[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.

[[Page 3846]]

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