[Federal Register Volume 87, Number 116 (Thursday, June 16, 2022)]
[Notices]
[Pages 36356-36357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12941]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 95086; File No. SR-NYSE-2021-74]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of a Proposed Rule Change To Amend the Provisions of 
NYSE Rule 7.35B

June 10, 2022.

I. Introduction

    On December 14, 2021, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant 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 7.35B relating to the 
cancellation of MOC, LOC, and Closing IO Orders before the Closing 
Auction. The proposed rule change was published for comment in the 
Federal Register on December 29, 2021.\3\ On February 8, 2022, pursuant 
to Section 19(b)(2) of the Act,\4\ the Commission extended the time 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
approve or disapprove the proposed change.\5\
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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. 93849 (Dec. 22, 
2021), 86 FR 74204 (Dec. 29, 2021 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94181 (Feb. 8, 
2022), 87 FR 8305 (Feb. 14, 2022).
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    On March 22, 2022, the Commission instituted proceedings under 
Section 19(b)(2)(B) of the Act to determine whether to approve or 
disapprove the proposed rule change.\6\ The Commission has received one 
comment on the proposed rule change.\7\ This Order approves the 
proposal.
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    \6\ See Securities Exchange Act Release No. 94483 (Mar. 22, 
2022), 87 FR 17346 (Mar. 28, 2022) (``OIP'').
    \7\ See letter to Vanessa Countryman, Secretary, Commission, 
from Hope M. Jarkowski, General Counsel, New York Stock Exchange LLC 
(May 24, 2022) (``NYSE Letter'').
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II. Description of the Proposal

    The Exchange proposes to modify NYSE 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,\8\ and to make 
conforming changes to NYSE Rule 7.35B(j)(2)(B).
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    \8\ A ``MOC Order'' or ``Market-on-Close Order'' is a Market 
Order that is to be traded only during a closing auction. See NYSE 
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 
NYSE 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 NYSE Rule 7.31(c)(2)(D).
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    NYSE Rule 7.35B(f)(2)(A) currently provides that, between the 
Closing Auction Imbalance Freeze Time, which is 10 minutes before the 
scheduled end of Core Trading Hours,\9\ and two minutes before the 
scheduled end of the Core Trading Hours, MOC, LOC, and Closing IO 
Orders may be canceled or reduced in size only to correct a Legitimate 
Error.\10\ NYSE Rule 7.35B(f)(2)(B) currently specifies that, except as 
provided for in NYSE Rule 7.35B(j)(2)(B),\11\ 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.
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    \9\ See NYSE Rule 7.35(a)(8).
    \10\ ``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 NYSE Rule 
7.35(a)(13).
    \11\ NYSE 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.
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    The Exchange proposes to modify NYSE 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 is entered between the beginning of 
the Auction Imbalance Freeze and the scheduled end of Core Trading 
Hours would be rejected. Thus, as proposed, requests to cancel, 
replace, or reduce in size a MOC, LOC, or Closing IO Order would have 
to be received before the beginning of the Auction Imbalance Freeze 
(i.e., 10 minutes prior to the scheduled end of Core Trading Hours), 
even in the case of a Legitimate Error. The Exchange represents that, 
since August 2021, 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.\12\
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    \12\ See Notice, supra note 3, 86 FR at 74205.
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    Additionally, NYSE proposes to make the following conforming 
changes to make NYSE Rule 7.35B(j)(2)(B) consistent with the proposed 
changes described above: (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, NYSE Rule 
7.35B(j)(2)(B), as amended, would 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 would be set forth in NYSE Rule 7.35B(f)(2), as amended).

III. Discussion and Commission Findings

    After careful review of the proposal and the comment letter, 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.\13\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section

[[Page 36357]]

6(b)(5) of the Act,\14\ which requires, among other things, that the 
rules of a national securities exchange be 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, and that the rules of a national 
securities exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \13\ 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).
    \14\ 15 U.S.C. 78f(b)(5).
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    In the OIP, the Commission noted that the Exchange had separately 
proposed a different set of changes to its Closing Auction process,\15\ 
and that the Commission was instituting proceedings to allow for 
additional analysis and input concerning the instant proposed rule 
change's consistency with requirements of the Act and to evaluate the 
proposal in light of of other pending proposed changes to the Closing 
Auction.\16\ In response to the OIP, the Exchange states that, because 
the two filings set forth independent proposed changes with distinct 
purposes, the Commission should approve the proposed rule change.\17\ 
The Exchange states that, while the instant proposal addresses certain 
orders that participate in the NYSE Closing Auction, the instant 
proposal is otherwise unrelated to changes proposed under the Closing 
Auction Filing.\18\ The Exchange further states that whereas the 
Closing Auction Filing proposed to modify how the Closing Auction Price 
would be determined and how Designated Market Makers would be able to 
participate in the Closing Auction, the proposed rule change in this 
instance proposes a discrete change pertaining only to the cancellation 
of MOC, LOC, and Closing IO Orders after the Auction Imbalance Freeze 
for the Closing Auction.\19\ In addition, the Exchange has withdrawn 
the Closing Auction Filing.\20\
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    \15\ See Securities Exchange Act Release No. 93037 (Sept. 16, 
2021), 86 FR 52719 (Sept. 22, 2021) (SR-NYSE-2021-44) (``Closing 
Auction Filing'').
    \16\ See OIP, supra note 8, 87 FR at 17347.
    \17\ See NYSE Letter, supra note 9 at 2.
    \18\ See NYSE Letter, supra note 9 at 1.
    \19\ See NYSE Letter, supra note 9 at 1-2.
    \20\ See Securities Exchange Act Release No. 94835 (May 3, 
2022), 87 FR 27669 (May 9, 2022).
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    The Commission finds that the proposed rule change is consistent 
with Section 6(b)(5) of the Act, because it is reasonably designed to 
provide greater certainty regarding MOC, LOC, and Closing IO Orders 
represented in the Exchange's auction imbalance information by 
requiring that any changes to those orders to correct a Legitimate 
Error be made by 10 minutes before the scheduled end of Regular 
Trading, which is the existing deadline for entering a MOC, LOC, or 
Closing IO Order, and because the restriction will apply equally to all 
users of MOC, LOC, or Closing IO Orders.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSE-2021-74) be, and hereby 
is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12941 Filed 6-15-22; 8:45 am]
BILLING CODE 8011-01-P