[Federal Register Volume 84, Number 76 (Friday, April 19, 2019)]
[Notices]
[Pages 16549-16552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07851]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85649; File No. SR-NYSE-2019-16]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7.31(i)(4) Relating to the Last Sale Peg Modifier
April 15, 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 April 2, 2019, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') 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
[[Page 16550]]
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(i)(4) relating to the Last
Sale Peg 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(i)(4) relating to the Last
Sale Peg Modifier, also referred to as a ``Last Sale Peg Order.''
Specifically, the Exchange proposes to specify a circumstance when the
working price of a Last Sale Peg Order would not be adjusted.
Rule 7.31(i)(4) provides that a Last Sale Peg Order is a Non-
Routable Limit Order to buy that will not trade or be displayed at a
price higher than the last-sale price, which is the later of the most
recent last-sale eligible trade \4\ executed on the Exchange or the
most recent consolidated last-sale eligible trade.\5\ Rule
7.31(i)(4)(A) provides that the working price of a Last Sale Peg Order
will be pegged to the lower of the last-sale price, the limit price of
the order, or the PBO. The Last Sale Peg Order is available to buy Non-
Routable Limit Orders only and is designed to assist member
organizations in their compliance with the ``safe harbor'' provisions
of Rule 10b-18 under the Act (``Rule 10b-18'') for issuer
repurchases.\6\ One of the four provisions required to fall under Rule
10b-18's safe harbor is that the purchase price of a security may not
exceed the highest independent bid or the last independent transaction
price for the security.\7\ Because a Last Sale Peg Order will not trade
at a price that is higher than the last-sale price, member
organizations can use this instruction to facilitate their compliance
with at least one of the conditions of the safe harbor provision of
Rule 10b-18.\8\
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\4\ A last-sale eligible trade must be of at least one round
lot.
\5\ A consolidated last-sale eligible trade is the last-sale
eligible trade reported to the responsible single plan processor.
\6\ See 17 CFR 240.10b-18. See also Securities Exchange Act
Release No. 78679 (August 25, 2016), 81 FR 60080 (August 31, 2016)
(SR-NYSE-2016-59).
\7\ See 17 CFR 240.10b-18(b)(3). The other three conditions
relate to time of purchases, volume of purchases, and a requirement
that only one broker or dealer be involved in such repurchases on a
single day.
\8\ See Securities Exchange Act Release No. 85158 (February 15,
2019), 84 FR 5794 (February 22, 2019) (SR-NYSE-2018-52) (``NYSE
Approval Order''). The Exchange does not represent that a Last Sale
Peg Order is guaranteed to meet the requirements of the safe harbor
provision of Rule 10b-18; rather, these instruction are available to
member organizations to facilitate their own compliance with Rule
10b-18.
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Rule 7.31(i)(4)(B) provides that the display price of a Last Sale
Peg Order is the same as the working price, unless the working price is
pegged to the PBO, in which case, the display price is determined under
paragraph (e)(1) of Rule 7.31.\9\ The Exchange proposes to amend Rule
7.31(i)(4)(B) to further specify that the working price of a Last Sale
Peg Order would not be adjusted if the PBO has adjusted to be equal to
or lower than the working price of the Last Sale Order. As a Non-
Routable Limit Order, a Last Sale Peg Order is subject to Rule
7.31(e)(1)(iii), which provides in part that if the PBO of an Away
Market re-prices to be equal to or lower than a Non-Routable Limit
Order's last display price, the order's display price will not change,
but the working price will be adjusted to be equal to its display
price. The Exchange proposes that if the PBO has adjusted in this
manner, the working price of the Last Sale Peg Order would not change
if the last-sale price adjusts to be the same or higher than the
working price.
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\9\ Rule 7.31(e)(1) describes how a Non-Routable Limit Order to
buy that, at the time of entry and after trading with any sell
orders in the Exchange Book priced at or below the PBO is priced.
