[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77376-77378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24760]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98853; File No. SR-NYSEAMER-2023-54]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change Amending Rule 
935NY

November 3, 2023.
    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 October 27, 2023, NYSE American LLC (``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 self-regulatory organization. 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 amend Rule 935NY (Order Exposure 
Requirements) to include reference to Rule 971.1NYP (Single-Leg 
Electronic Cross Transactions) to exempt orders submitted to the 
Customer Best Execution (``CUBE'') Auction on Pillar from the order 
exposure requirements. 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 935NY (Order Exposure 
Requirements) to include reference to the recently-adopted Rule 
971.1NYP (Single-Leg Electronic Cross Transactions) to exempt orders 
submitted to the CUBE Auction on Pillar from the order exposure 
requirements.\4\
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    \4\ See Securities Exchange Act Release No. 97938 (July 18, 
2023), 88 FR 47536 (July 24, 2023) (NYSEAmer-2023-35) (proposing, on 
an immediately effective basis, new Pillar Rule 971.1NYP (Single-Leg 
Electronic Cross Transactions), which will govern single-leg CUBE 
Auctions on Pillar) (the ``Pillar Single-Leg CUBE Filing''). 
Beginning on October 23, 2023, the Exchange implemented Rule 
971.1NYP in connection with the migration to the Exchange's Pillar 
trading platform pursuant to the scheduled rollout of underlying 
symbols as announced by Trader Update. See e.g., Trader Update, 
October 20, 2023 (announcing that Pillar Migration Tranche 1 will 
include underlying symbol Range: H, I), available here: https://www.nyse.com/trader-update/history#110000748106; and Trader Update, 
January 30, 2023 (announcing Pillar Migration Launch date of October 
23, 2023, for the Exchange), available here: https://www.nyse.com/trader-update/history#110000530919 (the ``Pillar Trader Updates''). 
The Exchange notes that, other than the rule change proposed herein, 
all Pillar-related rules (i.e., with a ``P'' modifier) have either 
been approved or are currently operative and, beginning on October 
23, 2023, will apply to options traded on underlying symbols that 
have been migrated to Pillar.
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    Rule 971.1NY describes the CUBE Auction, which is an electronic 
crossing mechanism for single-leg orders with a price improvement 
auction on the Exchange (the ``CUBE'').\5\ Agency orders (or ``CUBE 
Orders) submitted to the CUBE are exempt from the one-second order 
exposure requirement set forth in Rule 935NY.\6\
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    \5\ See generally Rule 971.1NY(Single-Leg Electronic Cross 
Transactions).
    \6\ Rule 935NY requires, among other things, that a User's 
agency orders be exposed for at least one (1) second before such 
orders may be executed against the User's principal orders, unless 
such agency order is afforded an exemption pursuant to Rule 
935NY(iii). See Rule 935NY(iii).
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    In connection with the Exchange's migration to the Pillar trading 
platform, which began on October 23, 2023, the Exchange adopted Rule 
971.1NYP to describe the operation of the CUBE on Pillar (the ``Pillar 
CUBE'').\7\ Pillar CUBE offers certain enhancements to the existing 
CUBE Auction but the core functionality of Pillar CUBE is substantively 
identical to the existing CUBE Auction.\8\
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    \7\ See generally Rule 971.1NYP(Single-Leg Electronic Cross 
Transactions).
    \8\ See supra note 4, Pillar Single-Leg CUBE Filing. 88 FR 
47536, at 47538 (stating that on Pillar, per Rule 971.1NYP, ``the 
Exchange is not proposing to change the core functionality of CUBE 
Auctions'').

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[[Page 77377]]

