---------------------------------------------------------------------------

    The Commission believes that the related proposed rule change to 
authorize the Exchange to modify the frequency with which it updates 
Auction Imbalance Information, provided such changes are announced by 
Trader Update,\67\ is consistent with the proposed changes to NYSE Arca 
Rule 6.64P-O(d)(4) allowing the Exchange to open a series on a quote 
following the Initial Auction Process time period after canceling 
potentially executable interest. The current rule \68\ provides for the 
publication of Auction Imbalance Information at least every second,\69\ 
and the Exchange represents that, given the proposal to cancel 
potentially executable interest under proposed changes to NYSE Arca 
Rule 6.64P-O(c), it may not be necessary to update Auction Imbalance 
Information with such frequency. The Commission believes that the 
proposal thus provides the Exchange with the flexibility to monitor the 
impact of the proposed rule change so as to better assess the 
appropriate frequency for publication of Auction Imbalance Information 
that would continue to provide market participants with the 
transparency necessary to participate in and benefit from the price 
discovery that may take place during the opening auction, consistent 
with the interests of market participants and a fair and orderly 
auction process.\70\
---------------------------------------------------------------------------

    \67\ See Proposed NYSE Arca Rule 6.64P-O(c).
    \68\ See NYSE Arca Rule 6.64P-O(c).
    \69\ NYSE Arca Rule 6.64P-O(c) provides that ``Auction Imbalance 
Information is updated at least every second until the Auction is 
conducted, unless there is no change to the information. The 
Exchange will begin disseminating Auction Imbalance Information at 
the following times: (1) Core Open Auction Imbalance Information 
will begin at 8:00 a.m. Eastern Time. (2) Trading Halt Auction 
Imbalance Information will begin at the beginning of the trading 
halt.''
    \70\ Other options market rules provide options exchanges with 
similar discretion. See, e.g., Nasdaq Options Market Section 
8(b)(3).
---------------------------------------------------------------------------

    In addition, the Commission believes that the proposal to modify 
the

[[Page 67979]]

requirements to open a series during the Initial Auction Process time 
period for option series with two or more assigned Market Makers by 
requiring, among other things,\71\ that at least two quotes with a non-
zero offer be submitted by any single Market Maker, rather than from 
two assigned Market Makers, as under the current rule,\72\ would 
continue to encourage Market Makers to quote during the opening 
process, while also providing additional flexibility with respect to 
how market depth in the affected series is established, thereby 
facilitating price discovery consistent with then current market 
conditions.
---------------------------------------------------------------------------

    \71\ See Proposed NYSE Arca Rule 6.64P-O(d)(3)(C).
    \72\ See NYSE Arca Rule 6.64P-O(d)(3)(c).
---------------------------------------------------------------------------

Other Exchange Rules: Proposed Non-Substantive Changes
    The Commission believes the proposed non-substantive changes to 
certain Exchange rules \73\ do not raise regulatory issues as they 
would, among other things, correct typographical errors, conform 
current rules to proposed changes, and correct or update certain cross 
references, thereby promoting ease of use for market participants and 
enhancing the internal consistency of Exchange rules.
---------------------------------------------------------------------------

    \73\ See, e.g., supra Section II; Proposed NYSE Arca Rules 
6.37O, 6.62P-O, 6.64P-O(d)(3)-(4).
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 2, is consistent with Section 
6(b)(5) of the Act \74\ and the rules and regulations thereunder 
applicable to a national securities exchange.
---------------------------------------------------------------------------

    \74\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 2 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 [email protected]. Please include 
File Number SR-NYSEARCA-2022-31 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-NYSEARCA-2022-31. 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 (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 website 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-NYSEARCA-2022-31, and should be 
submitted on or before December 1, 2022.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 2, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
2 in the Federal Register.
    The Commission believes there is good cause for the Commission to 
accelerate effectiveness of the proposed rule change because, as 
proposed, the changes set forth in Amendment No 2, including the 
cancellation of potentially executable interest before proceeding to 
continuous trading under Exchange rules,\75\ would remove impediments 
to and enable the Exchange to proceed with the timely opening of option 
series that have not opened by the end of the initial Auction Process 
time period because the spread of the Calculated NBBO is wider than 
that required to qualify as a Legal Width Quote,\76\ while also 
protecting otherwise potentially executable interest from trading at 
prices that are potentially extreme.
---------------------------------------------------------------------------

    \75\ See Proposed NYSE Arca Rule 6.64P-O(d)(4).
    \76\ See Proposed NYSE Arca Rule 6.64P-O(d)(4). The proposed 
rule change also requires, among other things, that the Calculated 
NBBO is not crossed and does not contain a zero offer. See id.
---------------------------------------------------------------------------

    In addition, the proposed changes to specify that the Exchange may 
modify, during the Auction Process, the maximum differential for the 
spread between the Calculated NBBO that is established by the Exchange 
on a class by class basis to qualify as a Legal Width Quote, provided 
that any such modification is announced by Trader Update, as well as 
the proposed change to allow the Exchange to modify the frequency with 
which Auction Imbalance Information is updated, provided that any such 
change is announced by Trader Update do not raise regulatory issues as 
these proposals provide greater specificity to Exchange rules, are not 
novel, and are, moreover, consistent with the rules of other options 
exchanges,\77\ The Commission believes that related changes in 
Amendment No. 2, including the proposal to remove specific values or 
time periods when the Exchange is authorized to change such values or 
timers by Trader Update would provide greater specificity to the 
Exchange's current rules, thereby enhancing transparency, eliminating 
stale values, and aligning the rules with current Exchange practice, as 
the Exchange represents that it has, on at least one occasion, changed 
certain values by Trader Update.\78\ Similarly, the proposed non-
substantive changes to certain Exchange rules \79\ do not raise 
regulatory issues as they would correct typographical errors, make 
conforming changes to, as well as correct and update certain cross 
references in Exchange rules thereby promoting ease of use for and 
enhancing the internal consistency of Exchange rules to the benefit of 
market participants. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act,\80\ to approve the proposed 
rule change, as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \77\ See supra, notes 32, 41 and accompanying text.
    \78\ See supra notes 26, 29 and accompanying text.
    \79\ See supra note 74 and accompanying text.
    \80\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\81\ that the proposed rule change (SR-NYSEARCA-2022-31), as 
modified by Amendment

[[Page 67980]]

No. 2 be, and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \81\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\82\
---------------------------------------------------------------------------

    \82\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24508 Filed 11-9-22; 8:45 am]
BILLING CODE 8011-01-P