Document ID: SEC-2016-2216-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-12-16T05:00Z

[Federal Register Volume 81, Number 242 (Friday, December 16, 2016)]
[Notices]
[Pages 91220-91221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30252]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79524; File No. SR-NYSEArca-2016-156]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Commentary 
.02 to Rule 6.72

December 12, 2016.
    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 November 28, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 Commentary .02 to Rule 6.72 in order 
to extend the Penny Pilot in options classes in certain issues (``Pilot 
Program'' or ``Pilot'') previously approved by the Securities and 
Exchange Commission (``Commission'') through June 30, 2017. The Pilot 
Program is currently scheduled to expire on December 31, 2016. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the Pilot Program,\4\ which is 
currently scheduled to expire on December 31, 2016, until June 30, 
2017.\5\ The Exchange believes that extending the Pilot would allow for 
further analysis of the Pilot Program and a determination of how the 
Pilot Program should be structured in the future.
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    \4\ See Securities Exchange Act Release No. 34-55156 (January 
23, 2007), 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73) 
(original approval of Pilot). The Pilot has been extended several 
times since the original approval, the most recent extension was 
obtained in earlier this year. See Securities Exchange Act Release 
No. 78174 (June 28, 2016), 81 FR 43332 (July 1, 2016) (SR-NYSEArca-
2016-88) (most recent extension of the Pilot until December 31, 
2016).
    \5\ See proposed Commentary .02 to Rule 6.72.
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    During this extension of the Pilot, as is the case today, the 
Exchange may replace any option class that is currently included in the 
Pilot Program and that has been delisted with the next most actively 
traded, multiply listed option class that is not yet participating in 
the Pilot Program (``replacement class''). In light of the extension, 
the Exchange also proposes that any replacement class would be 
determined based on national average daily volume in the preceding six 
months, and would be added on the second trading day following January 
1, 2017.\6\
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    \6\ See id. The month immediately preceding a replacement 
class's addition to the Pilot Program (i.e., December) would not be 
used for purposes of the analysis for determining the replacement 
class. Thus, a replacement class to be added on the second trading 
day following January 1, 2017 would be identified based on The 
Option Clearing Corporation's trading volume data from June 1, 2016 
through November 30, 2016. The Exchange will announce the 
replacement issues to the Exchange's membership through a Trader 
Update.
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    This filing does not propose any substantive changes to the Pilot 
Program: All classes currently participating will remain the same and 
all minimum increments will remain unchanged. The Exchange believes the 
benefits to public customers and other market participants who will be 
able to express their true prices to buy and sell options have been 
demonstrated to outweigh the increase in quote traffic.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change, which extends the Penny 
Pilot Program for six months, allows the Exchange to continue to 
participate in a program that has been viewed as beneficial to traders, 
investors and public customers and viewed as successful by the other 
options exchanges participating in it. Accordingly, the Exchange 
believes that the proposal is consistent with the Act because it would 
allow the Exchange to extend the Pilot Program prior to its expiration 
on December 31, 2016. The Exchange notes that this proposal does not 
propose any new policies or provisions that are unique or unproven, but 
instead relates to the continuation of an existing program that 
operates on a pilot basis.
    The Exchange believes that the Pilot Program promotes just and 
equitable principles of trade by enabling public customers and other 
market participants to express their true prices to buy and sell 
options to the benefit of all market participants.
    The proposal to extend the Pilot Program is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove

[[Page 91221]]

impediments to and perfect the mechanisms of a free and open market and 
a national market system, by allowing the Exchange and the Commission 
additional time to analyze the impact of the Pilot Program while also 
allowing the Exchange to continue to compete for order flow with other 
exchanges in option issues trading as part of the Pilot Program.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Specifically, the Exchange 
believes that, by extending the expiration of the Pilot Program, the 
proposed rule change would allow for further analysis of the Pilot 
Program and a determination of how the Program should be structured in 
the future. In doing so, the proposed rule change would also serve to 
promote regulatory clarity and consistency, thereby reducing burdens on 
the marketplace and facilitating investor protection. The Pilot Program 
is an industry-wide initiative supported by all other option exchanges. 
The Exchange believes that extending the Pilot Program would allow for 
continued competition between Exchange market participants trading 
similar products as their counterparts on other exchanges, while at the 
same time allowing the Exchange to continue to compete for order flow 
with other exchanges in option issues trading as part of the Pilot 
Program.

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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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 \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the 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 satisfied this pre-filing requirement.
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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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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-NYSEArca-2016-156 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-2016-156. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090 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; 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-
NYSEArca-2016-156 and should be submitted on or before January 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-30252 Filed 12-15-16; 8:45 am]
 BILLING CODE 8011-01-P