Document ID: SEC-2023-1067-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2023-09-28T04:00Z

[Federal Register Volume 88, Number 187 (Thursday, September 28, 2023)]
[Notices]
[Pages 66918-66921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21134]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98484; File No. SR-NYSEAMER-2023-45]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify Rule 
980NYP

September 22, 2023.
    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 September 18, 2023, NYSE American LLC (``NYSE American'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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 modify Rule 980NYP(g)(1) to expand the 
existing Complex Strategy Limit. 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 66919]]

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 980NYP(g) regarding risk 
checks of Electronic Complex Orders (or ECOs) \4\ to expand the 
existing Complex Strategy Limit.\5\ Specifically, the Exchange proposes 
to impose a limit on complex strategies per underlying symbol, as 
described below.\6\ The Exchange notes that an identical rule change 
was recently adopted on its affiliated exchange, NYSE Arca, Inc. 
(``NYSE Arca'') and therefore this proposal raises no new or novel 
issues not previously considered by the Commission.\7\ In addition, at 
least one other options exchange likewise may impose a limit on new 
complex order strategies.\8\
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    \4\ Rule 980NYP(a)(7) defines an ``Electronic Complex Order'' or 
``ECO'' to mean any Complex Order, as defined in Rule 900.3NYP(f). 
Rule 900.3NYP(f) (providing a Complex Order is ``any order involving 
the simultaneous purchase and/or sale of two or more option series 
in the same underlying security, for the same account, in a ratio 
that is equal to or greater than one-to-three (.333) and less than 
or equal to three-to-one (3.00) and for the purpose of executing a 
particular investment strategy.'').
    \5\ The Exchange notes that this proposed change modifies a 
Pillar rule (i.e., with a ``P'' modifier) that has not yet been 
implemented. The Exchange anticipates migrating to its Pillar 
trading platform beginning on October 23, 2023. As is the case with 
all Pillar rules, this proposed rule change (as well as the entire 
Rule 980NYP) will not be implemented until all other Pillar-related 
rule filings are approved or operative, as applicable, and the 
Exchange announces the migration of underlying symbols to Pillar by 
Trader Update.
    \6\ See proposed Rule 980NYP(g)(1) (Complex Strategy Limits). A 
``complex strategy'' means a particular combination of leg 
components and their ratios to one another. New complex strategies 
can be created when the Exchange receives either a request to create 
a new complex strategy or an ECO with a new complex strategy. See 
Rule 980NYP(a)(4).
    \7\ See Securities Exchange Act Release No. 98278 (September 1, 
2023), 88 FR 62113 (September 8, 2023) (SR-NYSEARCA-2023-56) 
(immediately effective rule change to modify Rule 6.91P-O(g) to 
expand the existing Complex Strategy Limit to include a limit on 
complex strategies per symbol, per day).
    \8\ See, e.g., Cboe Rule 5.33(a) (providing, in its definition 
of ``complex strategy'' that Cboe ``may limit the number of new 
complex strategies that may be in the [Cboe] System or entered for 
any EFID (which EFID limit would be the same for all Users) at a 
particular time'').
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    Rule 980NYP(g) describes the ``ECO Risk Checks,'' which are 
designed to help ATP Holders to effectively manage risk when trading 
ECOs.\9\ Rule 980NYP(g)(1) sets forth the ``Complex Strategy Limit,'' 
which establishes a limit on the maximum number of new complex 
strategies that may be requested to be created per Market Participant 
Identifier or MPID, which limit would be announced by Trader 
