[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12553-12554]
[FR Doc No: 2014-04798]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71630; File No. SR-NYSEMKT-2014-05]

Self-Regulatory Organizations; NYSE MKT LLC; Order Granting
Approval of Proposed Rule Change Amending Its Rules in Order To Clarify
the Applicability and Functionality of Certain Order Types on the
Exchange

February 27, 2014.

I. Introduction

    On January 8, 2014, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend its rules in order to clarify the applicability and functionality
of certain option order types on the Exchange. The proposed rule change
was published for comment in the Federal Register on January 21,
2014.\3\ The Commission received no comment letters regarding the
proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71294 (January 14,
2014), 79 FR 3431 (``Notice'').
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II. Description of the Proposal

    The Exchange has proposed to amend Rule 900.3NY in order to clarify
the applicability and functionality of certain option order types. The
Exchange states that it is not proposing to change or alter any
obligations, rights, policies or practices enumerated within its rules.
Rather, according to the Exchange, this proposal is designed to reduce
the potential for investor confusion as to the functionality and
applicability of certain option order types presently available on NYSE
Amex Options.\4\
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    \4\ See Notice, 79 FR at 3432.
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    The Exchange's proposed revisions to Rule 900.3NY would provide
greater detail as to the existing functionality of certain order types,
including:
     Rule 900.3NY(a)--Market Order. The Exchange has proposed
to amend Rule 900.3NY(a) to specify that: (1) Market Orders entered
before the opening of trading will be eligible for trading during the
Opening Auction Process; (2) Market Orders entered during Core Trading
Hours will be rejected if, at the time the order is received, there is
no National Best Bid (``NBB'') and no National Best Offer (``NBO'')
(collectively, ``NBBO'') disseminated by the Options Pricing Reporting
Authority (``OPRA'') for the relevant option series; and (3) if at the
time the Exchange receives a Market Order to buy (sell) there is an NBB
(NBO) but no NBO (NBB) being disseminated, the Market Order will be
processed pursuant to Rule 967NY(a).\5\
---------------------------------------------------------------------------

    \5\ See proposed Rule 900.3NY(a); see also Notice, 79 FR at
3432.
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     Rule 900.3NY(d)(1)-(2)--Stop Orders and Stop Limit Orders.
The Exchange has proposed to amend Rule 900.3NY(d)(1)-(2) to specify
that it will reject Stop Orders and Stop Limit Orders to buy entered
with a stop price below the bid at the time the order is entered and
Stop Orders and Stop Limit Orders to sell entered with a stop price
above the offer at the time the order is entered.\6\
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    \6\ See proposed Rule 900.3NY(d)(1)-(2); see also Notice, 79 FR
at 3432-33. The Commission notes that proposed Rule 900.3NY(d)(1)-
(2) accurately sets forth this additional specification, but the
Exchange's description of this rule change in the purpose section of
its filing refers to stop prices above the bid or below the offer
(instead of below the bid or above the offer) triggering rejection.
---------------------------------------------------------------------------

     Rule 900.3NY(o)--NOW Order. The Exchange has proposed to
clarify that a NOW Order that is not marketable against the NBBO when
submitted to the Exchange will be rejected.\7\
---------------------------------------------------------------------------

    \7\ See proposed Rule 900.3NY(o); see also Notice, 79 FR at
3433.
---------------------------------------------------------------------------

    The Exchange's additional proposed revisions to Rule 900.3NY would
be three-fold. First, the Exchange has proposed to specify in Rules
900.3NY(g) and 900.3NY(i) that One-cancels-the-other Orders and Single
Stock Future/Option Orders, respectively, are only eligible for open
outcry trading.\8\ Second, the Exchange has proposed to decommission
the functionality supporting the Inside Limit Order defined in Rule
900.3NY(c) and the Tracking Order defined in Rule 900.3NY(d)(5) due to
a lack of demand for these order types. The Exchange states that it
does not intend to re-introduce these order types in the future, and
thus proposes to delete the text of these rules.\9\ Third, the Exchange
has proposed to correct typographical errors in the definition of the
Opening Only Order in Rule 900.3NY(q).\10\
---------------------------------------------------------------------------

    \8\ See proposed Rules 900.3NY(g) and 900.3NY(i); see also
Notice, 79 FR at 3433.
    \9\ See Notice, 79 FR at 3432-33.
    \10\ See proposed Rule 900.3NY(q); see also Notice, 79 FR at
3433.
---------------------------------------------------------------------------

    The Exchange has stated that it plans to issue a Trader Update
announcing the changes proposed by this rule filing upon approval of
the filing.\11\
---------------------------------------------------------------------------

