[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
[Notices]
[Pages 74204-74206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28244]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93849; File No. SR-NYSE-2021-74]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Proposes To Amend the 
Provisions of Rule 7.35B

December 22, 2021.
    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 December 14, 2021, 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.
---------------------------------------------------------------------------

    \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 amend the provisions of Rule 7.35B 
relating to the cancellation of MOC, LOC, and Closing IO Orders before 
the Closing Auction. 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 7.35B (DMM-Facilitated Closing 
Auctions). Specifically, the Exchange proposes to modify Rule 
7.35B(f)(2), which sets forth rules pertaining to the cancellation of 
MOC, LOC, and Closing IO Orders before the Closing Auction Imbalance 
Freeze, and make conforming changes to Rule 7.35B(j)(2)(B).
    Rule 7.35B(f) provides that the Auction Imbalance Freeze for the 
Closing Auction will begin at the Closing Auction Imbalance Freeze Time 
and specifies how order entry and cancellation will be processed during 
the Closing Auction Imbalance Freeze.\4\ Rule 7.35B(f)(2)(A) currently 
provides that, between the beginning of the Auction Imbalance Freeze 
and two minutes before the scheduled end of the Core Trading Hours, 
MOC, LOC, and Closing IO Orders \5\ may be cancelled or reduced in size 
only to correct a Legitimate Error.\6\ Rule 7.35B(f)(2)(B) currently 
specifies that, except as provided for in Rule 7.35B(j)(2)(B),\7\ a 
request to cancel, cancel and replace, or reduce in size a MOC, LOC, or 
Closing IO Order entered two minutes or less before the scheduled end 
of the Core Trading Hours will be rejected.
---------------------------------------------------------------------------

    \4\ The ``Auction Imbalance Freeze'' is the period that begins 
before the scheduled time for an Auction. See Rule 7.35(a)(3). 
``Auction'' means the process for the opening, reopening, or closing 
of the trading of Auction-Eligible Securities on the Exchange, and 
an ``Auction-Eligible Security'' is a security for which the 
Exchange is the primary listing market. See Rules 7.35(a)(1) and 
7.35(a)(2). The ``Closing Auction'' is the Auction that closes 
trading at the end of the Core Trading Session, and the ``Closing 
Auction Imbalance Freeze Time'' is 10 minutes before the scheduled 
end of Core Trading Hours. See Rules 7.35(a)(1)(C) and 7.35(a)(8).
    \5\ A ``MOC Order'' or ``Market-on-Close Order'' is a Market 
Order that is to be traded only during a closing auction. See Rule 
7.31(c)(2)(B). A ``LOC Order'' or ``Limit-on-Close Order'' is a 
Limit Order that is to be traded only during a closing auction. See 
Rule 7.31(c)(2)(A). A ``Closing IO Order'' or ``Closing Imbalance 
Offset Order'' is a Limit Order to buy (sell) an in an Auction-
Eligible Security that it to be traded only in a Closing Auction. 
See Rule 7.31(c)(2)(D).
    \6\ ``Legitimate Error'' means an error in any term of an order, 
such as price, number of shares, side of the transaction (buy or 
sell), or identification of the security. See Rule 7.35(a)(13).
    \7\ Rule 7.35B(j)(2)(B) currently specifies the circumstances 
under which the Exchange may temporarily suspend the prohibition on 
canceling an MOC or LOC Order in connection with the Closing 
Auction.
---------------------------------------------------------------------------

    The Exchange proposes to modify Rule 7.35B(f)(2) to provide that 
any requests to cancel, cancel and replace, or reduce in size a MOC, 
LOC, or Closing IO Order that are entered between the beginning of the 
Auction Imbalance Freeze and the scheduled end of Core Trading Hours 
would be rejected. That is, requests to cancel, replace, and/or reduce 
in size a MOC, LOC, or Closing IO Order must be received prior to the 
beginning of the Auction Imbalance Freeze (i.e., 10

