[Federal Register Volume 87, Number 19 (Friday, January 28, 2022)]
[Notices]
[Pages 4695-4697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01705]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94030; File No. SR-NYSE-2022-05]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Rule 7.31 To Provide for Inside Limit Orders and Make Other 
Conforming Changes

January 24, 2022.
    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 January 18, 2022, 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 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.
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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 to modify Rule 7.31 to provide for Inside 
Limit Orders and make other conforming changes. 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 modify Rule 7.31 (Orders and Modifiers) to 
add new Rule 7.31(a)(3) to provide for Inside

[[Page 4696]]

Limit Orders and to make other conforming changes in connection with 
the addition of this new order type on the Exchange.
    Proposed Rule 7.31(a)(3) would define an Inside Limit Order as a 
Limit Order that is to be traded at the best price obtainable without 
trading through the NBBO. Proposed Rule 7.31(a)(3)(A) would provide 
that, on arrival, a marketable Inside Limit Order to buy (sell) would 
be assigned a working price of the NBO (NBB) and would trade with all 
sell (buy) orders on the Exchange Book priced at or below (above) the 
NBO (NBB) before routing to the NBO (NBB) on an Away Market. Once the 
NBO (NBB) is exhausted, the Inside Limit Order to buy (sell) would be 
displayed at its working price and be eligible to trade with incoming 
sell (buy) orders at that price. When the updated NBO (NBB) is 
displayed, the Inside Limit Order to buy (sell) would be assigned a new 
working price of the updated NBO (NBB) and would trade with all sell 
(buy) orders on the Exchange Book priced at or below the updated NBO 
(NBB) before routing to the updated NBO (NBB) on an Away Market. Such 
assessment would continue at each new NBO (NBB) until the order is 
filled, no longer marketable, or the limit price is reached. Once the 
Inside Limit Order is no longer marketable, it would be ranked and 
displayed on the Exchange Book.
    Proposed Rule 7.31(a)(3)(B) would provide that an Inside Limit 
Order may not be designated as a Limit IOC Order but may be designated 
as a Limit Routable IOC Order. An Inside Limit Order to buy (sell) 
designated as a Limit Routable IOC Order would trade with sell (buy) 
orders on the Exchange Book priced at or below (above) the NBO (NBB), 
and the quantity not traded would be routed to the NBO (NBB). Any 
unfilled quantity of the Inside Limit Order not traded on the Exchange 
or an Away Market would be cancelled.
    Proposed Rule 7.31(a)(3) is substantially based on rules providing 
for Inside Limit Orders on the NYSE's affiliated exchanges NYSE 
American LLC (``NYSE American''), NYSE Arca, Inc. (``NYSE Arca''), NYSE 
Chicago, Inc. (``NYSE Chicago''), and NYSE National, Inc. (``NYSE 
National'') (collectively, the ``Affiliated Exchanges''), with one 
exception.\4\ The Exchange does not propose to adopt a version of NYSE 
American Rule 7.31E(a)(3)(B), NYSE Arca Rule 7.31-E(a)(3)(B), NYSE 
Chicago Rule 7.31(a)(3)(B), or NYSE National Rule 7.31(a)(3)(B) with 
respect to designating an Inside Limit Order as a Primary Until 9:45 
Order or a Primary Until 3:55 Order because the latter order types are 
not offered on the Exchange.
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    \4\ See NYSE American Rule 7.31E(a)(3); NYSE Arca Rule 7.31-
E(a)(3); NYSE Chicago Rule 7.31(a)(3); and NYSE National Rule 
7.31(a)(3).
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    The Exchange also proposes conforming changes to Rule 7.31(d)(1), 
Rule 7.37(a)(4), and Rule 104(b)(6) to reflect the introduction of 
Inside Limit Orders as follows:
     Rule 7.31(d)(1) currently defines the Reserve Order. The 
Exchange proposes to modify Rule 7.31(d)(1) to provide that a Reserve 
Order is a Limit Order or Inside Limit Order with a quantity of the 
size displayed and with a reserve quantity of the size that is not 
displayed. This proposed change is consistent with NYSE American Rule 
7.31E(d)(1), NYSE Arca Rule 7.31-E(d)(1), NYSE Chicago Rule 7.31(d)(1), 
and NYSE National Rule 7.31(d)(1).
     Rule 7.37(a) specifies that an Aggressing Order will be 
matched for execution against contra-side orders in the Exchange Book 
as provided for in Rule 7.37(b), subject to the provisions of Rule 
7.37(a)(1) through (4). Rule 7.37(a)(4) currently provides that Market 
Orders will be executed at prices that are equal to or better than the 
NBBO. The Exchange proposes to modify Rule 7.37(a)(4) to provide that 
Inside Limit Orders will also be executed at prices that are equal to 
or better than the NBBO, consistent with the parameters of the Inside 
Limit Order as set forth in proposed Rule 7.31(a)(3). This proposed 
change is based on NYSE American Rule 7.37E(a)(4), NYSE Arca Rule 7.37-