    \11\ See Notice, 79 FR at 3433.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\12\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\13\ which
requires, among other things, that the rules of a national securities
exchange be 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; and are not designed to permit unfair discrimination
between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \12\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent
with, and would further the objectives of, Section 6(b)(5) of the Act
because it

would add transparency and clarity to the Exchange's rules by enhancing
the descriptions of certain order type functionality, deleting obsolete
or outdated rules, and correcting inaccurate language. The Exchange
also 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 the Exchange's
rulebook and better understand the order types available for trading on
the Exchange.
    Specifically, the Exchange believes that clarifying the definitions
of Market Orders, Stop Orders, and NOW Orders removes impediments to
and perfects the mechanism of a free and open market by helping to
ensure that investors better understand the functionality of these
order types. Additionally, the Exchange believes that specifying that
Single Stock Future/Option Orders and One-cancels-the-other Orders are
only eligible for open outcry trading will help to protect investors
and the public interest by reducing the potential for confusion when
routing orders to the Exchange. Lastly, the Exchange believes that
deleting the definitions applicable to Inside Limit Orders and Tracking
Orders provides clarity to Exchange rules by eliminating outdated and
obsolete functionality.
    The Commission notes that the instant proposal does not add any new
functionality but instead enhances and clarifies the descriptions of
the option order type functionality currently available on the
Exchange. The Exchange's proposed revisions would provide greater
detail as to the operation of certain option order types, including the
circumstances in which certain order types are rejected, order types
and modifiers that are compatible or incompatible with each other, and
the eligibility of certain order types for only open outcry trading.
Further, the Exchange proposes to update its rules by deleting obsolete
order type provisions. The Commission believes that these proposed
changes are reasonably designed to provide greater specificity, clarity
and transparency with respect to the order type functionality available
on the Exchange, and therefore should help to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, protect
investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-NYSEMKT-2014-05) be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04798 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P


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                                Foreign-Trade Zones Board

About Foreign-Trade
                        Zones & Contact Info
An Introduction to Foreign-Trade
                        Zones
Foreign-Trade Zones (FTZ) are secure
                        areas under U.S. Customs and Border Protection (CBP)
                        supervision that are generally considered outside CBP
                        territory upon activation. Located in or near CBP ports
                        of entry, they are the United States’ version of what
                        are known internationally as free-trade zones.

Authority for establishing these facilities
                        is granted by the Foreign-Trade Zones Board under the
                        Foreign-Trade Zones Act of 1934, as amended (19 U.S.C.
                        81a-81u). The Foreign-Trade Zones Act is administered
                        through two sets of regulations, the FTZ Regulations (15
                        CFR Part 400) and CBP Regulations (19 CFR Part 146).

Foreign and domestic merchandise may be moved
                        into zones for operations, not otherwise prohibited by
                        law, including storage, exhibition, assembly,
                        manufacturing, and processing. All zone activity is
                        subject to public interest review. Foreign-trade zone
                        sites are subject to the laws and regulations of the
                        United States as well as those of the states and
                        communities in which they are located.

Under zone procedures, the usual formal CBP
                        entry procedures and payments of duties are not required
                        on the foreign merchandise unless and until it enters
                        CBP territory for domestic consumption, at which point
                        the importer generally has the choice of paying duties
                        at the rate of either the original foreign materials or
                        the finished product. Domestic goods moved into the zone
                        for export may be considered exported upon admission to
                        the zone for purposes of excise tax rebates and
                        drawback.

Qualified public or private corporations that
                        may operate the facilities themselves or contract for
                        the operation sponsors foreign-trade zones. The
                        operations are conducted on a public utility basis, with
                        published rates. A typical general-purpose zone provides
                        leasable storage/distribution space to users in general
                        warehouse-type buildings with access to various modes of
                        transportation. Many zone projects include an industrial
                        park site with lots on which zone users can construct
                        their own facilities.

Subzones are normally private plant sites
                        authorized by the Board and sponsored by a grantee for
                        operations that usually cannot be accommodated within an
                        existing general-purpose zone.

The Advantages of Using
                        a Foreign-Trade Zone
CBP duty and federal
                        excise tax, if applicable, are paid when the merchandise
                        is transferred from the zone for consumption.

While in the zone, merchandise is not subject
                        to U.S. duty or excise tax. Certain tangible personal
                        property is generally exempt from state and local ad
                        valorem taxes.

Goods may be exported from the zone free of
                        duty and excise tax.

CBP security requirements provide protection
                        against theft.

Merchandise may remain in a zone
                        indefinitely, whether or not subject to duty.

The rate of duty and tax on the merchandise
                        admitted to a zone may change as a result of operations
                        conducted within the zone. Therefore, the zone user who
                        plans to enter the merchandise for consumption to CBP
                        territory may normally elect to pay either the duty rate
                        applicable on the foreign material placed in the zone or
                        the duty rate applicable on the finished article
                        transferred from the zone whichever is to his advantage.

