[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40108-40110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15822]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92446; File No. SR-NYSENAT-2021-15]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending Its 
Rules To Add New Subparagraph (i)(4) to Rule 7.31

July 20, 2021.
    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 July 6, 2021, NYSE National, Inc. (``NYSE National'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to its rules to add new subparagraph (i)(4) 
to Rule 7.31 (Orders and Modifiers) regarding orders designated as 
``Retail Orders.'' 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 its rules to add new subparagraph 
(i)(4) to Rule 7.31 (Orders and Modifiers) to add a description of a 
Retail Order modifier.
Proposed Rule Change
    The Exchange proposes to amend Rule 7.31 to add new subparagraph 
(i)(4) to provide for ETP Holders \4\ to designate an order with a 
retail modifier (``Retail Order''). The Exchange proposes that the new 
``Retail Order'' modifier would be used only for purposes of such 
orders being eligible for different rates on its Schedule of Fees and 
Rebates (``Fee Schedule''), and is not proposing to add a retail price-
improvement program for orders designated as ``Retail Orders'' pursuant 
to proposed Rule 7.31(i)(4). Instead, by adding the proposed Retail 
Modifier to proposed Rule 7.31(i)(4) now, the Exchange will have 
flexibility in the future to amend its Fee Schedule to add rates 
designated for ``Retail Orders.''
---------------------------------------------------------------------------

    \4\ See Rules 1.1(h) (definition of ETP) & (i) (definition of 
ETP Holder).

---------------------------------------------------------------------------

[[Page 40109]]

Proposed Modifier for ``Retail Orders''
    To define ``Retail Orders,'' the Exchange proposes to amend Rule 
7.31 (Orders and Modifiers) to add a new subsection (i)(4), titled 
``Retail Modifier'' to establish requirements for Retail Orders on the 
Exchange. These requirements are based on the requirements to enter 
orders with ``retail'' modifiers for purposes of rates available for 
such orders on the Exchange's affiliates, NYSE American LLC (``NYSE 
American''), New York Stock Exchange, LLC (``NYSE''), and NYSE Arca, 
Inc. (``NYSE Arca'').\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release Nos. 92254 (June 24, 
2021) (SR-NYSEAMER-2021-31) (approving the addition of ``retail'' 
order modifier at NYSE American Rule 7.31E(i)(4)); 72253 (May 27, 
2014), 79 FR 31353 (June 2, 2014) (SR-NYSE-2014-26) (approving the 
addition of ``retail'' order modifier at NYSE Rule 13(f)); and 67540 
(July 30, 2012), 77 FR 46539 (August 3, 2012) (SR-NYSEArca-2012-77) 
(approving the addition of ``retail'' order modifier on NYSE Arca). 
These requirements are distinct from, but related to, the 
requirements for a ``Retail Order'' on the Retail Liquidity Programs 
available on NYSE and NYSE Arca. See NYSE Rule 7.44 and NYSE Arca 
Rule 7.44-E. The Exchange does not offer a ``Retail Liquidity 
Program.''
---------------------------------------------------------------------------

    Proposed Rule 7.31(i)(4)(A) would define ``Retail Order'' as an 
agency order or a riskless principal order that meets the criteria of 
FINRA Rule 5320.03 that originates from a natural person and is 
submitted to the Exchange by an ETP Holder, provided that no change is 
made to the terms of the order with respect to price or side of market 
and the order does not originate from a trading algorithm or any other 
computerized methodology. This proposed rule is based on NYSE American 
Rule 7.31E(i)(4)(A) without any differences.
    Proposed Rule 7.31(i)(4)(B) would specify that in order for an ETP 
Holder to access the proposed Retail Order pricing, the ETP Holder 
would be required to designate an order as a Retail Order in the form 
and/or manner prescribed by the Exchange. This proposed rule is based 
on NYSE American Rule 7.31E(i)(4)(B) without any differences.
    Proposed Rule 7.31(i)(4)(C) would specify that in order to submit a 
Retail Order, an ETP Holder must submit an attestation, in a form 
prescribed by the Exchange, that substantially all orders designated as 
``Retail Orders'' would meet the requirements set out in the definition 
above. This proposed rule is based on NYSE American Rule 7.31E(i)(4)(C) 
without any differences.
    Proposed Rule 7.31(i)(4)(D) would specify that an ETP Holder must 
have written policies and procedures reasonably designed to assure that 
it would only designate orders as ``Retail Orders'' if all requirements 
of a Retail Order are met. Such written policies and procedures must 
require the ETP Holder to (i) exercise due diligence before entering a 
Retail Order to assure that entry as a Retail Order is in compliance 
with the requirements specified by the Exchange, and (ii) monitor 
whether orders entered as Retail Orders meet the applicable 
requirements. If an ETP Holder represents Retail Orders from another 
broker-dealer customer, the ETP Holder's supervisory procedures must be 
reasonably designed to assure that the orders it receives from such 
broker-dealer customer that it designates as Retail Orders meet the 
definition of a Retail Order. The ETP Holder must (i) obtain an annual 
written representation, in a form acceptable to the Exchange, from each 
broker-dealer customer that sends it orders to be designated as Retail 
Orders that entry of such orders as Retail Orders would be in 
compliance with the requirements specified by the Exchange, and (ii) 
monitor whether its broker-dealer customer's Retail Order flow 
continues to meet the applicable requirements. This proposed rule is 
based on NYSE American Rule 7.31E(i)(4)(D) without any differences.
    Proposed Rule 7.31(i)(4)(E) would specify that an ETP Holder that 
fails to abide by the requirements specified in paragraphs (i)(4)(A)-
(D) of Rule 7.31 would not be eligible for the Retail Order rates for 
orders it designates as ``Retail Orders.'' This proposed rule is based 
on NYSE American Rule 7.31E(i)(4)(E) without any differences.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\7\ 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 regulating, 
clearing, settling, processing information with respect to, and 
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 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed amendment to Rule 7.31(i) 
to add a Retail Modifier would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because the proposed requirements are based on existing requirements 
for orders designated as ``retail'' on NYSE American, NYSE, and NYSE 
Arca for purposes of fees and credits on those exchanges, and therefore 
are not novel. In addition, the proposed designation, attestation, and 
written policies and procedures are also based on existing procedures 
for similarly-defined orders on NYSE American, NYSE, and NYSE Arca, and 
therefore are not novel.\8\ The Exchange believes that the proposed 
requirements to submit attestations and to maintain written policies 
and procedures are not unfairly discriminatory, because they would 
apply equally to all ETP Holders that seek to enter Retail Orders.
---------------------------------------------------------------------------

