Document ID: SEC-2022-1209-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2022-09-13T04:00Z

[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56097-56099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19680]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95687; File No. SR-NYSEARCA-2022-57]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 
6.62P-O(a)(4)

September 7, 2022.
    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 August 29, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.62P-O(a)(4) to modify the 
values used to determine Trading Collars. 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.

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 6.62P-O(a)(4) to modify the 
values used to determine Trading Collars as set forth below.
    The Exchange has in place various price check features that are 
designed to help maintain a fair and orderly market, including Trade 
Collar Protection.\4\ Trading Collars mitigate the risks associated 
with orders sweeping through multiple price points (including during 
extreme market volatility) and resulting in executions at prices that 
are potentially erroneous. Specifically, a Market Order or Limit Order 
to buy (sell) will not trade or route to an Away Market at a price 
above (below) the Trading Collar assigned to that order.\5\ As such, 
Trading Collars function as a ceiling (for buy orders) or floor (for 
sell orders) of the price at which such order could be traded, 
displayed, or routed.
---------------------------------------------------------------------------

    \4\ See Rule 6.62P-O(a)(4)(A). Trading Collars assigned to an 
order are calculated once per trading day and would be updated only 
if the series is halted. See id.
    \5\ Rule 6.62P-O(a)(1) provides that a Market Order is ``[a]n 
unpriced order message to buy or sell a stated number of option 
contracts at the best price obtainable, subject to the Trading 
Collar assigned to the order. A Market Order may be designated Day 
or GTC.'' Rule 6.62P-O(a)(2) provides that a Limit Order is ``[a]n 
order message to buy or sell a stated number of option contracts at 
a specified price or better, subject to Limit Order Price Protection 
and the Trading Collar assigned to the order.''
---------------------------------------------------------------------------

    Trading Collars are determined based on the Reference Price, which 
for an order to buy (sell) is the NBO (NBB).\6\ Under the current rule, 
the Trading Collar for an order to buy (sell) is a specified amount 
above (below) the Reference Price, as follows: (1) for orders with a 
Reference Price of $1.00 or lower, $0.25; or (2) for orders with a 
Reference Price above $1.00, the lower of $2.50 or 25%.\7\
---------------------------------------------------------------------------

    \6\ See Rule 6.62P-O(a)(4)(B).
    \7\ See Rule 6.62P-O(a)(4)(C).
---------------------------------------------------------------------------

    The current Trading Collar functionality (and the method of 
calculation) was recently implemented in connection with the Exchange's 
migration to the Pillar trading platform.\8\ Consistent with the pre-
Pillar functionality (under Rule 6.60-O(a)),

[[Page 56098]]

the Trading Collar thresholds were designed to be within the current 
parameters for determining whether a trade is an Obvious Error or 
Catastrophic Error to protect per Rule 6.87-O (the ``Obvious Error 
Rule'').\9\ While the Exchange believes that these recent changes have 
been generally successful in protecting market participants against bad 
executions, the Exchange has determined that additional modifications 
would enhance the Trading Collar functionality. The Exchange therefore 
proposes to modify the Trading Collar thresholds to better align with 
the thresholds in the Obvious Error Rule. As such, the proposed change 
is designed to (further) prevent the trading of aggressively-priced 
interest that, if executed, would qualify to be handled under the 
procedures set forth in the Obvious Error Rule.
---------------------------------------------------------------------------

    \8\ The Exchange announced the migration of the fifth and final 
tranche of symbols to the Pillar trading platform, via Trader 
Update, available here: https://www.nyse.com/trader-update/history#110000440092.
    \9\ See Rules 6.87-O(c)(1) (thresholds for Obvious Errors) and 
6.87-O(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------

    Specifically, the Exchange proposes to amend Rule 6.62P-O(a)(4)(C) 
to modify the values used to calculate the Trading Collars as follows:
* * * * *