Merchandise imported under bond may be
                        admitted to a FTZ for the purpose of satisfying a legal
                        requirement of exporting the merchandise. For instance,
                        merchandise may be admitted into a zone to satisfy any
                        exportation requirement of the Tariff Act of 1930, or an
                        exportation requirement of any other Federal law (and
                        many state laws) insofar as the agency charged with its
                        enforcement deems it so.

Establishing a
                        Foreign-Trade Zone
The Foreign-Trade Zones Act
                        of 1934 created a Foreign-Trade Zones Board to review
                        and approve applications to establish, operate, and
                        maintain foreign-trade zones. The Board may approve any
                        zone or subzone which it deems necessary to serve
                        adequately "the public interest".

The Board also regulates the administration
                        of foreign-trade zones and the rates charged by zone
                        "grantees".

CBP must approve activation of the zone
                        before any merchandise is admitted under the
                        Foreign-Trade Zones Act.

It is the intent of the U.S. foreign-trade
                        zone program to stimulate economic growth and
                        development in the United States. In an expanding global
                        marketplace there is increased competition among nations
                        for jobs, industry and capital. The FTZ program was
                        designed to promote American competitiveness by
                        encouraging companies to maintain and expand their
                        operations in the United States.

The FTZ program encourages U.S.-based
                        operations by removing certain disincentives associated
                        with manufacturing in the United States. The duty on a
                        product manufactured abroad and imported into the U.S.
                        is assessed on the finished product rather than on its
                        individual parts, materials, or components. The U.S.
                        based manufacturer finds itself at a disadvantage
                        compared with its foreign competitor when it must pay a
                        higher rate on parts, materials, or components imported
                        for use in a manufacturing process. The FTZ program
                        corrects this imbalance by treating products made in the
                        zone, for the purpose of tariff assessment, as if it
                        were manufactured abroad. At the same time, this country
                        benefits because the zone manufacturer uses U.S. labor,
                        services, and inputs.

Role of
                        CBP
CBP is responsible for the transfer of
                        merchandise into and out of the FTZ and for matters
                        involving the collection of revenue. The Office of
                        Regulations and Rulings at CBP Headquarters provides
                        legal interpretations of the applicable statute, CBP
                        Regulations and procedures.

The Port Director of CBP, in whose port a
                        zone is located, is charged with overseeing zone
                        activity as the local representative of the
                        Foreign-Trade Zones Board. He or she controls the
                        admission of merchandise into the zone, the handling and
                        disposition of merchandise in the zone, and the removal
                        of merchandise from the zone. In addition to the
                        Foreign-Trade Zones Act, he or she enforces all laws
                        normally enforced by CBP that are relevant to
                        foreign-trade zones.

Zones are supervised by FTZ Coordinators
                        (i.e., CBP Officers, Import Specialists, Entry
                        Specialists or Agricultural Specialists, etc.) through
                        compliance reviews and visits; the security of the zone
                        must meet certain requirements.

What may be placed in
                        zones
Any foreign or domestic merchandise not
                        prohibited by law or other exception listed below,
                        whether dutiable or not, may be taken into a
                        foreign-trade zone.

Merchandise, which lawfully cannot be
                        imported into the United States, is prohibited without
                        exception. Furthermore, placing merchandise subject to a
                        quota into a zone cannot circumvent quota on the
                        imported merchandise.

On the other hand, merchandise for which a
                        quota is filled or for which a quota on entry is
                        established, may be placed into a zone until the quota
                        opens or is removed since foreign-trade zones are
                        considered outside CBP territory for entry purposes.
                        Such products, with the exception of certain textiles
                        (19 CFR 146.63(d)), may be manipulated or manufactured
                        while in the zone into a product not subject to quota.

Some Federal agencies regulate storage and
                        handling in the United States of certain types of
                        merchandise, such as explosives. Depending on the nature
                        of the requirements and the particular characteristics
                        of the zone facility, such merchandise may be excluded.
                        Moreover, agencies, which license importers or issue
                        importation permits may block admissions to a zone,
                        which are not properly licensed or permitted.

The Foreign-Trade Zones Board may exclude
                        from a zone any merchandise that is in its judgment
                        detrimental to the public interest, health, or safety.
                        The Board may place restrictions on certain types of
                        merchandise, which would limit the zone status allowed,
                        the kind of operation on the merchandise in a zone, the
                        entry of the merchandise into the commerce, or similar
                        transactions or activities.

