Document ID: SEC-2013-0493-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2013-03-14T04:00Z

[Federal Register Volume 78, Number 50 (Thursday, March 14, 2013)]
[Notices]
[Pages 16332-16334]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05883]

[[Page 16332]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69081; File No. SR-NYSEMKT-2013-16]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rules 
Governing Order Format and System Entry Requirements

March 8, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on March 5, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend rules governing Order Format and 
System Entry Requirements. The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Exchange Rule 955NY(c) by revising 
the requirements for entering an order into the Electronic Order 
Capture System (``EOC''). In addition, the Exchange proposes to delete 
all references pertaining to the Electronic Tablet, a decommissioned 
Exchange order entry mechanism.
Order Format and System Entry Requirements
    EOC is the Exchange's floor-based electronic audit trail and order 
tracking system that provides an accurate time-sequenced record of all 
orders and transactions entered and executed on the floor of the 
Exchange. EOC records the receipt of an order and documents the life of 
the order through the process of execution, partial execution, or 
cancellation. This system includes the electronic communications 
interface between booth terminals and the Floor Broker work stations 
and hand held applications. The EOC is designed to fulfill one of the 
undertakings contained in the Commission's Order Instituting Public 
Administrative Proceedings Pursuant to Sections 19(h)(1) of the 
Securities Exchange Act of 1934, Making Findings and Imposing Remedial 
Sanctions (``Order'').\4\ Specifically, the EOC is intended to respond 
to Section IV.B.e.(v) of the Order, which requires, among other things, 
that the Exchange incorporate into its audit trail all non-electronic 
orders such that the audit trail provides an accurate, time-sequenced 
record of electronic and other orders, quotations and transactions, 
beginning with the receipt of the order and documenting the life of the 
order through the process of execution, partial execution, or 
cancellation.
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    \4\ See Securities Exchange Act Release No. 43268 (September 11, 
2000) and Administrative Proceeding File No. 3-10282.
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    In order to comply with the terms of Rule 955NY(c), and thus be in 
compliance with the Order, Floor Brokers and employees of floor 
brokerage firms (collectively ''Floor Brokers'') upon receiving an 
order for execution on the Exchange must immediately, prior to 
representation in the trading crowd, record the details of the order 
into EOC. This process, commonly referred to the ``systemization'' of 
an order, creates an accurate time-sequenced record of orders on the 
Exchange.
    The Exchange has prescribed certain data elements that must be 
entered into the EOC before an order may be represented in the Trading 
Crowd. These data elements, as contained in Rule 956NY--Record of 
Orders, include: (1) Clearing Member Trade Agreement (``CMTA'') 
information,\5\ and the name of the clearing ATP Holder; (2) options 
symbol, expiration month, exercise price and type of options; (3) side 
of the market and order type; \6\ (4) quantity of options; (5) limit or 
stop price or special conditions; (6) opening or closing transaction; 
(7) time in force; (8) account origin code; \7\ and (9) whether the 
order was solicited or unsolicited. The Exchange may, from time to 
time, also require additional information if needed. The remaining data 
elements prescribed in Rule 956NY are to be recorded as the events 
occur and/or during trade reporting procedures.
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    \5\ The CMTA process allows an OTP Holder or OTP Firm [sic] to 
enter a trade that is subsequently settled into the account of a 
different Broker Dealer at the Options Clearing Corporation.
    \6\ Order type is also referred to as the origin code (i.e. 
Customer, Firm or Market Maker).
    \7\ See supra note 6.
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    The Exchange now proposes to incorporate into the text of Rule 
955NY(c) specific data elements required for the proper systemization 
of an order. The Exchange proposes that in order to meet the 
requirements for the proper systemization of an order Floor Brokers 
will be required to enter into the EOC: (i) The option symbol; (ii) the 
expiration date of the option; \8\ (iii) the exercise price; (iv) buy 
or sell with applicable limit or stop price or special instructions; 
(v) call or put; (vi) the quantity of contracts; (vii) the name of the 
clearing ATP Holder; and (viii) such other information as may be 
required by the Exchange from time to time. Any additional information 
with respect to the order, including those data elements found in Rule 
956NY that pursuant to this proposal will no longer be required at the 
time of systemization, shall be recorded contemporaneously upon receipt 
which may occur after the representation and execution of the order. 
The proposed order entry requirements for the EOC are consistent with 
the order format requirements of Rule 955NY(b). Thus, adopting the 
order format requirements of Rule 955NY(b) for the EOC and 
incorporating them into Rule 955NY(c) will serve to align Exchange 
Rules on order entry requirements. In addition, the Exchange notes that 
the proposed order entry requirements necessary for the systemization 
of an order for the EOC are substantially similar to those prescribed 
by the Chicago Board

[[Page 16333]]