    Accordingly, the Exchange believes that it would be consistent with 
the Act to exempt orders submitted to Pillar CUBE from the one-second 
order exposure requirement.\9\ This proposed handling would result in 
consistent treatment of CUBE Orders whether submitted to the existing 
CUBE or to Pillar CUBE. Like the existing CUBE Auction, Pillar CUBE 
provides ATP Holders a minimum of 100 milliseconds to respond to CUBE 
Orders, which should promote timely executions, while ensuring adequate 
exposure of the CUBE Order seeking price improvement.\10\ Further, 
consistent with Rule 935NY, Commentary .01, the ATP Holders that submit 
CUBE Orders--whether to the existing CUBE Auction or to Pillar CUBE--
would do so only when there is a genuine intention to execute a bona 
fide transaction.\11\ Furthermore, as with the existing CUBE Auction, 
any User on the Exchange can respond to a Pillar CUBE which is the same 
as the existing CUBE Auction.\12\
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    \9\ See proposed Rule 935NY(iii) (excluding from the order 
exposure requirement agency orders submitted to ``the Customer Best 
Execution Auction (`CUBE Auction') pursuant to Rules 971.1NY, 
971.1NYP, or 971.2NY'') (emphasis added).
    \10\ See Rule 971.1NYP(c)(1)(B) (regarding a Response Time 
Interval of no less than 100 milliseconds).
    \11\ See Rule 935NY, Commentary .01 (``Rule 935NY prevents a 
User from executing agency orders to increase its economic gain from 
trading against the order without first giving other trading 
interest on the Exchange an opportunity to either trade with the 
agency order or to trade at the execution price when the User was 
already bidding or offering on the book'').
    \12\ See Rule 971.1NY(c)(2)(C) (providing that ``[a]ny ATP 
Holder may respond to the RFR, provided such response is properly 
marked specifying price, size and side of the market (`RFR 
Response'))''; Rule 971.1NY(c)(1)(C) (same).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\13\ in general, and 
furthers the objectives of Section 6(b)(5),\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that adding a cross-reference to newly-
adopted Rule 971.1NYP and thus extending the exe4mption from the one-
second order exposure requirement set forth in Rule 935NY to include 
the Pillar CUBE would remove impediments to and perfect the mechanism 
of a free and open market and a national market system. Pillar CUBE was 
adopted in connection with the Exchange's migration to the Pillar 
trading platform and offers features that are substantively identical 
to the existing CUBE Auction. Accordingly, the Exchange believes that 
it would promote just and equitable principles of trade to exempt 
orders submitted to Pillar CUBE from the one-second order exposure 
requirement, particularly because this would result in consistent 
treatment of CUBE Orders whether submitted to the existing CUBE or to 
Pillar CUBE. Like the existing CUBE Auction, Pillar CUBE provides ATP 
Holders a minimum of 100 milliseconds to respond to CUBE Orders, which 
should promote timely executions, while ensuring adequate exposure of 
Pillar CUBE Orders.\15\ Further, consistent with Rule 935NY, Commentary 
.01, the ATP Holders submitting CUBE Orders--to the existing CUBE or to 
Pillar CUBE--would do so only when there is a genuine intention to 
execute a bona fide transaction.\16\
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    \15\ See Rule 971.1NYP(c)(1)(B) (regarding a Response Time 
Interval of no less than 100 milliseconds).
    \16\ See Rule 935NY, Commentary .01 (``Rule 935NY prevents a 
User from executing agency orders to increase its economic gain from 
trading against the order without first giving other trading 
interest on the Exchange an opportunity to either trade with the 
agency order or to trade at the execution price when the User was 
already bidding or offering on the book'').
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    In addition, the proposed rule change would promote clarity and 
transparency of which rules would be eligible for the exception 
specified in Rule 935NY. Finally, adding the reference to Pillar CUBE 
would promote internal consistency in Exchange rules and would ensure 
that CUBE Orders submitted to Pillar CUBE are afforded the same 
treatment as CUBE Orders submitted to the existing CUBE.

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 does not 
believe that its proposed rule change will impose any burden on intra-
market competition because any User on the Exchange may utilize Pillar 
CUBE and all orders submitted to Pillar CUBE would be treated in the 
same manner for purposes of Rule 935NY (i.e., such orders would be 
exempt from the one-second order exposure requirement).
    The Exchange does not believe that its proposed rule change will 
impose any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because other 
options exchanges are free to adopt (if they haven't already done so) 
electronic crossing mechanisms with price improvement auctions and to 
seek to have orders submitted to such mechanisms exempt from order 
exposure requirements.

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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ 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 so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the operative delay would allow the Exchange to update 
Exchange Rule 935NY without delay to include the Pillar CUBE, in 
addition to the existing CUBE Auction, as an exception to the one-
second exposure requirement in

[[Page 77378]]

Exchange Rule 935NY. The Exchange states that the Pillar CUBE Auction 
offers features that are substantively identical to the Exchange's 
existing CUBE Auction.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission finds that it is consistent with the protection of 
investors and the public interest to waive the 30-day operative delay. 
Exchange Rule 935NY currently allows Users to utilize the CUBE Auction 
to satisfy the requirement in Exchange Rule 935NY that a User expose an 
agency order on the Exchange for at least one second before trading 
with the agency order as principal. The proposal would amend Exchange 
Rule 935NY to allow Users to utilize the Pillar CUBE Auction in 
Exchange Rule 971.1NYP for the same purpose. As discussed above, the 
Exchange states that the Pillar CUBE Auction offers features that are 
substantively identical to the existing CUBE Auction. The Commission 
believes that the proposal does not raise new or novel regulatory 
issues and that waiver of the operative delay will allow the Exchange 
to immediately provide consistent treatment, for purposes of Exchange 
Rule 935NY, of agency orders submitted to the CUBE and the Pillar CUBE 
Auctions. Accordingly, the Commission waives the 30-day operative delay 
and designates the proposal operative upon filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2023-54 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-NYSEAMER-2023-54. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2023-54 and should 
be submitted on or before November 30, 2023.

    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), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24760 Filed 11-8-23; 8:45 am]
BILLING CODE 8011-01-P