[Federal Register Volume 84, Number 29 (Tuesday, February 12, 2019)]
[Notices]
[Pages 3521-3523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01945]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85064; File No. SR-NYSEArca-2019-03)]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-
E Relating to the Minimum Trade Size Modifier
February 6, 2019.
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 January 28, 2019, 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 and II
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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 7.31-E relating to the Minimum
Trade Size Modifier. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.31-E relating to the Minimum
Trade Size (``MTS'') Modifier. Specifically, the Exchange proposes to
make the MTS Modifier available for Non-Displayed Limit Orders.\4\ The
Exchange also proposes to provide additional optionality for ETP
Holders using the MTS Modifier with Limit IOC Orders, Non-Displayed
Limit Orders, Mid-Point Liquidity (``MPL'') Orders, and Tracking
Orders. As proposed, ETP Holders could choose how such orders would
trade on arrival to trade either with (i) orders that in the aggregate
meet the MTS (current functionality), or (ii) individual orders that
each meet the MTS (proposed functionality).
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\4\ See Rule 7.31-E(d)(2). In sum, A Non-Displayed Limit Order
is a Limit Order that is not displayed and does not route. Id.
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The MTS Modifier is currently available for Limit IOC Orders,\5\
MPL Orders,\6\ and Tracking Orders.\7\ As such,
[[Page 3522]]
the MTS Modifier is currently available only for orders that are not
displayed and do not route. On arrival, both Limit IOC Orders and MPL
Orders with an MTS Modifier will trade against contra-side orders in
the Exchange Book that in the aggregate, meet the MTS.\8\ Once resting,
MPL Orders and Tracking Orders with an MTS Modifier function similarly:
If a contra-side order does not meet the MTS, the incoming order will
not trade with and may trade through the resting order with the MTS
Modifier. In addition, both MPL Orders and Tracking Orders with an MTS
Modifier will be cancelled if such orders are traded in part or reduced
in size and the remaining quantity is less than the MTS.
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\5\ See Rule 7.31-E(b)(2)(A). In sum, a Limit Order designated
IOC is to be traded in whole or in part on the NYSE Arca Marketplace
as soon as such order is received, and the quantity not so traded is
cancelled. Id.
\6\ See Rule 7.31-E(d)(3). In sum, an MPL Order is a ``Limit
Order that is not displayed and does not route, with a working price
at the midpoint of the PBBO.'' Id.
\7\ See Rule 7.31-E(d)(4). In sum, a Tracking Order is an order
to buy (sell) with a limit price that is not displayed, does not
route, must be entered in round lots and designated Day, and will
trade only with an order to sell (buy) that is eligible to route.
\8\ Tracking Orders, including Tracking Orders with an MTS
Modifier, are passive orders that do not trade on arrival.
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The Exchange proposes to amend its rules to make MTS Modifier
functionality available for an additional non-displayed order that does
not route, i.e., Non-Displayed Limit Orders. The Exchange also proposes
to add an option that an order with an MTS Modifier would trade on
entry only with individual orders that each meet the MTS. This proposed
change is based on the rules of its affiliate, NYSE American LLC
(``NYSE American''), which offers the option for orders with an MTS to
trade on entry only with individual orders that each meet the MTS of
the incoming order.\9\ Both of these proposed changes are also based on
the rules of the Nasdaq Stock Market LLC (``Nasdaq'') and Investors
Exchange LLC (``IEX''), which both offer minimum trade size
functionality for orders that are not displayed and that do not
route.\10\ Nasdaq and IEX, as well as Cboe BYX Exchange, Inc.
(``BYX''), Cboe BZX Exchange, Inc. (``BZX''), Cboe EDGA Exchange, Inc.
(``EDGA''), and Cboe EDGX Exchange, Inc. (``EDGX'', together with BYX,
BZX, and EDGA, the ``Cboe Equity Exchanges''), also all offer the
option for orders with a minimum trade size to trade on entry only with
individual orders that each meet the minimum trade size condition of
the incoming order.\11\
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\9\ See NYSE American Rule 7.31E(i)(3)(B). See also Securities
Exchange Act Release No. 81672 (September 21, 2017), 82 FR 45099
(September 27, 2017) (SR-NYSEAMER-2017-17) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 7.31E
Relating to the Minimum Trade Size Modifier for Additional Order
Types and Expanding the Minimum Trade Size Modifier for Existing
Order Types). The Exchange understands that NYSE American as well as
its other affiliated exchanges, the New York Stock Exchange, Inc.
(``NYSE''), and NYSE National, Inc. (``NYSE National'', together
with the Exchange and NYSE, the ``Affiliate SROs'') intend to file
similar proposed rule changes with the Commission to extend the
availability of their respective MTS modifiers to Non-Displayed
Limit Orders.
\10\ See Nasdaq Rule 4703(e) (Nasdaq's ``Minimum Quantity
Order'' may not be displayed and will be rejected if it includes an
instruction to route) and IEX Rule 11.190(b)(11)(A) (IEX's ``Minimum
Quantity Order'' or ``MQTY'' is a non-displayed, non-routable
order'').