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Accordingly, as amended, Rule 7.31(i)(4)(B) would provide that if
the PBO has adjusted to be equal to or lower than the working price of
the Last Sale Peg Order, the working price of such order would not
change if the last-sale price adjusts to be the same or higher than the
working price. The Exchange believes that this proposed amendment would
simplify the operation of the Last-Sale Peg Order and eliminate the
need for a price change that would not otherwise be required for such
order to facilitate compliance with Rule 10b-18. This proposed
amendment would not change the behavior of a Last-Sale Peg Order if the
last-sale price adjusts lower. In such case, even if the PBO has
adjusted to be equal to or lower than the working price of a Last Sale
Peg Order, if the last-sale price adjusts to be lower than such working
price, the working price of the Last Sale Peg Order would be adjusted.
For example, if the Away Market PBO is $10.02 and the last-sale
price is $10.00, a Last Sale Peg Order to buy 1,000 shares with a limit
price of $10.05 will be assigned a working and display price of $10.00,
which is the same as the last-sale price. If the Away Market PBO
updates to $9.95, which is lower than the Last Sale Peg Order's working
price, pursuant to Rule 7.31(e)(1)(iii), the Last Sale Peg Order would
remain at $10.00. If, while the PBO is $9.95, there is an update of the
last-sale price to $10.02, with this proposed rule change, the Last
Sale Peg Order would remain at $10.00 and not be adjusted. By contrast,
if, while the PBO is $9.95, there is an update of the last-sale price
to $9.99, the working price of the Last Sale Peg Order would be
adjusted to $9.95, with a display price of $9.94.\10\
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\10\ See Rule 7.31(e)(1)(A).
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The Exchange has not yet implemented Last Sale Peg Orders, which
were recently approved.\11\ The Exchange proposes that, subject to
effectiveness of this proposed rule change, to implement this proposed
rule change at the same time that it introduces Last Sale Peg Orders.
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\11\ See NYSE Approval Order, supra note 8. The Exchange has
announced that it will implement Last Sale Peg Orders on April 29,
2019. See Trader Update dated February 21, 2019, available here:
https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Update_NYSE_Tape_A_NGW_February_2019.pdf.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\12\ in general, and
furthers the objectives of Section 6(b)(5),\13\ 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
[[Page 16551]]
and a national market system and, in general, to protect investors and
the public interest. The Exchange 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 specify in the
Exchange's rules circumstances when a Last Sale Peg Order would not be
re-priced. The proposed rule change would further remove impediments to
and perfect the mechanism of a free and open market and a national
market system because it would simplify operations by reducing the
number of times a Last Sale Peg Order would be required to re-price
while at the same time maintaining the order type's core functionality
to facilitate compliance with Rule 10b-18. Because a Last Sale Peg
Order will continue to not trade at a price that is higher than the
last sale, member organizations can continue use Last Sale Peg Orders
to facilitate their compliance with at least one of the conditions of
the safe harbor provision of Rule 10b-18.\14\ Lastly, the Last Sale Peg
Order was recently approved by the Commission \15\ and this proposal
does not seek to amend its operation in any significant manner.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ See supra note 6.
\15\ See NYSE Approval Order, supra note 8.
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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 proposed rule change is
not designed to have a competitive impact because it is intended to
simplify operations by reducing the number of times a Last Sale Peg
Order would be required to reprice, while maintaining the core
functionality of such order to facilitate compliance with Rule 10b-18.
Nonetheless, the proposed rule change should promote competition by
enhancing the Exchange's rules to provide greater specificity to market
participants and improving the efficiency of the Exchange's order
handling processes.
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 \16\ and Rule 19b-4(f)(6) thereunder.\17\
Because the foregoing 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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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization 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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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of the filing. However,
Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The NYSE asked the Commission to
waive the 30-day operative delay so that the Exchange. Specifically the
Exchange noted that Last Sale Peg Orders were approved by the
Commission on February 15, 2019,\21\ and intends to implement the
orders on April 29, 2019.\22\ The Exchange represents that this
proposed rule change does not seek to amend the operation of the Last
Sale Peg Order in any significant manner and that the proposed rule
change maintains the core functionality of this order type to
facilitate issuer compliance with Exchange Act Rule 10b-18. The
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest, and
accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change operative upon filing.\23\
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\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ See NYSE Approval Order, supra note 8.
\22\ See supra note 11.
\23\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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-NYSE-2019-16 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-2019-16. 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
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submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2019-16 and should be
submitted on or before May 10, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07851 Filed 4-18-19; 8:45 am]
BILLING CODE 8011-01-P