[Federal Register Volume 85, Number 248 (Monday, December 28, 2020)]
[Notices]
[Pages 84431-84434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28522]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90730; File No. SR-NYSE-2020-87]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend Rule 7.31

December 18, 2020.

I. Introduction

    On October 20, 2020, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant

[[Page 84432]]

to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NYSE 
Rule 7.31 to (1) cancel ALO Orders that lock displayed interest and (2) 
add two new types of Self Trade Prevention (``STP'') modifiers. The 
proposed rule change was published for comment in the Federal Register 
on November 6, 2020.\3\ On December 15, 2020, the Exchange filed 
Amendment No. 1 to the proposed rule change, which replaced and 
superseded the proposed rule change in its entirety.\4\ The Commission 
has received no comments on the proposed rule change. This order 
provides notice of the filing of Amendment No. 1 to the proposed rule 
change, and grants approval to the proposed rule change, as modified by 
Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 90309 (November 2, 
2020), 85 FR 71127 (November 6, 2020).
    \4\ In Amendment No. 1 to the proposed rule change, the Exchange 
removed its proposal to cancel ALO Orders that lock displayed 
interest, and now only proposes to add two new types of STP 
modifiers to NYSE Rule 7.31. Amendment No. 1 is available on the 
Commission's website at https://www.sec.gov/comments/sr-nyse-2020-87/srnyse202087-8146047-226657.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    The Exchange's proposal, as modified by Amendment No. 1, seeks to 
amend NYSE Rule 7.31 to provide for two additional types of STP 
modifiers. Currently, NYSE offers two versions of STP: STP Cancel 
Newest (``STPN'') and STP Cancel Oldest (``STPO''), as described in 
NYSE Rules 7.31(i)(2)(A) and 7.31(i)(2)(B), respectively. NYSE proposes 
to expand its STP offerings to establish STP Decrement and Cancel 
(``STPD'') and STP Cancel Both (``STPC''), which would be set forth in 
proposed Rules 7.31(i)(2)(C) and 7.31(i)(2)(D), respectively. NYSE's 
proposed STPD and STPC offerings are based in part on the STPD and STPC 
offerings on NYSE's affiliates NYSE Arca, Inc. (``NYSE Arca''), NYSE 
American LLC (``NYSE American''), NYSE Chicago, Inc. (``NYSE 
Chicago''), and NYSE National, Inc. (``NYSE National'') (collectively, 
the ``Affiliated Exchanges''),\5\ with differences to separately 
describe order processing for orders that are allocated in price-time 
priority and how STPD and STPC would function consistent with NYSE's 
parity allocation model.
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    \5\ See NYSE Arca Rule 7.31-E(i)(2); NYSE American Rule 
7.31E(i)(2); NYSE National Rule 7.31(i)(2); and NYSE Chicago Rule 
7.31(i)(2).
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    For STPD, proposed NYSE Rule 7.31(i)(2)(C) would provide that an 
incoming order to buy (sell) with an STPD modifier would not trade with 
resting interest to sell (buy) marked with any of the STP modifiers 
from the same Client ID,\6\ as outlined in proposed NYSE Rules 
7.31(i)(2)(C)(i) and (ii).
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    \6\ As specified in current NYSE Rule 7.31(i)(2)(D), for 
purposes of STP, references to Client ID mean a Client ID when using 
Pillar phase I protocols to communicate with NYSE or an MPID when 
using Pillar phase II protocols to communicate with NYSE.
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    Proposed NYSE Rule 7.31(i)(2)(C)(i) would apply to resting orders 
in a priority category that allocates orders on price-time priority. As 
proposed, if both orders with an STP modifier are equivalent in size, 
both orders would be canceled back to the originating member 
organization. If the orders are not equivalent in size, the equivalent 
size would be canceled back to the originating Client ID and the larger 
order would be decremented by the size of the smaller order, with the 