E(a)(4), NYSE Chicago Rule 7.37(a)(4), and NYSE National Rule 
7.37(a)(4).
     The Exchange proposes to modify Rule 104(b)(6), which 
specifies the orders and modifiers that DMM units are not permitted to 
enter. The Exchange proposes to add Inside Limit Orders to Rule 
104(b)(6) as an order type that DMM units may not enter.\5\
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    \5\ The Exchange also proposes a non-substantive change to Rule 
104(b)(6) to replace the reference to ``Buy Minus Zero Plus 
Instructions'' with ``Last Sale Peg Orders'' to reflect the updated 
terminology used in its rules for such order type. See, e.g., Rule 
7.31(i)(4).
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    The Exchange believes that the proposed rule change would provide 
enhanced opportunities for trading by adding a new order type and would 
promote consistency between the Exchange's rules and the rules of its 
Affiliated Exchanges governing the same order type. In addition, 
because the purpose of an Inside Limit Order is to assess away market 
displayed interest on a price-by-price basis, thereby slowing down the 
routing of such order rather than simultaneously routing the order to 
away markets at potentially multiple prices, the order would be routed 
to the market participant with the best displayed price, and any 
unfilled portion would not be routed to the next best price level until 
all quotes at the current best bid or offer are exhausted. Accordingly, 
the Inside Limit Order would offer market participants an opportunity 
to obtain improved executions by waiting for changes to the NBBO.
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update. Subject to approval of this proposed rule change, the 
Exchange anticipates that the proposed changes will be implemented in 
February 2022.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934,\6\ in general, and furthers the 
objectives of Section 6(b)(5),\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 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
remove impediments to and perfect the mechanism of a free and open 
market because it would make an additional order type available on the 
Exchange. Moreover, the Inside Limit Order would offer market 
participants opportunities to obtain better execution prices because it 
would wait and adjust for changes to the NBBO (i.e., the order would be 
routed to the market participant with the best displayed price, and any 
unfilled portion would not be routed to the next best price level until 
all quotes at the current best bid or offer are exhausted). The 
Exchange also believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market, as 
well as protect investors and the public interest, because it is based 
on the rules of the Affiliated Exchanges and would therefore promote 
market quality by providing uniformity and continuity across the 
Affiliated exchanges with respect to the same order type.

[[Page 4697]]

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 Exchange believes that 
the proposed rules would promote competition because they would provide 
for an additional order type on the Exchange, thereby offering 
additional trading opportunities for market participants. The Exchange 
further believes that the proposed rules would not impose any burden on 
competition that is not necessary or appropriate because they are 
designed to provide its members with consistency across the Affiliated 
Exchanges, thereby enabling the Exchange to compete with unaffiliated 
exchange competitors that similarly operate multiple exchanges on the 
same trading platforms.

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)(iii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to allow the 
Exchange to implement the proposal when the technology associated with 
the proposed change is available, which is anticipated to be less than 
30 days from the date of this filing. The Exchange states that waiver 
of the operative delay would allow the Exchange to provide a new order 
type that would provide opportunities for improved executions and 
promote consistency with the rules of its Affiliated Exchanges. The 
Commission notes that the operation of the proposed order type is 
substantively similar to that of order types offered by the Exchange's 
affiliates. The Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission waives the 30-day operative delay 
and designates the proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
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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    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 to 
determine whether the proposed rule 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-NYSE-2022-05 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-2022-05. 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-2022-05, and should be submitted on 
or before February 18, 2022.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01705 Filed 1-27-22; 8:45 am]
BILLING CODE 8011-01-P