Options Exchange (``CBOE'') pursuant to CBOE Rule 6.24(a)(2).\9\
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    \8\ In order to accommodate Quarterly Options Series and Short 
Term Option Series, the Exchange proposes to require the actual 
expiration date of an option, and not just the expiration month, as 
presently required.
    \9\ See CBOE Rule 6.24(a)(2). See also Securities Exchange Act 
Release No. 50996 (January 7, 2005), 70 FR 2436 (Jan. 13, 2005) (SR-
CBOE-2004-77).
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    Pursuant to the proposed rule change, Floor Brokers will be 
required to enter much of the same information when systematizing an 
order as is presently required, with the exception of the CMTA 
information, opening/closing designation, the order type or account 
origin code, the time in force, and whether the order was solicited or 
unsolicited. Floor Brokers have told the Exchange that generally these 
are the last bits of information given to them when receiving an order 
and that waiting to receive this information and enter it into EOC can 
delay the representation and execution of an order. In today's trading 
environment of rapidly moving markets and the need to execute an order 
and hedge a trade in real or near real time, even a slight delay can 
prove to be detrimental to the handling of an order. Because the CMTA 
information, the opening/closing designation, the account origin code, 
the time if force and whether an order was solicited or unsolicited are 
not contractual terms of a trade itself nor are they required data 
elements pursuant to the Exchange's order format requirements, the 
Exchange does not believe this information needs to be entered into the 
EOC prior to an order being represented in the Trading Crowd, but may 
be entered contemporaneously upon the receipt of such information, even 
if that occurs after the order had been represented and executed in the 
Trading Crowd.
    The Exchange notes that proposed rule changes mentioned above 
relate only to the system entry requirements for floor based orders and 
do not amend or revise rules governing the record of orders (Rule 
956NY). Floor Brokers must continue to maintain proper order records, 
including order information presently required for the proper 
systemization of an order that will no longer be required for that 
purpose pursuant to this proposal. In addition, the Exchange notes that 
this proposal does not amend or revise rules governing trade reporting 
duties (Rule 957NY).
The Electronic Tablet
    The Electronic Tablet was an order entry system which would record 
orders in a hand written format that in turn could be transmitted to a 
Floor Broker's EOC workstation for representation in the Trading Crowd. 
The Electronic Tablet provided an alternative to the order entry 
functionality of the EOC while providing for an accurate time-sequenced 
record of orders on the Exchange. Floor Brokers could hand write order 
information into the Electronic Tablet upon receipt of an order, route 
the order to EOC and then manually key into EOC additional order and 
transaction information for reporting and clearing purposes.
    The Electronic Tablet was designed to expedite the entry of orders 
into EOC. Due to ongoing enhancements to the functionality of the EOC 
system since its introduction, the Electronic Tablet was used 
increasingly less often and eventually became obsolete. The Electronic 
Tablet was fully decommissioned by the Exchange in 2009. Because Floor 
Brokers may satisfy all order entry requirements by entering an order 
directly into EOC, the Exchange has no plans to utilize the Electronic 
Tablet functionality going forward. Accordingly, the Exchange proposes 
to delete references to the Electronic Tablet found in its Rules.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\10\ in general, and 
furthers the objectives of Section 6(b)(5),\11\ 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 mechanism of a free and open market and a national market system.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to order entry requirements for the EOC is 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities by ensuring that the terms of an order 
continue to be properly systematized prior to the order being 
represented in the Trading Crowd. The Exchange notes that changes are 
consistent with the order systemization requirements in the Order which 
requires, among other things, that the Exchange incorporate into its 
audit trail all non-electronic orders such that the audit trail 
provides an accurate, time-sequenced record of electronic and other 
orders, quotations and transactions, beginning with the receipt of the 
order and documenting the life of the order through the process of 
execution, partial execution, or cancellation. The Exchange believes 
that aligning the order entry requirements for the EOC with the 
Exchange's order format requirements will further promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities on the 
Exchange. Reducing the burden on Floor Brokers to enter order 
information prior to representation will promote just and equitable 
principles of trade and remove impediments to and perfect the mechanism 
of a free and open market by reducing the delay in representation and 
execution of an order on the Exchange. The proposal is also designed to 
prevent fraudulent and manipulative acts and practices, by ensuring 
that the Exchange is able to meet its obligation to create and maintain 
a time-sequenced record of orders, quotations and transactions on the 
Exchange. In addition, the deletion of rule references pertaining to a 
decommissioned order entry system will help protect investors and the 
public interest by reducing potential confusion that may result from 
having obsolete or out-dated rules in the Exchange's rulebook. 
Furthermore, the proposal removes impediments to and perfects the 
mechanism of a free and open market and a national market system by 
allowing for more timely executions of open-outcry orders.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
designed to enable NYSE Amex Options to align the order format 
requirements of the Exchange with those of a competing options 
exchange. The proposal would allow Floor Brokers on the Exchange to be 
afforded the ability to transact business under the similar 
requirements as brokers on a competing exchange. The Exchange believes 
that the proposal will reduce the burden on Floor Brokers by 
coordinating order entry requirements on different exchanges. By 
reducing Floor Brokers burden on order entry compliance, the Exchange 
believes the proposal will improve the competitiveness of Exchange 
Floor Brokers and also promote competition for orderflow among market 
participants and the options exchanges.

[[Page 16334]]

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2013-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2013-16. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2013-16, and should 
be submitted on or before April 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05883 Filed 3-13-13; 8:45 am]
BILLING CODE 8011-01-P