Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”) and Rule 19b-4 thereunder, notice is hereby given that on March 29, 2021, NYSE American LLC (“NYSE American” 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
15 U.S.C. 78a.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 985NY (Qualified Contingent Cross Trade) to clarify the permissible trading differentials for such orders. 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 purpose of this rule change is to amend Rule 985NY(Qualified Contingent Cross Trade) to clarify the permissible trading differentials for such orders.
Rule 900.3NY(y) provides that a Qualified Contingent Cross or QCC Order must be comprised of an originating order to buy or sell at least 1,000 contracts that is identified as being part of a qualified contingent trade, coupled with a contra-side order or orders to buy or sell an equal number of contracts. As Qualified Contingent Crosses, QCC Orders are automatically executed upon entry provided that the execution (i) is not at the same price as a Customer Order in the Consolidated Book and (ii) is at or between the NBBO. In addition, QCC Orders may only be entered in the regular trading increments applicable to the options class under Rule 960NY (Trading Differentials). Rule 960NY subsection (a) sets forth the minimum quoting increments for all options traded on the Exchange and subsection (b) sets forth the minimum trading increments of one cent ($0.01) for all series of option contracts traded on the Exchange.
A “qualified contingent trade” is a transaction consisting of two or more component orders, executed as agent or principal, where: (i) At least one component must be an NMS Stock; (ii) all the components must be effected with a product price contingency that either has been agreed to by all the respective counterparties or arranged for by a broker-dealer as principal or agent; (iii) the execution of one component must be contingent upon the execution of all other components at or near the same time; (iv) the specific relationship between the component orders (e.g., the spread between the prices of the component orders) must be determined by the time the contingent order is placed; (v) the component orders must bear a derivative relationship to one another, represent different classes of shares of the same issuer, or involve the securities of participants in mergers or with intentions to merge that have been announced or cancelled; and (vi) the transaction must be fully hedged (without regard to any prior existing position) as a result of other components of the contingent trade. See Commentary .01 to Rule 900.3NY.
See Rule 985NY. QCC Orders that cannot be executed when entered will automatically cancel. See Rule 985NY(1).
See Rule 985NY(2).
See Rule 960NY(a) and (b), respectively. Paragraph (2) to Rule 985NY provides that QCCs “may only be entered in the regular trading increments applicable to the options class under Rule 960NY.”
The Exchange proposes to modify Rule 985NY(2) to add reference to paragraph (b) of Rule 960NY in the text of the rule, which would make clear that QCCs may be entered in minimum trading increments of one cent ($0.01). The Exchange believes this proposed change, which aligns with current functionality, would add clarity, transparency and internal consistency to Exchange rules.
See proposed Rule 985NY(2) (“Qualified Contingent Cross Orders may only be entered in the regular trading increments applicable to the options class under Rule 960NY(b)”).
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”), in general, and furthers the objectives of Section 6(b)(5) of the Act, in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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.
15 U.S.C. 78f(b)(5).
The Exchange believes that the proposed modification—to make clear that QCC Orders may be entered and traded in minimum trading increments of a penny would promote just and equitable principles of trade, as well as serve to remove impediments to and perfect the mechanism of a free and open market because the proposed change clarifies existing functionality. In addition, the Exchange believes that the proposed rule change is consistent with other options order types and functionalities that are not displayed in OPRA's quote feed. For example, electronic paired auctions, which are not displayed in OPRA's quote feed before they are executed, provide for penny trading increments, regardless of the quoting increment of the options class. As a result, the proposed change would not impact the protection of investors and the public interest.
See, e.g., Rule 971.1NY(b)(7) (regarding the Customer Best Execution—or CUBE—auction and providing that “CUBE Orders may be entered in $.01 increments regardless of the MPV of the series involved”).
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. Specifically, as discussed above, the Exchange believes that the proposed change would align the rule text with current functionality. Thus, the Exchange does not believe the proposal creates any significant impact on competition.
Intramarket Competition. The proposed rule change would be applicable to all market participants that trade QCC Orders and therefore would not impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Intermarket Competition. The Exchange believes that this proposed rule change will not have an impact on intermarket 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 and Rule 19b-4(f)(6) thereunder. 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 subparagraph (f)(6) of Rule 19b-4 thereunder.
17 CFR 240.19b-4(f)(6).
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 satisfied this requirement.
A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of its filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to 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 upon filing. The Exchange believes a waiver is consistent with the protection of investors and the public interest because it would enable to Exchange to clarify current functionality for QCC Orders without delay. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing so that the benefits of this proposed rule change can be realized immediately.
17 CFR 240.19b-4(f)(6)(iii).
For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
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 under Section 19(b)(2)(B) to determine whether the proposed rule 195change 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. 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-NYSEAMER-2021-16 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-2021-16. 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 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-NYSEAMER-2021-16 and should be submitted on or before April 29, 2021.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07199 Filed 4-7-21; 8:45 am]
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