Update.\10\ Under current functionality, when an MPID reaches the limit 
on the maximum number of new complex strategies, the Exchange rejects 
all requests to create new complex strategies from that MPID for the 
rest of the trading day.
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    \9\ An ATP Holder is a natural person, sole proprietorship, 
partnership, corporation, limited liability company or other 
organization, in good standing, which has been issued an ATP, and 
references to ``member'', and ``member organization'' as those terms 
are used in the Rules of the Exchange should be deemed to be 
references to ATP Holders. See Rule 900.2NY. An ATP is an American 
Trading Permit issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities. See 
id.
    \10\ Per Rule 900.2NY, an MPID refers to the identifier assigned 
to the orders and quotes of a single ATP Holder for the execution 
and clearing of trades on the Exchange by that permit holder. An ATP 
Holder may obtain multiple MPIDs and each such MPID may be 
associated with one or more sub-identifiers of that MPID.'' See id.
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    Notwithstanding the established Complex Strategy Limit, Rule 
980NYP(g)(1) also authorizes the Exchange to reject a request to create 
a new complex strategy from any MPID whenever the Exchange determines 
it is necessary in the interests of a fair and orderly market. The 
established Complex Strategy Limit (the ``Strategy Limit''), and the 
Exchange's discretion related thereto, is a system protection tool that 
enables the Exchange to prevent any single MPID from creating more than 
a limited number of complex strategies during the trading day.
    The Exchange proposes to modify Rule 980NYP(g)(1) to adopt another 
limit for the number of permissible complex strategies requested to be 
created by an MPID in a trading day, except that the new limit would be 
based on the number of complex strategies in the same underlying symbol 
(the ``Strategy Limit per Symbol''). Like the existing Strategy Limit, 
the proposed Strategy Limit per Symbol would operate as a system 
protection tool that enables the Exchange to prevent any single MPID 
from creating more than a limited number of complex strategies in a 
particular symbol during the trading day.
    The Exchange has observed that the high volume of requests to 
create complex strategies in the same underlying symbol can tax 
Exchange resources and result in latency in providing acknowledgements 
to ATP Holders for all series in that same underlying symbol. As such, 
the proposed Strategy Limit per Symbol would augment and add 
granularity to the existing Complex Strategy Limit by allowing the 
Exchange to establish separate limits based on the underlying symbol. 
The Exchange believes that MPIDs may benefit from this added 
granularity. For example, an MPID that sends a significant number of 
complex series creation requests for a particular underlying symbol may 
breach the Strategy Limit per Symbol for that underlying. However, that 
MPID would continue to have the ability to request complex strategies 
in other symbols--unless or until that MPID breaches the Strategy Limit 
per Symbol in a different symbol or--in the aggregate--breaches the 
Complex Strategy Limit. Thus, the Exchange believes that the proposed 
change would benefit all market participants because it would curtail 
(or remove) the latency that has at times resulted from the Exchange 
receiving a significant number of requests for new complex strategies 
in the same underlying.
    To accommodate the proposed change, the Exchange proposes to 
reorganize and re-word certain of the existing text without changing 
functionality. As proposed, Rule 980NYP(g)(1) would be re-named (in 
plural) ``Complex Strategy Limits'' (as opposed to a singular ``Complex 
Strategy Limit'') and would state the following:

