[Federal Register Volume 84, Number 121 (Monday, June 24, 2019)]
[Notices]
[Pages 29565-29566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13309]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86131; File No. SR-NYSE-2019-25]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Change of 
Amendments To Define ``Net Position Information in DMM Securities'' in 
NYSE Rule 98(c)(5) and the ``the Position of the DMM Unit'' in NYSE 
Rule 104(g)(1)(B)

June 18, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on June 7, 2019, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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 amendments to define ``net position 
information in DMM securities'' in Rule 98(c)(5) and the ``the position 
of the DMM unit'' in Rule 104(g)(1)(B). The proposed 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 amendments to define ``net position 
information in DMM securities'' in Rule 98(c)(5) and ``the position of 
the DMM unit'' in Rule 104(g)(1)(B).
Background
    The Exchange recently amended Rules 98(c)(5) and 104(g),\4\ and the 
amended rules will be implemented when the Exchange transitions trading 
in NYSE-listed securities to its Pillar trading platform.\5\ As 
amended, Rule 104(g) provides that transactions on the Exchange by a 
DMM for the DMM's account must be effected in a reasonable and orderly 
manner in relation to the condition of the general market and the 
market in the particular stock. More particularly, amended Rule 
104(g)(1)(B) prohibits DMM transactions in the last ten minutes of 
trading if the transaction is an ``Aggressing Transaction,'' i.e., the 
DMM reaches across the market, and, as a result, creates a new high/low 
price for the security on the Exchange for the day at the time of the 
DMM's transaction, unless the DMM's Aggressing Transaction:
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    \4\ See Securities Exchange Act Release No. 85637 (April 12, 
2019), 84 FR 16079, 16083 (April 17, 2019) (SR-NYSE-2018-34).
    \5\ The transition of Exchange-listed securities to the Pillar 
trading system is currently anticipated to begin in the third 
quarter of 2019. See Securities Exchange Act Release No. 85637 
(April 12, 2019), 84 FR 16079, 16083 (April 17, 2019) (SR-NYSE-2018-
34) (Approval Order).
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     Matches another market's better bid or offer price;
     brings the price of a security into parity with an 
underlying or related security or asset; or
     liquidates or decreases the position of the DMM unit.
    As amended, Rule 98(c)(5) provides that a member organization 
operating a DMM unit must daily provide the Exchange with ``net 
position information in DMM securities by the DMM unit and any 
independent trading unit of which it is part at such times and in the 
manner prescribed by the Exchange.'' This requirement enables the 
Exchange to effectively monitor for compliance with the third exception 
in Rule 104(g)(1)(B) by utilizing DMM position information provided on 
a same-day basis for its automated surveillances.
    The phrase ``net position information in DMM securities'' in Rule 
98(c)(5) and ``the position of the DMM unit'' in Rule 104(g)(1)(B) are 
not defined in the Exchange's rules.
Proposed Rule Change
    The Exchange proposes to define references to DMM position 
information in the amended versions of Rules 98(c)(5) and 104(g) that 
would be implemented concurrent with the implementation of these 
amended rules.
    First, the Exchange proposes to add a new subsection (A) to Rule 
98(c)(5) that would provide that the phrase ``net position information 
in DMM securities'' in Rule 98(c)(5) means the DMM unit's inventory of 
securities exclusive of pending, unexecuted orders. The proposed 
subsection would also make clear that, as used in Rule 98(c)(5), the 
phrase ``net position information in DMM securities'' is independent of 
any reference to position information in connection with an 
interpretation of Rule 7.16 (Short Sales) or Regulation SHO.\6\ 
Finally, the proposed subsection would state that, consistent with Rule 
7.16(c), a member organization must mark all sell orders as ``long,'' 
``short'' or ``short exempt'' in accordance with the provisions of Rule 
200 of Regulation SHO and related SEC FAQs 2.5, 2.5A, 2.5B, 2.5C and 
2.6.
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    \6\ 17 CFR 242.200.
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    Second, the Exchange proposes a new subsection (i) to Rule 
104(g)(1)(B) that would state that the phrase ``the position of the DMM 
unit'' in Rule 104(g)(1)(B) means the DMM unit's inventory of 
securities exclusive of pending, unexecuted orders and has the same 
meaning as ``net position information in DMM securities'' in Rule 
98(c)(5).
    As noted, under the amended rules, the sole reason DMM position 
information will be relevant is for when a DMM would seek to avail 
itself of the third exception under amended Rule 104(g)(1)(B) for 
Aggressing Transactions in the last ten minutes of trading that would 
liquidate or decrease the DMM unit's position. The primary purpose of 
amended Rule 98(c)(5) is for DMMs to provide net position information 
to the Exchange to facilitate the Exchange's automated surveillance of 
amended Rule 104(g)(1)(B).\7\ In order to assess whether a transaction 
is liquidating or decreasing a position for purposes of

[[Page 29566]]

amended Rule 104(g)(1)(B), the Exchange must know the actual number of 
shares in the DMM unit's inventory at the point in time the Aggressing 
Transactions was effectuated, which would necessarily exclude pending, 
unexecuted shares.
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    \7\ In connection with the implementation of these rules, the 
Exchange will publish regulatory guidance setting forth the 
requirement that DMMs provide net position on a daily basis but in 
no event later than trading day plus one (T+1).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, because it 
is designed 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 protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices by facilitating 
the Exchange's ability to appropriately and efficiently surveil for 
Prohibited Transactions by DMM units in the final ten minutes of 
trading. Similarly, the proposed rule change promotes just and 
equitable principles of trade and removes impediments to and perfects 
the mechanism of a free and open market by ensuring and continuing to 
require that DMM units provide detailed and accurate data to the 
Exchange pursuant to Rule 98. The proposed stated interpretation also 
promotes transparency and clarity so that the Exchange, DMMs, the 
public, and the Commission have a common understanding of the 
circumstances of when a DMM may avail itself of an exception to 
Prohibited Transactions and how DMMs will be reporting position 
information pursuant to Rule 98(c)(5). For the same reasons, the 
proposal is also designed to protect investors as well as the public 
interest because investors will not be harmed and in fact would benefit 
from this increased transparency, thereby reducing potential confusion.

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 
intended to define a phrase in the Exchange's rules in order to promote 
clarity and greater transparency in order to avoid confusion with 
respect to the meaning of a DMM unit's position, and therefore would 
not impose any burden on competition.

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 \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
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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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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-2019-25 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-2019-25. 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-2019-25 and should be submitted on 
or before July 15, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13309 Filed 6-21-19; 8:45 am]
 BILLING CODE 8011-01-P