Document ID: SEC-2019-1662-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American LLC
Posted Date: 2019-11-07T05:00Z

[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Notices]
[Pages 60125-60128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24254]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87442; File No. SR-NYSEAMER-2019-41]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing of Proposed Rule Change Regarding the Applicability and 
Functionality of Certain Order Types on the Exchange

November 1, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on October 22, 2019, NYSE American LLC (``Exchange'') 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to clarify the 
applicability and functionality of certain order types on the Exchange. 
The proposed rule change is available on the Exchange's website 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.

[[Page 60126]]

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 amend Rule 900.3NY(Orders Defined) to 
clarify the applicability and functionality of certain order types. 
Specifically, the Exchange proposes to amend the definitions of Stop 
Orders, Stop Limit Orders and All-or None (``AON'') Orders, as set 
forth in Rule 900.3NY(d), which describes the Contingency Orders or 
Working Orders. The Exchange is not proposing to change or alter any 
obligations, rights, policies or practices enumerated within its rules. 
Rather, this proposal is designed to reduce any potential investor 
confusion as to the functionality and applicability of certain order 
types presently available on the Exchange.
Proposed Changes to Order Type Definitions
    Rule 900.3NY (the ``Rule'') contains certain definitions of options 
order types available on the Exchange. Paragraph (d) of the Rule 
defines Contingency Orders or Working Orders as orders that are 
``contingent upon a condition being satisfied or an order with a 
conditional or undisplayed price and/or size.'' Contingency Orders and 
Working Orders are maintained in the Working Order File of the 
Consolidated Book until they are eligible for execution and/or 
display.\4\ The Exchange proposes to amend the definitions of Stop 
Orders, Stop Limit Orders and AON Orders, which are Contingency Orders/
Working Orders.
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    \4\ See Rule 900.3NY(d). See Rule 964NY(b)(2)(E) (regarding 
priority of orders in the Working Order File once eligible for 
execution and stating that such orders ``do not have any priority or 
standing until they are eligible for execution and/or display'') and 
Rule 964NY(a) (providing, in relevant part, that the Exchange will 
display ``all non-marketable limit orders in the Display Order 
Process, unless indicated otherwise'').
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    Rule 900.3NY(d)(1)-(2) Stop Orders and Stop Limit Orders. A Stop 
Order is an order that becomes a Market Order when the market for a 
particular option contract reaches a specified price.\5\ A Stop Limit 
Order is an order that becomes a Limit Order when the market for a 
particular option contract reaches a specified price.\6\ Stop Orders 
and Stop Limit Orders (collectively, ``Stop Orders'' herein unless 
otherwise specified) track the price of an option and are generally 
used to limit losses as prices move up, in the case of buy orders, or 
down in the case of sell orders. In each case, the ``triggering 
event,'' which converts the order type (to a Market Order or Limit 
Order, as applicable) occurs once the option trades or is quoted at, or 
above for a buy (below for a sell), the specified stop price.\7\ Thus, 
Stop Orders to buy (sell) may be triggered as the price of an option 
rises (falls). The current rule provides that a Stop Order to buy 
(sell) will be rejected if, at the time of arrival, the stop price is 
below (above) the bid (offer).\8\ Regarding priority, Stop Orders 
(including Stop Limit Orders) are not displayed and have no standing in 
any Order Process in the Consolidated Book.\9\ As such, Stop Orders 
``are not eligible to execute against incoming orders and will become 
eligible to execute via the Display Order Process only after the 
incoming order is executed in full or rests in the book or the working 
order is sent to the Display Order Process at the end of a triggering 
event.'' \10\
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    \5\ See Rule 900.3NY(d)(1).
    \6\ See Rule 900.3NY(d)(2).
    \7\ See Rule 900.3NY(d)(1),(2).
    \8\ See Rule 900.3NY(d)(1),(2).
    \9\ See Rule 900.3NY(d)(1) (setting forth details about both 
Stop Orders and Stop Limit Orders, even though paragraph (d)(1) 
pertains solely to Stop Orders). See also Rule 964NY(b)(2)(E) 
(regarding priority of orders in the Working Order File once 
eligible for execution and stating that such orders ``do not have 
any priority or standing until they are eligible for execution and/
or display'') and Rule 964NY(a) (providing, in relevant part, that 
the Exchange will display ``all non-marketable limit orders in the 
Display Order Process, unless indicated otherwise'').
    \10\ See Rule 900.3NY(d)(1) (settings forth details about both 
Stop Orders and Stop Limit Orders, even though paragraph (d)(1) 
pertains solely to Stop Orders).
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    The Exchange proposes to modify the description of Stop Orders to 
enhance the clarity of the rule text, including by streamlining some of 
the existing text and adding new text, as appropriate, and deleting 
existing text to correct an inaccuracy regarding current functionality. 
First, the Exchange proposes to streamline the description of the order 
types as follows. The Exchange proposes to revise the first sentence 
describing each order type (i.e., Rule 900.3NY(d)(1),(2)) to state that 
the order type converts to a Market or Limit Order, respectively--or 
``is triggered''--when the market for a particular option contract 
reaches a specified price.\11\ The Exchange also proposes to modify 
Rule 900.3NY(d)(1),(2) to combine into one sentence the description of 
both buy and sell Stop Orders without modifying current functionality. 
The current rule addresses buy and sell Stop Orders in two sentences 
and the Exchange thinks the proposed change would streamline the rule 
and make it easier to navigate. Specifically, proposed Rule 
900.3NY(d)(1),(2) would provide that a Stop Order (or Stop Limit Order) 
``to buy (sell) is triggered'' such that it becomes a Market Order or 
Limit Order, respectively, ``when the option contract trades at a price 
equal to or greater (less) than the specified `stop' price on the 
Exchange or another Market Center or when the Exchange bid (offer) is 
quoted at a price equal to or greater (less) than the stop price.'' 
\12\
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    \11\ See proposed Rule 900.3NY(d)(1), (2).
    \12\ See proposed Rule 900.3NY(d)(1), (2). Consistent with this 
proposed change to address both buy and sell Stop Orders and Stop 
Limit Orders in one sentence, the Exchange proposes to delete as 
unnecessary the sentences in the current definitions that describes 
the functionality for sell Stop Orders and sell Stop Limit Orders. 
See id.
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    The Exchange also proposes to address the display and standing of 
each type of Stop Order for which information is currently contained 
only in paragraph (d)(1) of Rule 900.3NY.\13\ Specifically, the 
Exchange proposes to modify the current rules to reflect that each type 
of Stop Order ``is not displayed and has no standing in any Order 
Process in the Consolidated Book, unless or until it is triggered 
(i.e., same-side incoming interest trades or quotes at a price equal to 
or better than the stop price).'' \14\ The Exchange also proposes to 
add new rule text to clarify that ``[a]fter the triggering event,'' a 
Stop Order (per Rule 900.3NY(d)(1)) becomes a new Market Order, and a 
Stop Limit Order (per Rule 900.3NY(d)(2)) becomes a new Limit Order, 
and each converted order is processed accordingly.\15\
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    \13\ See Rule 900.3NY(d)(1) (which provides that ``Stop Orders 
(including Stop Limit Orders) shall not have standing in any Order 
Process in the Consolidated Book and shall not be displayed'').
    \14\ See proposed Rule 900.3NY(d)(1), (2). The Exchange notes 
that this proposed text modifies the existing text in paragraph 
(d)(1) and is new text for paragraph (d)(2) of the Rule. See id.
    \15\ See proposed Rule 900.3NY(d)(1), (2). See also Rule 
900.3NY(a), (b) (defining Market Order and Limit Order, 
respectively).
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    Finally, the Exchange proposes to delete as inaccurate the last two 
sentences in the description of each type of Stop Order, which provides 
for the rejection of such orders to buy (sell) if entered with a stop 
price below the bid (or above the offer). This language is not accurate 
as the Exchange does not reject Stop Orders so priced, but instead 
would execute such orders once triggered. This proposed change would 
reflect current functionality and therefore add clarity and consistency 
to Exchange rules.\16\
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    \16\ See proposed Rule 900.3NY(d)(1), (2).
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    Rule 900.3NY(d)(4) All-Or-None Orders (``AON Orders''). An AON 
Order is a Market or Limit Order that is to be executed in its entirety 
or not at all.\17\

