Document ID: SEC-2017-0155-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2017-02-03T05:00Z

[Federal Register Volume 82, Number 22 (Friday, February 3, 2017)]
[Notices]
[Pages 9256-9258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02259]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79895; File No. SR-NYSEMKT-2017-03]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rules 900.3NY, 
Rule 961NY, Make a Conforming Change to Rule 935NY, and Eliminate 
Section 910-AEMI of the AEMI Rules, and Sections 910 and 910-AEMI of 
the NYSE MKT Company Guide

January 30, 2017.
    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 January 18, 2017, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``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 Rule 900.3NY to eliminate Price 
Improving Orders and Quotes, amend Rule 961NY to eliminate the 
electronic and open outcry bidding and offering requirements associated 
with a Price Improving Order or Quote, and make a conforming change to 
Rule 935NY, and (2) eliminate Section 910-AEMI of the AEMI Rules, and 
Sections 910 and 910-AEMI of the NYSE MKT Company Guide. 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 (1) amend Rule 900.3NY to eliminate Price 
Improving Orders and Quotes, amend Rule 961NY to eliminate the 
electronic and open outcry bidding and offering requirements associated 
with a Price Improving Order or Quote, and make a conforming change to 
Rule 935NY, and (2) eliminate Section 910-AEMI of the AEMI Rules, and 
Sections 910 and 910-AEMI of the NYSE MKT Company Guide. The Exchange 
proposes to eliminate these order types in order to streamline its 
rules and reduce complexity among its order type offerings, and to 
delete obsolete and outdated rules.\4\
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    \4\ See e.g., Mary Jo White, Chair, Securities and Exchange 
Commission, Speech at the Sandler O'Neill & Partners, L.P. Global 
Exchange and Brokerage Conference (June 5, 2014) (available at 
www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw) 
(``I am asking the exchanges to conduct a comprehensive review of 
their order types and how they operate in practice. As part of this 
review, I expect that the exchanges will consider appropriate rule 
changes to help clarify the nature of their order types and how they 
interact with each other, and how they support fair, orderly, and 
efficient markets.'' Id.).
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Elimination of Price Improving Orders and Quotes
    The Exchange proposes to eliminate, and thus delete from its rules, 
Price Improving Orders and Quotes, as defined in Rule 900.3NY(r).
    A Price Improving Order or Price Improving Quote is an order or 
quote to buy or sell an option at a specified price at an increment 
smaller than the minimum price variation in the security. Price 
Improving Orders and Quotes may be entered in increments as small as 
one cent. Because the Exchange has not implemented this functionality, 
the Exchange believes it is appropriate to delete the functionality 
from its rules.\5\
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    \5\ Though originally adopted as a competitive response to 
another options market introducing price improving orders, the 
Exchange never implemented this functionality for a variety of 
reasons, including technology and because most options volume was 
concentrated in Penny Pilot issues where price improving orders 
would be of little or no value.
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    To reflect this elimination, the Exchange proposes to delete all 
references to Price Improving Orders and Quotes in Rule 900.3NY(r), and 
to the electronic and open outcry bidding and offering requirements 
associated with a Price Improving Order or Quote in the second 
introductory paragraph of Rule 961NY and in Rules 961NY(a), 961NY(b) 
and 961NY(c), and to delete in the Commentary to Rule 935NY a reference 
to Rule 900.3NY(r),\6\ as follows:
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    \6\ See Securities Exchange Act Release No. 59472 (February 27, 
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14) (order 
granting accelerated approval of proposed rule change establishing 
rules for the trading of listed options including order exposure 
requirements in connection with Price Improving Orders and Quotes, 
designation of options eligible for Penny Price Improvement, the 
manner of bidding or offering in open outcry for Penny Pricing, and 
the required ``sweep'' of any Penny Pricing interest in the System).
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     Delete Rule 900.3NY(r), which defines Price Improving 
Orders and Quotes;
     delete the second introductory paragraph of Rule 961NY, 
which describes which options may be