[[Page 74205]]

minutes prior to the scheduled end of Core Trading Hours), even in the 
case of a Legitimate Error. To facilitate this change, the Exchange 
proposes to delete current Rule 7.35B(f)(2)(A) and modify current Rule 
7.35B(f)(2)(B) to replace the reference to ``two minutes or less 
before'' with ``from the beginning of the Auction Imbalance Freeze 
until,'' in relation to the scheduled end of Core Trading Hours. The 
Exchange also proposes to renumber current Rule 7.35B(f)(2)(B) as Rule 
7.35B(f)(2).\8\
---------------------------------------------------------------------------

    \8\ The Exchange also proposes a non-substantive formatting 
change to italicize the heading of Rule 7.35B(f)(2).
---------------------------------------------------------------------------

    The Exchange proposes conforming changes to Rule 7.35B(j)(2)(B) to 
reflect the proposed changes to Rule 7.35B(f)(2), described above. Rule 
7.35B(j)(2)(B) currently provides that the Exchange may temporarily 
suspend the prohibition on cancelling an MOC or LOC Order after two 
minutes before the scheduled end of Core Trading Hours when (1) the 
cancellation is necessary to correct a Legitimate Error, or (2) the 
execution of such an MOC or LOC Order would cause significant price 
dislocation at the close. To make Rule 7.35B(j)(2)(B) consistent with 
the proposed changes to Rule 7.35B(f)(2), the Exchange proposes to (1) 
replace the reference to ``two minutes before the scheduled end of Core 
Trading Hours'' with ``the beginning of the Auction Imbalance Freeze,'' 
and (2) replace the reference to ``paragraph (f)(2)(B)'' with 
``paragraph (f)(2).'' Thus, Rule 7.35B(j)(2)(B), as amended, will 
provide that the Exchange may temporarily suspend the prohibition on 
cancelling an MOC or LOC Order after the beginning of the Auction 
Imbalance Freeze (as such prohibition will be set forth in Rule 
7.35B(f)(2), as amended).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934,\9\ in general, and furthers the 
objectives of Section 6(b)(5),\10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and to remove impediments to and 
perfect the mechanism of a free and open market and, in general, 
protect investors and the public interest because it would streamline 
the Exchange's processing of MOC, LOC, and Closing IO Orders in 
connection with the Auction Imbalance Freeze. Specifically, rather than 
permitting MOC, LOC, and Closing IO Orders to be cancelled, replaced, 
and/or reduced in size for the limited purpose of correcting a 
Legitimate Error up until two minutes before the scheduled end of Core 
Trading Hours, the Exchange proposes to modify Rule 7.35B(f)(2) to 
provide that requests to cancel, cancel and replace, or reduce in size 
such orders would be rejected after the beginning of the Auction 
Imbalance Freeze. The Exchange notes that, since August 2021, it has 
not received any requests to cancel, cancel and replace, or reduce in 
size an MOC, LOC, or Closing IO Order between the beginning of the 
Auction Imbalance Freeze and two minutes before the scheduled end of 
Core Trading Hours. Accordingly, the Exchange believes that the 
proposed rule change would also remove impediments to and perfect the 
mechanism of a free and open market by providing greater determinism of 
the Closing Auction Imbalance Information because MOC, LOC, and Closing 
IO Orders would not be eligible to be cancelled once the Auction 
Imbalance Freeze begins for any reason. The proposed change would also 
eliminate a provision in Exchange rules that is not used by Members, 
thereby simplifying the Exchange's rules and better aligning its rules 
with the behavior of its Members.

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 
would apply to the processing of all MOC, LOC, and Closing IO Orders 
during the Auction Imbalance Freeze and thus would not create any undue 
burden on competition. Moreover, as described above, the Exchange has 
not received any requests to cancel, cancel and replace, or reduce in 
size a MOC, LOC, or Closing IO Order between the beginning of the 
Auction Imbalance Freeze and two minutes before the scheduled end of 
Core Trading Hours since August 2021 and thus believes that modifying 
Rule 7.35B(f)(2) and making conforming changes to Rule 7.35B(j)(2)(B) 
to permit such requests only up until the beginning of the Auction 
Imbalance Freeze 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2021-74 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-2021-74. 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

[[Page 74206]]

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-2021-74 and should be submitted on or before January 19, 2022.
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-28244 Filed 12-28-21; 8:45 am]
BILLING CODE 8011-01-P