What may be done in
                        zones
The Foreign-Trade Zones Board may
                        exclude from a zone any merchandise that is in its
                        judgment detrimental to the public interest, health, or
                        safety. The Board may place restrictions on certain
                        types of merchandise, which would limit the zone status
                        allowed, the kind of operation on the merchandise in a
                        zone, the entry of the merchandise into the commerce, or
                        similar transactions or activities.

Many products subject to an internal revenue
                        tax may not be manufactured in a zone. These products
                        include alcoholic beverages, products containing
                        alcoholic beverages except domestic denatures distilled
                        spirits, perfumes containing alcohol, tobacco products,
                        firearms, and sugar. In addition, the manufacture of
                        clock and watch movements is not permitted in a zone.

No retail trade of foreign merchandise may be
                        conducted in a FTZ. However, foreign and domestic
                        merchandise may be stored, examined, sampled, and
                        exhibited in a zone.

Entering merchandise
                        from a zone into the United States for
                        consumption
The entry, classification, and
                        appraisement of merchandise transferred from a
                        foreign-trade zone is affected by the "status" of the
                        merchandise.

Privileged foreign
                        status
Prior to any manipulation or
                        manufacture, which would change its tariff
                        classification, an importer may apply to the Port
                        Director to have imported merchandise in the zone given
                        privileged foreign status. The merchandise is classified
                        and appraised and duties and taxes are determined as of
                        the date the application is filed. When such merchandise
                        is transferred from the zone for U.S. consumption,
                        either in its original state or after manipulation or
                        manufacture the applicable duties and taxes would be
                        paid based on the rate established when privileged
                        foreign status was granted.

Zone restricted
                        status
Merchandise transferred to a zone from
                        CBP territory for storage or for the purpose of
                        satisfying a legal requirement for exportation or
                        destruction is considered exported and cannot be
                        returned to CBP territory for consumption unless the
                        Foreign-Trade Zones Board rules that it's return is in
                        the public interest. The status of merchandise
                        transferred to a zone under these circumstances is "zone
                        restricted." Zone restricted merchandise may not be
                        manipulated, except to destroy it, or manufactured in a
                        zone. As in the case of privileged foreign status, the
                        zone user must apply for zone restricted status on the
                        appropriate CBP form.

Nonprivileged foreign
                        status
Merchandise composed entirely of or
                        derived entirely of nonprivileged merchandise are
                        appraised and classified in its condition at the time of
                        transfer into CBP territory for consumption or for CBP
                        bonded warehousing. Waste recovered from privileged
                        foreign merchandise is assigned NPF status. Domestic
                        merchandise, which has lost its identity, will be
                        assigned NPF status. NPF may be changed to PF prior to
                        manipulation or manufacture.

Domestic
                        status
Domestic status, which may be approved
                        upon application to the Port Director, is available for
                        merchandise which is (a) the growth, product, or
                        manufacture of the United States on which all internal
                        revenue taxes, if applicable, have been paid, (b)
                        previously imported merchandise on which all internal
                        revenue taxes have been paid, or (c) merchandise
                        previously admitted free of duty. Domestic merchandise
                        may be admitted to a zone without a CBP permit, and also
                        removed from a zone without a CBP permit if it has not
                        been combined with any other merchandise of any other
                        status.

Articles of mixed
                        status
Since manipulation and manufacture
                        generally are permitted in a zone, articles transferred
                        to CBP territory may be composed in part of, or derived
                        in part from, merchandise that is privileged and
                        nonprivileged, whether foreign and/or domestic. The
                        articles are appraised according to the status of the
                        merchandise of which they are composed or from which
                        they were derived as explained above. Additionally,
                        foreign merchandise, subject to specified CBP controls
                        and conditions, may be temporarily removed from a zone
                        without formal entry for the performance of certain
                        limited operations and thereafter returned in the same
                        zone status to the zone from which it is removed. This
                        procedure is designed to remove unnecessary burdens on
                        zone inventory and accounting procedures where, in doing
                        so, there is no danger to the revenue.

Where is additional
                        information available?
The Executive
                        Secretariat of the Board is located at:

U.S. Department of
                        Commerce
Foreign-Trade Zones
                        Board
1401 Constitution Avenue, NW, Room
                        2111
Washington, D.C. 20230
Main
                        Phone:<PHONE_NUMBER>
(
                        Foreign-Trade Zones Board )

CBP Regulations, 19 CFR Part 146, govern the
                        transfer of merchandise to and from foreign-trade zones.
                        For answers to specific questions contact the Port
                        Director of the CBP port where the zone is located or
                        CBP headquarters at:

U.S. Customs and Border
                        Protection
Office of Field
                        Operations
Cargo and Conveyance
                        Security
1300 Pennsylvania Avenue, NW, Room
                        5.2C
Washington, D.C. 20229

or email: <A
<EMAIL_ADDRESS>                        Control

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