[[Page 60127]]

The Exchange is not proposing to modify the functionality of an AON 
Order, but rather proposes to amplify the definition of an AON Order to 
clarify its current functionality. Specifically, the Exchange proposes 
to make clear that an AON Order that does not execute on arrival will 
not be displayed or routed to another Market Center (i.e., AON Orders 
may only be executed on the Exchange) and would have no standing in any 
Order Process in the Consolidated Book.\18\ Further, the Exchange 
proposes to clarify that AON Orders are not eligible to execute against 
incoming interest but rather may execute solely against interest 
resting in the Consolidated Book when sufficient size is available.\19\ 
Finally, the Exchange proposes to specify that the System monitors the 
Consolidated Book for AON Order execution opportunities.\20\ The 
Exchange believes the proposed changes would add transparency to the 
operation of this order type, without altering the current 
functionality.
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    \17\ See Rule 900.3NY(d)(4).
    \18\ See proposed Rule 900.3NY(d)(4). See also Rule 
964NY(b)(2)(E) (regarding priority orders in the Working Order File 
and noting that such orders (i.e., AON Orders) have no priority or 
standing until eligible for execution and/or display).
    \19\ See proposed Rule 900.3NY(d)(4).
    \20\ See id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \21\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\22\ in particular, in that 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, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that deleting inaccurate 
language (regarding Stop Orders) and enhancing the descriptions as to 
the functionality of Stop Orders and AON Orders types (i.e., the 
Contingency Orders or Working Orders) would add transparency and 
clarity to the Exchange's rules, without altering current 
functionality. In addition, the Exchange believes that clarifying the 
definitions and current operation of Stop Orders and AON Orders removes 
impediments to, and perfects the mechanism of a free and open market by 
helping to ensure that investors better understand the current 
functionality of certain orders types available for trading on the 
Exchange.
    The Exchange further 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 certain order types available 
for trading on the Exchange.

Technical Changes

    The Exchange notes that the proposed organizational and non-
substantive changes to the rule text would provide clarity and 
transparency to Exchange rules and 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.

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

    The Exchange does not believe that this proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather revise or amplify 
incomplete or inaccurate rule text or remove language pertaining to 
unavailable functionality in the Exchange's rulebook, thereby reducing 
confusion and making the Exchange's rules easier to understand and 
navigate. The Exchange believes the proposed changes would add 
transparency to the operation of certain order types, without altering 
the current functionality.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
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-NYSEAMER-2019-41 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-2019-41. 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-NYSEAMER-2019-41 and should be submitted 
on or before November 29, 2019.
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    \23\ 17 CFR 200.30-3(a)(12).

[[Page 60128]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24254 Filed 11-6-19; 8:45 am]
 BILLING CODE 8011-01-P