Citation: "79 FR 44953"
Document Number: "Release No. 34-72680; File No. SR-NYSEMKT-2014-63"
July 28, 2014.
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
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 15 U.S.C. 78a. END FOOTNOTE
FOOTNOTE 3 17 CFR 240.19b-4. END FOOTNOTE
The Exchange proposes to remove building access and other restrictions on traders conducting certain futures and options trading on
FOOTNOTE 4 IFUS is a Designated Contract Market pursuant to the Commodity Exchange Act, as amended, and is regulated by the
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.
The Exchange proposes to remove the building access and other restrictions on the IFUS traders conducting certain futures and options trading on the IFUS Trading Floor, currently located in Exchange facilities at
FOOTNOTE 5 On
FOOTNOTE 6 See Securities Exchange Act Release Nos. 68997 (
FOOTNOTE 7 Currently, there are 24 IFUS Traders and 13 clerical staff on the IFUS Trading Floor. At the time of the Original Filing, there were 40 IFUS Traders. END FOOTNOTE
FOOTNOTE 8 Specifically, the IFUS Traders must use the
FOOTNOTE 9 Certain of the IFUS Traders conduct business on foreign markets on Exchange holidays. See Securities Exchange Act Release Nos. 69764 (
Proposed Rule Change
The Exchange now proposes to remove certain restrictions on the IFUS Traders set forth in the Original and Supplemental Filings. In particular, the Exchange proposes to eliminate the building access restrictions, which would allow the IFUS Traders to enter the Exchange's facilities from either the
The Exchange does not believe that removing the restrictions on the IFUS Traders entering or crossing the
FOOTNOTE 10 These include the Russell 2000, Russell 1000, and Russell Value and Growth, all of which qualify as broad-based indices. The Exchange understands, however, that the IFUS Traders trade only a small volume of the Russell products and, of that small volume, most is in the Russell 2000 mini-contracts. END FOOTNOTE
FOOTNOTE 11 No IFUS Traders are members of the Exchange,
FOOTNOTE 12 See Securities Exchange Act Release Nos. 68997 (
IFUS traders can only conduct trading in IFUS products from within IFUS Trading Floor space via terminals located in the IFUS Trading Floor; they do not have wireless hand-held devices. Accordingly, the IFUS Traders could not conduct any trading in futures from any other location, for example, at an equities trading post in the
The Exchange further notes that there is a limited nexus between products that trade on IFUS and those that trade on the Exchange. The only IFUS Contracts that are related to Exchange-traded products are futures and options on futures on certain Russell indexes, all of which are broad-based indexes as defined in Section 3(a)(55)(C)(vi) of the Securities Exchange Act of 1934. /13/ As the Commission previously found, a market participant's ability to manipulate the price of broad-based ETFs, Trust Issued Receipts or related options is limited. /14/
FOOTNOTE 13 15 U.S.C. 78c(a)(55)(A). IFUS product offerings have historically been benchmark futures and options contracts relating to agricultural products, currencies, and broad-based market indexes. There are no plans to offer single stock futures on IFUS. END FOOTNOTE
FOOTNOTE 14 See Exchange Act Release No. 46213 (
Moreover, given that IFUS Traders represent only a small proportion of IFUS's total trading volume, the Exchange does not believe IFUS Traders would be in possession of any non-public information that could be used by Exchange members to their advantage or to gain an unfair competitive advantage over other market participants. As noted in the previous filings, approximately 83% of IFUS's total daily contract volume is in IFUS energy contracts. The IFUS Traders transact less than 5% of the 17% of IFUS's average daily volume that is not related to energy contracts and a fraction of 1% of the total average daily IFUS volume (which includes the energy contracts transacted on IFUS). Further, pricing information about the products traded on the IFUS Trading Floor--cotton, frozen concentrated orange juice, coffee, sugar, cocoa, energy, broad-based equity indices and foreign currencies--is contemporaneously and publicly available on
Finally, the Exchange's experience with the IFUS Trading Floor the past year has not given the Exchange reason to believe that there is an increased likelihood of potentially collusive trading. To date, the
The Exchange further notes that important safeguards will remain in place. The IFUS Traders will continue to sit together in segregated booth space with privacy barriers to reduce the likelihood that trading screens can be viewed or conversations overheard between firms and traders. An IFUS Market Regulation compliance officer will continue to be present performing on-site surveillance on a regular basis. The Exchange's equities and options on-Floor surveillance staff will also continue to be located near the IFUS Trading Floor. Moreover, FINRA has been provided with the names of the IFUS Traders to assist in identifying any potentially violative trading involving the IFUS Traders. /15/ The Exchange has reminded its members and member organizations to protect the confidentiality of nonpublic order and trade information, and that members and employees of member organizations should not engage in any trading, order or market related communications with the IFUS Traders or their clerical staff. /16/
FOOTNOTE 15 Providing the names of the IFUS Traders to FINRA was for the purpose of regulatory information sharing. Neither the Exchange nor FINRA will be responsible for regulating or surveilling the IFUS Traders' activity, and the IFUS Traders are not subject to the Exchange's jurisdiction. Rather, the IFUS Traders will continue to be regulated by IFUS. END FOOTNOTE
FOOTNOTE 16 See Member Education Bulletin 2013-5 (
In short, based on the limited trading conducted by the IFUS Traders, the extremely negligible trading in related products, the experience with the IFUS Trading Floor during the past year and the significant controls that will remain in place, the Exchange does not believe that prescribing the manner in which the IFUS Traders enter the Exchange's facilities or prohibiting the IFUS Traders from entering or crossing the
2. Statutory Basis
The Exchange believes that the Proposal is consistent with the provisions of Section 6 of the Act, /17/ in general, and Section 6(b)(5) of the Act, /18/ 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, and, in general, to protect investors and the public interest. The Exchange believes that the Proposal is designed to remove impediments to and perfect the mechanism of a free and open market and a national market system because it would eliminate restrictions on the manner that IFUS Traders may access the IFUS Trading Floor that are not necessary for the protection of investors or the public interest given that the only securities related to IFUS Contracts are securities based on broad-based indexes. The Exchange further believes that eliminating the building access and other restrictions will enable IFUS Traders to efficiently and effectively conduct business on the IFUS Trading Floor.
FOOTNOTE 17 15 U.S.C. 78f(b). END FOOTNOTE
FOOTNOTE 18 15 U.S.C. 78f(b)(4) and (5). END FOOTNOTE
The Exchange does not believe that the Proposal will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposal is designed to promote competition by providing the Exchange additional flexibility to maximize the use of its trading floor space.
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
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be 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:
* Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
* Send an email to firstname.lastname@example.org. Please include File Number SR-NYSEMKT-2014-63 on the subject line.
* Send paper comments in triplicate to Secretary,
All submissions should refer to File Number SR-NYSEMKT-2014-63. 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
For the Commission, by the
FOOTNOTE 19 17 CFR 200.30-3(a)(12). END FOOTNOTE
Kevin M. O'Neill,
[FR Doc. 2014-18115 Filed 7-31-14;
BILLING CODE 8011-01-P
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