------------------------------------------------------------------------
          Reference price                      Trading collar
------------------------------------------------------------------------
$0.00 to $1.00....................  $0.20.
$1.01 to $2.00....................  Lesser of $0.20 or 25% of the
                                     Reference Price.
$2.01 to $3.00....................  Lesser of $0.30 or 25% of the
                                     Reference Price.
$3.01 to $5.00....................  Lesser of $0.30 or 25% of the
                                     Reference Price.
$5.01 to $7.50....................  Lesser of $0.40 or 25% of the
                                     Reference Price.
$7.51 to $10.00...................  Lesser of $0.40 or 25% of the
                                     Reference Price.
$10.01 to $20.00..................  Lesser of $0.70 or 25% of the
                                     Reference Price.
$20.01 to $50.00..................  Lesser of $0.90 or 25% of the
                                     Reference Price.
$50.01 to $100.00.................  Lesser of $1.40 or 25% of the
                                     Reference Price.
$100.01 and above.................  Lesser of $1.90 or 25% of the
                                     Reference Price.
------------------------------------------------------------------------

    Consistent with current Rule 6.62P-O(a)(4)(C)(i), if the 
calculation of a Trading Collar would not be in the Minimum Price 
Variation or MPV for the series, such calculation would be rounded down 
to the nearest price within the applicable MPV.
    In addition, the Exchange proposes that the amounts in the proposed 
table above would apply, ``[u]nless announced otherwise by Trader 
Update,'' which discretion is consistent with the implementation of 
Trading Collars on other option exchanges.\10\
---------------------------------------------------------------------------

    \10\ See, e.g., NYSE American Rule 967NY(a)(2) (providing that 
the values set forth in paragraphs (A)(i)-(v) of Rule 967NY(a)(2) 
apply ``unless announced otherwise via Trader Update. . .''). The 
Exchange notes that, when migrating to Pillar, it inadvertently 
failed to include this language affording the Exchange discretion to 
modify the Trading Collars. See, e.g., Rule 6.60-O(a)(2) (providing 
that the values set forth in paragraphs (A)(i)-(v) of Rule 6.60-
O(a)(2) apply ``unless announced otherwise via Trader Update. . 
.'').
---------------------------------------------------------------------------

    The Exchange believes that the proposed modifications would enhance 
the efficacy of the price protection afforded by Trading Collars and 
the proposed values for determining such collars would better align 
with the current parameters for determining whether a trade is an 
Obvious Error or Catastrophic Error.
Implementation
    The Exchange will announce the implementation of this proposal via 
Trader Update to be published no later than 60 days following the 
effectiveness of this this rule.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and 
furthers the objectives of Section 6(b)(5),\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Overall, the Exchange believes the proposed change is consistent 
with the protection of investors and the investing public and would 
promote a fair and orderly market because it would enhance the 
(recently revised) operation of the Trading Collar functionality and 
would continue to protect investors from receiving bad executions away 
from prevailing market prices. Further, the Exchange believes that the 
proposed modification would promote just and equitable principles of 
trade as the proposed values for determining Trading Collars would 
better align with the current parameters for determining whether a 
trade is an Obvious Error or Catastrophic Error.\13\
---------------------------------------------------------------------------

    \13\ See, e.g., Rules 6.87-O(c)(1) (thresholds for Obvious 
Errors) and 6.87-O(d)(1) (thresholds for Catastrophic Errors).
---------------------------------------------------------------------------

    In addition, the Exchange believes that its proposal to retain 
discretion to modify the values used to determine the Trading Collar 
would promote just and equitable principles of trade because it would 
allow the Exchange to respond to certain market conditions as 
necessary, which discretion is consistent with the implementation of 
Trading Collars on other option exchanges.\14\
---------------------------------------------------------------------------

    \14\ See, e.g., NYSE American Rule 967NY(a)(2).
---------------------------------------------------------------------------

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. Instead, the Exchange 
believes the proposal would enhance the operation of the Trading 
Collars that provide market participants with protection from anomalous 
executions. Thus, the Exchange does not believe the proposal creates 
any significant impact on competition.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
Because the 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

[[Page 56099]]

prior to 30 days from the date on which it was filed, or such shorter 
time as the Commission may designate, if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 
19b-4(f)(6)(iii) thereunder.\17\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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 fulfilled this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiver of the operative delay is consistent with the protection of 
investors and the public interest because it will allow the Exchange to 
provide, without delay, further protections against potentially 
erroneous executions. Accordingly, the Commission hereby waives the 30-
day operative delay and designates the proposal operative upon 
filing.\20\
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 [email protected]. Please include 
File Number SR-NYSEARCA-2022-57 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-2022-57. 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-2022-57 and should be submitted 
on or before October 4, 2022.
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19680 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P