[Federal Register Volume 85, Number 1 (Thursday, January 2, 2020)]
[Notices]
[Pages 154-156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28278]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87860; File No. SR-NYSE-2019-071]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change To Add Certain Recently Adopted Trading Rules To the List
of Minor Rule Violations in Rule 9217
December 26, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 16, 2019, the New York Stock Exchange LLC (``NYSE'' or
``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 Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and approving the proposal on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 add certain recently adopted trading rules
to the list of minor rule violations in Rule 9217. 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.
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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 add certain recently adopted trading rules
to the list of minor rule violations in Rule 9217. As discussed below,
the rules the Exchange proposes to add to Rule 9217 are based on the
rules of its affiliate NYSE Arca, Inc. (``NYSE Arca'') or on rules the
Exchange adopted in connection with its transition to Pillar, which
were based on legacy Exchange rules governing auctions in Exchange-
listed securities. In both cases, substantively similar rules to those
the Exchange proposes to add are minor fine eligible rules.
Background
On January 29, 2015, the Exchange announced the implementation of
Pillar, an integrated trading technology platform designed to use a
single specification for connecting to the equities and options markets
operated by the Exchange and its affiliates.\3\ The Exchange underwent
a multi-phase transition to Pillar that culminated with Exchange-listed
securities transitioning to Pillar in August 2019. In order to support
the transition of Exchange-listed securities to Pillar, the Exchange
adopted trading and other rules including rules to conduct auctions in
Pillar that were substantively based on the auction rules then in
effect.\4\ As discussed below, violations of some of those legacy rules
are already eligible for minor rule violations under Rules 9216 and
9217.\5\
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\3\ See Trader Update dated January 29, 2015, available here:
www.nyse.com/pillar.
\4\ See Securities Exchange Act Release No. 82945 (March 26,
2018), 83 FR 13553 (March 29, 2018) (SR-NYSE-2017-36) (``Release No.
82945''); Securities Exchange Act Release No. 85962 (May 29, 2019),
84 FR 26188 (June 5, 2019) (SR-NYSE-2019-05) (``Release No.
85962'').
\5\ Although the Exchange is adding the Pillar equivalent rules
to the list of rules eligible for a minor rule fine in Rule 9217,
the Exchange is not proposing to delete the legacy rules from Rule
9217 at this time.
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Proposed Rule Change
Rule 9217 sets forth the list of rules under which a member
organization or covered person may be subject to a fine under a minor
rule violation plan as described in proposed Rule 9216(b). The Exchange
proposes to add the following rules to the list of rules in Rule 9217
eligible for disposition pursuant to a fine under Rule 9216(b):
Rule 7.16 (Short Sales)
Rule 7.35A(d) (Pre-Opening Indications)
Rule 7.35B (Cancellation of limit-at-the-close (``LOC'')
and market-at-the-close (``MOC'') orders)
Rule 7.35A (Requirements relating to openings, re-
openings, delayed openings, and trading halts)
Rule 7.16 (Short Sales) establishes requirements relating to short
sales for trading on the Pillar trading platform. Rule 7.16 is based on
NYSE Arca Rule 7.16-E and incorporates text from Rule 440B relating to
Exchange-listed securities.\6\ NYSE Arca Rule 7.16-E is eligible for
NYSE Arca's Minor Rule Plan.\7\
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\6\ See Release No. 82945, 83 FR at 13565; Release No. 85962, 84
FR at 26221. Rule 440B (Short Sales) is not applicable to trading on
the Pillar trading platform.
\7\ See NYSE Arca Rule 10.12(i)(1) (NYSE Arca Rule 7.16-E); NYSE
Arca Rule 10.9217(f)(1). NYSE Arca Rule 10.12 is NYSE Arca's legacy
minor rule plan and applies only to matters for which a written
statement was served under Rule 10.12 prior to May 27, 2019;
thereafter, Rules 10.9216(b) and 10.9217 apply. See generally NYSE
Arca Rules 10.0 (preamble) and 10.9001.
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Rules 7.35A and 7.35B, adopted in 2019, were based on legacy Rule
15 (Pre-Opening Indications and Opening Order Imbalance Information),
Rule 123C (The Closing Procedures), and Rule 123D (Openings and Halts
in Trading). Each of these rules are already eligible for minor fines
under NYSE Rule 9217.
Specifically, Rule 7.35A (DMM-Facilitated Core Open and Trading
Halt Auctions) sets forth DMM responsibilities for the opening and
reopening of securities, and is based on legacy Rule 123D with minor
modifications.\8\ Rule 123D is on the list of rules in Rule 9217
eligible for disposition pursuant to a fine under Rule 9216(b).
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\8\ See Release No. 85962, 84 FR at 26202.