[[Page 9257]]

designated for penny price improvement; \7\
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    \7\ See id.
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     delete Rule 961NY(a), which describes the electronic 
submission process in connection with a Price Improving Order or Quote; 
\8\
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    \8\ See id.
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     delete Rule 961NY(b), which describes the open outcry 
submission process in connection with a Price Improving Order or Quote; 
\9\
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    \9\ See id.
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     delete Rule 961NY(c), which describes the requirement to 
electronically ``sweep'' any penny pricing interest in the Exchange's 
System; \10\ and
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    \10\ See id.
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     delete in the Commentary to Rule 935NY a reference to Rule 
900.3NY(r).
Elimination of Obsolete and Out Dated Section 910-AEMI of the AEMI 
Rules and Sections 910 and 910-AEMI of the NYSE MKT Company Guide
    The Exchange also proposes to eliminate, and thus delete one 
section from its rulebook and two sections from the Company Guide, 
governing the same topic, that are now obsolete and outdated:
     Delete Section 910-AEMI. Amex Company Guide RELATIONSHIP 
WITH SPECIALIST (Sec.  910-AEMI) PROCEDURES, RULES AND REGULATIONS, of 
the AEMI Rules;
     delete Section 910. PROCEDURES, RULES AND REGULATIONS, of 
the NYSE MKT Company Guide; and
     delete Section 910-AEMI. PROCEDURES, RULES AND 
REGULATIONS, of the NYSE MKT Company Guide.
    The Exchange has identified these obsolete and outdated rules and 
proposes to delete both the section in the rulebook and the 
corresponding sections in the Company Guide. These rules relate to 
trading systems that have been decommissioned by the Exchange and rules 
governing Specialists' obligations, conduct, and activities, including 
dealings and communications, which were superseded by later-implemented 
rules governing the same conduct or circumstances. The Commission has 
previously approved the Exchange's new Equity Rules that superseded the 
AEMI rules.\11\ Specifically, pursuant to Rule 0(b) and Rule 0--
Equities, the Equities Rules govern all transactions conducted on the 
Exchange's Equities Trading Systems.
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    \11\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (order 
approving proposed rule change to establish new membership, member 
firm conduct, and equity trading rules following the acquisition of 
the Exchange).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \12\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that eliminating Price 
Improving Orders and Quotes would remove impediments to and perfect a 
national market system by simplifying the functionality and complexity 
of its order types. The Exchange believes that eliminating these order 
types would be consistent with the public interest and the protection 
of investors because investors will not be harmed and in fact would 
benefit from the removal of complex functionality. The Exchange also 
believes that eliminating Price Improving Orders and Quotes would 
benefit investors and add transparency and clarity to the Exchange's 
rules because the functionality of those order types was not 
implemented and therefore is not available.
    The Exchange further believes that deleting corresponding 
references in Exchange rules to deleted order types, and the associated 
bidding and offering process in connection with a deleted order type, 
also 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 the 
order types available for trading on the Exchange. Removing obsolete 
cross references also furthers the goal of transparency and adds 
clarity to the Exchange's rules.
    The Exchange further believes that by deleting obsolete and 
outdated rules, it also promotes just and equitable principles of 
trade, removes impediments to and perfects the mechanism of a free and 
open market and a national market system, and, in general, helps to 
protect investors and the public interest by providing transparency as 
to which rules are operable and reducing potential confusion that may 
result from having obsolete or outdated rules in the Exchange's 
rulebook. 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 and understand the Exchange's rulebook.

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 change is not 
designed to address any competitive issue but would rather remove 
complex functionality, references to functionality that is not 
available, and obsolete and outdated rules, thereby reducing confusion 
and making the Exchange's rules easier to understand and navigate.

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 \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ 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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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 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

[[Page 9258]]

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) \18\ of the Act to determine whether the proposed rule 
change should be approved or disapproved.
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    \18\ 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-2017-03 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-NYSEMKT-2017-03. 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 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-NYSEMKT-2017-03 and should 
be submitted on or before February 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02259 Filed 2-2-17; 8:45 am]
 BILLING CODE 8011-01-P