balance remaining on NYSE's Book. The Exchange states that this 
proposed functionality is based on the STPD functionality available on 
the Affiliated Exchanges.
    Proposed NYSE Rule 7.31(i)(2)(C)(ii) would address how STPD would 
function for resting orders in a priority category that allocates 
orders on parity. As proposed, if a resting order would have been 
considered for an allocation, both the portion of the resting order 
that would receive an allocation and the portion of the incoming order 
marked with the STPD modifier that would be allocated to the resting 
order would be canceled back to the originating member organization. 
Resting orders with an STP modifier from the same Client ID that would 
not have been eligible for a parity allocation would remain on NYSE's 
Book. NYSE states that if a member organization designates an order 
with an STPD modifier, that member organization has instructed NYSE to 
cancel the equivalent portion of both the incoming order and resting 
order with an STP modifier from the same Client ID, resulting in the 
larger order being decremented by the size of the smaller order and 
remaining on NYSE's Book. According to the Exchange, in the case of a 
parity allocation, because resting orders are allocated based on their 
position on an allocation wheel,\7\ it would be consistent with the 
incoming order's decrementing instruction to provide a parity 
allocation to an eligible resting order with an STP modifier from the 
same Client ID and cancel both the portion of the resting order 
corresponding to the allocation and the portion of the incoming order 
that would have been allocated to the resting order. The Exchange 
states that this proposed functionality is similar to how NYSE 
currently processes STPO modifiers if a resting order with an STP 
modifier from the same Client ID is in a priority category that 
allocates orders on parity, as described in NYSE Rule 
7.31(i)(2)(B)(ii).
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    \7\ See NYSE Rule 7.37(b)(2).
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    For STPC, proposed NYSE Rule 7.31(i)(2)(D) would provide that an 
incoming order to buy (sell) marked with the STPC modifier would not 
trade with resting interest to sell (buy) marked with any of the STP 
modifiers from the same Client ID, as outlined in proposed NYSE Rules 
7.31(i)(2)(D)(i) and (ii).
    Proposed NYSE Rule 7.31(i)(2)(D)(i) would apply to resting orders 
in a priority category that allocates orders on price-time priority. As 
proposed, the entire size of both orders with an STP modifier would be 
canceled back to the originating member organization. The Exchange 
states that the proposed functionality is based on the STPC 
functionality available on the Affiliated Exchanges.
    Proposed NYSE Rule 7.31(i)(2)(D)(ii) would address how STPC would 
function for resting orders in a priority category that allocates 
orders on parity. As proposed, if a resting order with an STP modifier 
is in a priority category that allocates orders on parity and would 
have been considered for an allocation against an incoming order with 
an STPC modifier, none of the resting orders eligible for a parity 
allocation in that priority category would receive an allocation. The 
first resting order with an STP modifier eligible for a parity 
allocation would be canceled back, as would the incoming order. NYSE 
states that this proposed processing would be consistent with the 
member organization's instruction that both the incoming order and 
resting order with an STP modifier from the same Client ID be canceled 
if there were a potential for an execution between the two orders. The 
Exchange states that this proposed functionality is similar to how NYSE 
currently processes STPN modifiers if a resting order with an STP 
modifier from the same Client ID is in a priority category that 
allocates orders on parity, as described in NYSE Rule 
7.31(i)(2)(A)(ii).
    NYSE also proposes non-substantive changes to renumber current NYSE 
Rules 7.31(i)(2)(C) and 7.31(i)(2)(D) as NYSE Rules 7.31(i)(2)(E) and 
7.31(i)(2)(F) to accommodate the