\11\ See Nasdaq Rule 4703(e) (Nasdaq's ``Minimum Quantity''
order attribute allows for a Nasdaq participant to specify one of
two alternatives to how a Minimum Quantity Order would be processed
at the time of entry, one of which is that ``the minimum quantity
condition must be satisfied by execution against one or more orders,
each of which must have a size that satisfies the minimum quantity
condition'') and IEX Rule 11.190(b)(11)(G)(iii)(B) (On arrival,
IEX's ``Minimum Execution Size with All-or-None Remaining''
qualifier for IEX's MQTY executes against each willing resting order
in priority, provided that each individual execution size meets its
effective minimum quantity.) See also BYX Rule 11.9(c)(5); BZX Rule
11.9(c)(5); EDGA Rule 11.6(h); and EDGX Rule 11.6(h) (The Cboe
Equity Exchanges each allow a User to alternatively specify the
order not execute against multiple aggregated orders simultaneously
and that the minimum quantity condition be satisfied by each
individual order resting on the book).
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Rule 7.31-E(i)(3) currently states that on arrival, an order to buy
(sell) with an MTS Modifier will trade with sell (buy) orders in the
NYSE Arca Book that in the aggregate meet such order's MTS. As amended,
Rule 7.31-E(i)(3)(B) would now require an ETP Holder to specify one of
the following instructions with respect to how an order with an MTS
Modifier would trade on arrival (new text underlined):
(i) An order to buy (sell) with an MTS Modifier will trade with
sell (buy) orders in the Exchange Book that in the aggregate meet such
order's MTS[.]; or
(ii) An order to buy (sell) with an MTS Modifier will trade with
individual sell (buy) order(s) in the Exchange Book that each meets
such order's MTS.
Proposed paragraph (i)(3)(B)(ii) is new and reflects the Exchange's
proposal to add an alternative to how an order with an MTS Modifier
would trade on arrival. An order with an MTS Modifier that is to trade
upon entry only with individual orders that each meet the MTS would
execute against resting orders in accordance with Rule 7.36-E, Order
Ranking and Display, until it reaches an order that does not satisfy
the MTS, at which point it would be posted or cancelled in accordance
with the terms of the order. This proposed rule text is also based on
NYSE American Rule 7.31E(i)(3)(B).\12\ Proposed Exchange Rule 7.31-
E(i)(3)(B)(i) would describe the existing functionality as one of the
instructions that would be available to ETP Holders.
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\12\ See supra note 9.
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As discussed above, the addition of this instruction for how orders
with an MTS Modifier would trade on entry is based on the rules of NYSE
American, Nasdaq, IEX, and the Cboe Equity Exchanges.\13\
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\13\ See supra notes 9 and 11.
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* * * * *
Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date of this
proposed rule change by Trader Update. The Exchange anticipates that
the implementation date will be in the second quarter of 2019.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\14\ in general, and
furthers the objectives of Section 6(b)(5),\15\ in particular, because
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, 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.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal to expand the availability
of the Exchange's existing MTS Modifier to an additional non-displayed,
non-routable order, e.g., Non-Displayed Limit Orders, would 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, because the proposed rule change is based on
similar minimum trade size functionality on Nasdaq and IEX, which both
similarly make minimum trade size functionality available to non-
displayed, non-routable orders.\16\
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\16\ See supra note 10.
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The Exchange also believes that the proposal would 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 because it would provide ETP Holders with the
option for orders with a MTS Modifier to trade on entry only with
individual orders that each meets the MTS of the incoming order,
thereby
[[Page 3523]]
providing ETP Holders with more control in how such orders could
execute. The proposed rule change is based on similar options available
for users of minimum trade size functionality on the Exchange's
affiliate, NYSE American, as well as Nasdaq, IEX, and the Cboe Equity
Exchanges.\17\ The Exchange further believes that this proposed option
would remove impediments to, and perfect the mechanism of, a free and
open market and a national market system because it would allow ETP
Holders to provide an instruction that an order with an MTS Modifier
would not trade with orders that are smaller in size than the MTS for
such order, thereby providing ETP Holders with more control over when
an order with an MTS Modifier may be executed.
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\17\ See supra notes 9 and 11.
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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 Exchange believes that
the proposed rule change is designed to increase competition by making
available on the Exchange functionality that is already available on
Nasdaq, IEX, and the Cboe Equity Exchanges. The Exchange also believes
that the proposed rule change would promote competition by providing
market participants with an additional venue to which to route non-
displayed, non-routable orders with an MTS Modifier.
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
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 for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its 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.
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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 to
determine whether the proposed rule 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 [email protected]. Please include
File Number SR-NYSEArca-2019-03 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-NYSEArca-2019-03. 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 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 such 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-NYSEArca-2019-03, and should be
submitted on or before March 5, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01945 Filed 2-11-19; 8:45 am]
BILLING CODE 8011-01-P