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Similarly, Rule 7.35A(d) and its subparagraphs are based on Rule
15(a)-(f) relating to pre-opening indications with non-substantive
differences.\9\ Rule 15 is also on the list of rules in Rule 9217
eligible for disposition pursuant to a fine under Rule 9216(b).
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\9\ See id. at 26204-05.
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Rule 7.35B (DMM-facilitated Closing Auctions) sets forth DMM
responsibilities for the closing of securities, and is based in part on
legacy Rules 123C and 123D.\10\ The entry and cancellation procedures
for MOC and LOC Orders set forth in Rule 7.35B are based on legacy Rule
123C,\11\ which is also on the list of rules in Rule 9217 eligible for
disposition pursuant to a fine under Rule 9216(b).
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\10\ See id. at 26209-17.
\11\ See id.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of 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 and a national market system and, in general, to protect
investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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Summary fines provide a meaningful sanction for minor or technical
violations of rules. The Exchange believes that the proposed rule
change will strengthen the Exchange's ability to carry out its
oversight and enforcement responsibilities in cases where full
disciplinary proceedings are unwarranted in view of the minor nature of
the particular violation.
Specifically, the proposed rule change is designed to prevent
fraudulent and manipulative acts and practices because it will provide
the Exchange the ability to issue a minor rule fine for violations of
its rules where similar conduct is currently eligible for a minor rule
fine where more formal disciplinary action may not be warranted or
appropriate. In addition, the Exchange believes that adding a rule
based on the rules of its affiliate to the Exchange's minor rule plan
would promote fairness and consistency in the marketplace by permitting
the Exchange to issue a minor rule fine for violations of a
substantially similar rule that is eligible for minor rule treatment on
the Exchange's affiliate, thereby harmonizing minor rule plan fines
across affiliated exchanges for the same conduct.
The Exchange also believes that adding rules based on legacy
Exchange rules that are eligible for a minor rule fine also is designed
to prevent fraudulent and manipulative acts and practices because it
will provide the Exchange the ability to be able to continue issuing
minor rule fines for violations of rules involving the same or similar
conduct.
The Exchange further believes that the proposed amendments to Rule
9217 are consistent with Section 6(b)(6) of the Act,\14\ which provides
that members and persons associated with members shall be appropriately
disciplined for
[[Page 156]]
violation of the provisions of the rules of the exchange, by expulsion,
suspension, limitation of activities, functions, and operations, fine,
censure, being suspended or barred from being associated with a member,
or any other fitting sanction. As noted, the proposed rule change would
provide the Exchange ability to sanction minor or technical violations
pursuant to the Exchange's rules to deter the same or violative
activity that is already eligible for a minor rule fine.
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\14\ 15 U.S.C. 78f(b)(6).
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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 change is not
designed to address any competitive issue but rather to update the
Exchange's rules to strengthen the Exchange's ability to carry out its
oversight and enforcement functions and deter potential violative
conduct.
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. 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-2019-071 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-2019-071. 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-2019-071 and should be submitted on
or before January 23, 2020.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\15\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\16\ which requires that the
rules of an exchange be designed to promote just and equitable
principles of trade, to remove impediments and to perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. The Commission
also believes that the proposal is consistent with Sections 6(b)(1) and
6(b)(6) of the Act \17\ which require that the rules of an exchange
enforce compliance with, and provide appropriate discipline for,
violations of Commission and Exchange rules. Finally, the Commission
finds that the proposal is consistent with the public interest, the
protection of investors, or otherwise in furtherance of the purposes of
the Act, as required by Rule 19d-1(c)(2) under the Act,\18\ which
governs minor rule violation plans. The Commission notes that the
Exchange merely proposes to add to its minor rule violation plan Pillar
rules that are identical to the provisions already included in the
plan. Accordingly, the Commission believes the proposal raises no novel
or significant issues.
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\15\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\16\ 15 U.S.C. 78f(b)(5).
\17\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
\18\ 17 CFR 240.19d-1(c)(2).
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For the same reasons discussed above, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\19\ for approving the
proposed rule change prior to the thirtieth day after the date of
publication of the notice of the filing thereof in the Federal
Register. The proposal merely adds Pillar rules, which are
substantively based on legacy rules already in the Exchange's minor
rule violation plan. Accordingly, the Commission believes that a full
notice-and-comment period is not necessary before approving the
proposal.
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\19\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\20\ and Rule 19d-1(c)(2) thereunder,\21\ that the proposed rule change
(SR-NYSE-2019-71) be, and hereby is, approved and declared effective on
an accelerated basis.
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\20\ 15 U.S.C. 78s(b)(2).
\21\ 17 CFR 240.19d-1(c)(2).
\22\ 17 CFR 200.30-3(a)(12).
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For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28278 Filed 12-31-19; 8:45 am]
BILLING CODE 8011-01-P