[[Page 84433]]

addition of the proposed rules governing STPD and STPC. NYSE also 
proposes a conforming change to current NYSE Rules 7.31(d)(4)(F) and 
7.31(i)(2)(C) to clarify that D Orders could only be designated with an 
STPN or STPO modifier (i.e., that the new STPD and STPC modifiers would 
not be available for use with D Orders). NYSE also proposes to amend 
current NYSE Rule 7.31(i)(2)(D) to specify that STPD and STPC modifiers 
would only be available for use with Pillar phase II protocols.
    The Exchange states that, because of the technology changes 
associated with this proposed rule change, it will announce the 
implementation date by Trader Update. Subject to approval of the 
proposed rule change, the Exchange anticipates that the proposed change 
will be implemented in January 2021.

III. Discussion and Commission Findings

    After careful consideration of the proposed rule change, as 
modified by Amendment No. 1, the Commission finds that the Exchange's 
proposal is consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to national securities exchanges. 
In particular, the Commission finds that the Exchange's proposal is 
consistent with Section 6(b)(5) of the Act,\8\ which requires that the 
rules of an exchange be designed, among other things, to promote just 
and equitable principles of trade, 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, and not 
be designed to permit unfair discrimination between customers, issuers, 
brokers or dealers.
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    \8\ 15 U.S.C. 78f(b)(5).
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    With respect to the proposed addition of STPD and STPC modifiers, 
NYSE asserts that the proposed change would remove impediments to and 
perfect the mechanism of a free and open market by allowing member 
organizations to better manage order flow and prevent executions with 
themselves. NYSE asserts that because orders routed by the same member 
organization via different connections may, in certain circumstances, 
be eligible to trade against each other, its proposal to establish 
additional STP modifiers would remove impediments to and perfect the 
mechanism of a free and open market, and serve to protect investors and 
the public interest, by enhancing member organizations' ability to 
prevent potentially undesirable trades and internalize order flow. NYSE 
also asserts that the proposed rule change is designed 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 because the proposed changes are based on the 
approved rules of its Affiliated Exchanges, with modifications to 
address functionality specific to the NYSE's parity allocation model, 
and aligning its STP modifiers with those offered by its Affiliated 
Exchanges would promote consistency for member organizations that are 
members of the Exchange and one or more other Affiliated Exchanges. 
NYSE further asserts that the proposed differences to address how the 
proposed STPD and STPC modifiers would function for resting orders that 
are in a priority category that allocates orders on parity would remove 
impediments to and perfect the mechanism of a free and open market 
because the proposed rules are designed to honor the STPD and STPC 
instructions consistent with the NYSE's parity model. These proposed 
rules are also similar to how NYSE currently processes STPN and STPO 
modifiers for resting orders that are in a priority category that 
allocates orders on parity.
    The Commission believes that the proposed rule change, as amended, 
will make the Exchange's STP rules consistent with the existing rules 
and functionalities of other exchanges. Accordingly, the Commission 
believes that the proposal is reasonably designed to remove impediments 
to and perfect the mechanism of a free and open market and is not 
designed to permit unfair discrimination. Based on the foregoing, the 
Commission therefore finds that the proposed rule change is consistent 
with the Act.\9\
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    \9\ 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).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
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 No. SR-NYSE-2020-87 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 No. SR-NYSE-2020-87. The file 
numbers 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 such 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 publicly available. All submissions 
should refer to File No SR-NYSE-2020-87 and should be submitted on or 
before January 19, 2021.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the amended proposal in the 
Federal Register. In Amendment No. 1, the Exchange removed its proposal 
to cancel ALO Orders that lock displayed interest, and now only 
proposes to add two new types of STP modifiers. Amendment No. 1 does 
not change any substantive provisions of the latter part of the 
proposed rule change regarding STP modifiers that were noticed for 
public comment. As discussed above, the Exchange further states that 
this proposed rule change will make its rules consistent with the rules 
and

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functionalities of other exchanges. Accordingly, the Commission finds 
good cause, pursuant to Section 19(b)(2) of the Act,\10\ to approve the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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    \10\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NYSE-2020-87), as modified 
by Amendment No. 1, be, and hereby is, approved on an accelerated 
basis.
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    \11\ Id.
    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28522 Filed 12-23-20; 8:45 am]
BILLING CODE 8011-01-P