    The Exchange will establish limits, which will be announced by 
Trader Update, on (A) the maximum number of new complex strategies 
(irrespective of the underlying symbol) that an MPID may request be 
created (the ``Strategy Limit''); and (B) the maximum number of new 
complex strategies in a particular underlying symbol that an MPID 
may request be created (the ``Strategy Limit per Symbol''). When an 
MPID breaches the Strategy Limit, the Exchange will reject for the 
rest of the trading day, all requests from that MPID to create new 
complex strategies. When an MPID breaches the Strategy Limit per 
Symbol in a particular underlying, the Exchange will reject for the 
rest of the trading day all requests from that MPID to create 
complex strategies in that underlying symbol. Notwithstanding the 
established Strategy Limit and Strategy Limit per Symbol, the 
Exchange may reject a request to create a new complex strategy from 
any MPID whenever the Exchange determines it is necessary in the 
interests of a fair and orderly market.\11\
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    \11\ See proposed Rule 980NYP(g)(1) (Complex Strategy Limits).

    For example, if the Strategy Limit is 100, an MPID has already 
requested and created 100 complex strategies in a trading day, the 
Exchange will reject any request for the 101st complex strategy for the 
remainder of the trading day. The same logic applies for the Strategy 
Limit per Symbol such that if this limit is 50 and an MPID has already 
requested and created 50 complex strategies in the underlying symbol 
XYZ

[[Page 66920]]

in a trading day, the Exchange will reject any request for the 51st 
complex strategy in XYZ for the remainder of the trading day.
    The Exchange believes that this proposed modification is merely an 
extension of existing functionality that would help the Exchange add 
granularity to, and better calibrate, its risk settings related to the 
number of Complex Strategies per Symbol for an MPID per trading day and 
is therefore non-controversial.
Implementation
    This proposed change modifies a Pillar rule (i.e., with a ``P'' 
modifier). As is the case with all Pillar rules, this proposed rule 
change (as well as the entire Rule 980NYP) will not be implemented 
until all other Pillar-related rule filings are approved or operative, 
as applicable, and the Exchange announces the migration of underlying 
symbols to Pillar by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\12\ in general, and 
furthers the objectives of section 6(b)(5),\13\ 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange has observed that the high volume of requests to 
create complex strategies in the same underlying symbol can tax 
Exchange resources and result in latency in providing acknowledgements 
to ATP Holders for all series in that underlying symbol. As such, the 
proposed Strategy Limit per Symbol would augment and add granularity to 
the existing Complex Strategy Limit by allowing the Exchange to 
establish separate limits based on the underlying symbol. The Exchange 
believes that MPIDs may benefit from this added granularity. For 
example, an MPID that sends a significant number of complex series 
creation requests for a particular underlying symbol may breach the 
Strategy Limit per Symbol for that underlying. However, that MPID would 
continue to have the ability to request complex strategies in other 
symbols--unless or until that MPID breaches the Strategy Limit per 
Symbol in a different symbol or--in the aggregate--breaches the Complex 
Strategy Limit. Thus, the 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 because it would curtail (or remove) the latency that has at 
times resulted from the Exchange receiving a significant number of 
requests for new complex strategies in the same underlying.
    The Exchange believes that the proposed change to expand the limits 
placed on Complex Strategies per MPID would promote just and equitable 
principles of trade because it would modify existing functionality in a 
manner that would enable the Exchange to add granularity to, and better 
calibrate, its risk settings related to the number of Complex 
Strategies in the same underlying symbol requested in a trading day.
    Finally, the proposed rule change would help maintain a fair and 
orderly market because it would enhance an existing system protection 
tool to enable the Exchange to prevent any single MPID from creating 
more than a limited number of complex strategies in the same underlying 
symbol during the trading day.

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 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 the proposed Strategy Limit per 
Symbol would apply equally to all market participants that request new 
complex strategies. As stated herein, the proposed rule change would 
provide the Exchange the ability to better calibrate risk settings 
related to the number of Complex Strategies per Symbol for an MPID per 
trading day, which in turn should benefit all market participants 
because (as described above) it would curtail (or remove) the latency 
that has at times resulted from the Exchange receiving a significant 
number of requests for new complex strategies in the same underlying.
    The Exchange believes that the proposed rule change would not 
impose a burden on competing options exchanges. The Exchange notes that 
it operates in a highly competitive market in which market participants 
can readily favor competing venues. When an exchange offers enhanced 
functionality (like the proposed Strategy Limit per Symbol) that 
distinguishes it from the competition and participants find it useful, 
it has been the Exchange's experience that competing exchanges will 
move to adopt similar functionality. Thus, the Exchange believes that 
this type of competition amongst exchanges is beneficial to the entire 
marketplace as it can result in enhanced processes, functionality, and 
technologies.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A)(iii) of the Act \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 66921]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2023-45 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-2023-45. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2023-45 and should 
be submitted on or before October 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21134 Filed 9-27-23; 8:45 am]
BILLING CODE 8011-01-P