    \8\ As noted above (see supra note 5), the proposed changes are 
based not on the Retail Liquidity Programs available on NYSE and 
NYSE Arca, but on the availability of retail fees on those exchanges 
for orders properly designated as ``retail'' orders.
---------------------------------------------------------------------------

    The Exchange further believes that adding the proposed Retail 
Modifier to its rules in advance of amending its Fee Schedule to add 
rates for Retail Orders would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because by adding the Retail Modifier now, the Exchange will have more 
flexibility in the future to amend its Fee Schedule to add rates 
specific to Retail Orders pursuant to a proposed rule change filed 
under Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(2) \10\ 
thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    The proposed retail modifier for purposes of providing different 
rates for ``Retail Orders'' is also based in part on the availability 
of such modifiers on the Nasdaq Stock Market LLC (``Nasdaq'') and Cboe 
EDGX Exchange, Inc. (``EDGX''), which both offer pricing for orders 
designated as ``retail'' under their respective rules, even in the 
absence of a retail price improvement program. For example, Nasdaq 
defines the term ``Designated Retail Order'' on its Price List as:
    [A]n agency or riskless principal order that meets the criteria of 
FINRA Rule 5320.03 and that originates from a natural person and is 
submitted to Nasdaq by a member that designates it pursuant to this 
section, provided that no change is made to the terms of the order with 
respect to price or side of market and the order does not originate

[[Page 40110]]

from a trading algorithm or any other computerized methodology. An 
order from a ``natural person'' can include orders on behalf of 
accounts that are held in a corporate legal form--such as an Individual 
Retirement Account, Corporation, or a Limited Liability Company--that 
has been established for the benefit of an individual or group of 
related family members, provided that the order is submitted by an 
individual. Members must submit a signed written attestation, in a form 
prescribed by Nasdaq, that they have implemented policies and 
procedures that are reasonably designed to ensure that substantially 
all orders designated by the member as ``Designated Retail Orders'' 
comply with these requirements. Orders may be designated on an order 
by-order basis, or by designating all orders on a particular order 
entry port as Designated Retail Orders.\11\
---------------------------------------------------------------------------

    \11\ Nasdaq Equity 7, section 118; see also Cboe EDGX Rule 11.21 
(defining ``Retail Order'' and establishing attestation requirement 
to access preferential pricing for such orders).
---------------------------------------------------------------------------

    Nasdaq does not have a corresponding definition of ``Designated 
Retail Order'' in its trading rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposed 
rule change would promote competition because it is based on the 
availability of similar ``retail'' modifiers on NYSE American, NYSE, 
NYSE Arca, Nasdaq, and EDGX. More specifically, multiple other cash 
equity exchanges offer pricing for orders designated as ``retail'' 
orders, even in the absence of a retail price improvement program on 
those exchanges.\13\ The Exchange believes that the proposed change 
could promote competition between the Exchange and other execution 
venues, including those that currently offer similar order types and 
comparable transaction pricing, by providing the Exchange with the 
flexibility to amend its Fee Schedule to similarly provide pricing for 
orders designated as Retail Orders.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra notes 5, 11.
---------------------------------------------------------------------------

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

    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 \14\ and Rule 19b-
4(f)(6) \15\ thereunder.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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.
---------------------------------------------------------------------------

    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 will institute proceedings to 
determine whether the proposed rule change 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-NYSENAT-2021-15 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-NYSENAT-2021-15. 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-NYSENAT-2021-15 and should be submitted 
on or before August 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15822 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P