[Federal Register Volume 84, Number 30 (Wednesday, February 13, 2019)]
[Notices]
[Pages 3843-3846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02115]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85071; File No. SR-NYSE-2019-01]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7.31 Relating to the Minimum Trade Size Modifier
February 7, 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, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the
[[Page 3844]]
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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.31 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.31 relating to the Minimum
Trade Size (``MTS'') Modifier. Specifically, the Exchange proposes to
make the MTS Modifier available for Non-Displayed Limit Orders \4\ and
Non-Displayed Primary Pegged Orders.\5\ The Exchange also proposes to
provide additional optionality for member organizations using the MTS
Modifier with Limit IOC Orders, Non-Displayed Limit Orders, and Mid-
Point Liquidity (``MPL'') Orders. As proposed, member organizations
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(d)(2). In sum, a Non-Displayed Limit Order is
a Limit Order that is not displayed and does not route. Id.
\5\ See Rule 7.31(h)(4). In sum, A Non-Displayed Primary Pegged
Order is a Pegged Order to buy (sell) with a working price that is
pegged to the PBB (PBO), with no offset allowed, that is not
displayed and does not route. Id.
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The MTS Modifier is currently available for Limit IOC Orders \6\
and MPL Orders.\7\ As such, 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. Once resting, MPL 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, MPL 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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\6\ See Rule 7.31(b)(2)(A). In sum, a Limit Order designated IOC
is to be traded in whole or in part on the Exchange as soon as such
order is received, and the quantity not so traded is cancelled. Id.
\7\ See Rule 7.31(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.
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The Exchange proposes to amend its rules to make MTS Modifier
functionality available for two additional non-displayed orders that do
not route, i.e., Non-Displayed Limit Orders and Non-Displayed Primary
Pegged Orders.\8\
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\8\ The Exchange also proposes to make related changes to
paragraph (F) of Rule 7.31(i)(3) and Rule 7.37 to refer to orders
with an MTS Modifier generally to accommodate the additional order
types that may include an MTS Modifier.
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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, NYSE Arca, Inc. (``NYSE Arca''), and
NYSE National, Inc. (``NYSE National'', together with the Exchange
and NYSE Arca, 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(i)(3) currently states that on arrival, 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. As amended,
Rule 7.31(i)(3)(B) would now require a member organization to specify
one of the following instructions with respect to how an order with an
MTS Modifier would trade on arrival (new text underlined):
[[Page 3845]]
[GRAPHIC] [TIFF OMITTED] TN13FE19.001
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 Rules
7.31(i)(3)(F)(i) and 7.36, 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(i)(3)(B)(i) would
describe the existing functionality as one of the instructions that
would be available to member organizations.
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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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For parity allocation purposes, the Exchange proposes to treat an
order with an MTS Modifier that is to execute on entry only with
individual orders that each meet the MTS the same as a resting order
with an MTS Modifier that becomes an Aggressing Order. Rule
7.31(i)(3)(F)(ii) sets forth how a resting order to buy (sell) with an
MTS that becomes an Aggressing Order trades with sell (buy) orders in a
priority category that allocates orders on parity. Because in a parity
allocation model, more than one contra-side resting order may
participate in an allocation, the Aggressing Order to buy (sell) with
an MTS Modifier does not trade with any contra-side orders if at least
one sell (buy) order that would have been considered for allocation
does not meet the MTS. The Exchange proposes that this allocation logic
would be applicable both when an order is resting and becomes an
Aggressing Order (current functionality) or when an order is designated
to execute on entry only with individual orders that each meet the MTS
(proposed functionality). In such scenario, if the arriving order
cannot trade, it would be ranked on the Exchange Book.
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 first 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 two additional non-
displayed, non-routable orders, e.g., Non-Displayed Limit Orders and
Non-Displayed Primary Pegged 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 member organizations 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 providing member organizations 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 member organizations 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 member
organizations 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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The Exchange believes that if a member organization designates an
order with an MTS Modifier, that member organization has instructed the
Exchange not to trade that order with contra-side orders that are
smaller in size than the MTS. Because in a parity allocation, resting
orders are allocated based on their position on an allocation wheel, it
would be consistent with the incoming order's instruction and current
functionality for resting orders with an MTS that become an Aggressing
Order not to trade at all rather than to trade with even one order in
the parity allocation that that does not meet the MTS.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \18\ and Rule 19b-4(f)(6) thereunder.\19\
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.\20\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange 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.
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At any time within 60 days of the filing of such 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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 [email protected]. Please include
File Number SR-NYSE-2019-01 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-NYSE-2019-01. 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-NYSE-2019-01 and should be submitted on
or before March 6, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02115 Filed 2-12-19; 8:45 am]
BILLING CODE 8011-01-P