[Federal Register Volume 89, Number 45 (Wednesday, March 6, 2024)]
[Notices]
[Pages 16071-16073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-04699]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99642; File No. SR-NYSENAT-2024-04]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 7.31(a)(2)(B)

February 29, 2024.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 16, 2024, NYSE National, Inc. (``NYSE National'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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\ 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 7.31(a)(2)(B) regarding Limit 
Order Price Protection. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 7.31(a)(2)(B) (``Limit Order 
Price Protection'') to provide for the application of Limit Order Price 
Protection during the Core Trading Session even where a contra-side NBB 
(NBO) has not been established.
    Currently, Rule 7.31(a)(2)(B) provides that a Limit Order to buy 
(sell) will be rejected if it is priced at or above (below) the greater 
of $0.15 or a specified percentage away from the National Best Offer 
(National Best Bid) (``NBO'' and ``NBB,'' respectively),\3\ and that 
Limit Order Price Protection will not be applied to an incoming Limit 
Order to buy (sell) if there is no NBO (NBB).
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    \3\ For securities with a reference price between $0.00 and 
$25.00, the specified percentage is 10%; for securities with a 
reference price between $25.01 and $50.00, the specified percentage 
is 5%; and for securities with a reference price greater than 
$50.00, the specified percentage is 3%.
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    The Exchange has recently received requests from market 
participants to modify this rule so that during the Core Trading 
Session, Limit Order Price Protection would apply even when no contra-
side NBB or NBO has been established. In such cases, market 
participants have suggested that the Limit Order Price Protection 
calculation should use an alternate reference price, such as the last 
consolidated round-lot price of the trading day or the prior trading 
day's official closing price. That way, even if no contra-side NBB or 
NBO has been established, the Exchange would still apply Limit Order 
Price Protection using the best-available alternate reference price, 
thereby offering market participants greater protections against the 
execution of Limit Orders with aberrant prices during the Core Trading 
Session. The Exchange is aware that the Limit Order Price Protection 
rule on the MIAX Pearl equities exchange (``MIAX Pearl'') currently 
features such a hierarchy of reference prices, so that Limit Order 
Price Protection is applied to all Limit

[[Page 16072]]

Orders, even where no contra-side NBB or NBO has been established.\4\
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    \4\ Under current MIAX Pearl rules, a Limit Order to buy (sell) 
will be rejected if it is priced at or above (below) the greater of 
a specified dollar and percentage away from (1) the PBO (PBB), or, 
if unavailable, (2) the consolidated last sale price disseminated 
during the Regular Trading Hours on trade date, or, if unavailable, 
(3) the prior day's Official Closing Price. See MIAX Pearl Rule 
2614(a)(1)(ix)(A).
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    In light of these requests from market participants, the Exchange 
now proposes to amend Rule 7.31(a)(2)(B) to provide a hierarchy of 
reference prices against which Limit Order Price Protection would apply 
during the Core Trading Session. As in the current rule, during the 
Core Trading Session, a Limit Order to buy (sell) would be rejected if 
it is priced at or above (below) the greater of $0.15 or a specified 
percentage (as set forth in the accompanying table) away from the NBO 
(NBB). But if such NBO (NBB) has not yet been established, the Exchange 
would use as the reference price the last consolidated round-lot price 
of that trading day, or, if none, the prior trading day's Official 
Closing Price.\5\ This proposal is substantively identical to an 
immediately-effective rule change recently filed by the Exchange's 
affiliate exchange, NYSE American LLC (``NYSE American'').\6\
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    \5\ The Exchange's proposed hierarchy of reference prices is 
substantially similar to the hierarchy in the MIAX Pearl rules. The 
only differences are that the Exchange's proposal (a) would continue 
to reference the NBO (NBB) instead of the PBO (PBB), as the 
Exchange's Limit Order Price Protection mechanism has always done; 
and (b) unlike the MIAX Pearl rule, which permits an odd lot to 
serve as ``the consolidated last sale price disseminated during the 
Regular Trading Hours on trade date,'' the Exchange's proposal would 
instead use the last consolidated round-lot price of that trading 
day, which the Exchange believes is a better indication of actual 
market conditions. Both the MIAX Pearl rule and the Exchange's 
proposed rule would use the prior trading day's Official Closing 
Price as the reference price of last resort.
    \6\ See Securities Exchange Act Release No.__ (SR-NYSEAMER-2024-
11). [sic]
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    As in the NYSE American filing, the Exchange does not propose for 
this change to apply during the Early and Late Trading Sessions. This 
is because with respect to both the Early and Late Trading Sessions, 
there is a higher likelihood that overnight news developments may move 
the market more than the percentages specified in the Limit Order Price 
Protection rule. If, in the absence of an NBO (NBB), such percentages 
were applied to the prior trading day's Official Closing Price, this 
might lead the Exchange to reject orders that are appropriately trying 
to establish a quote at the new market level. For this reason, the 
Exchange believes the current rule should continue to govern during the 
Early and Late Trading Sessions, such that if there is no contra-side 
NBO (NBB), Limit Order Price Protection will not be applied.
    Accordingly, the Exchange proposes to amend and reorganize Rule 
7.31(a)(2)(B) into three sub-sections, with sub-section (i) describing 
the relevant reference prices during the Core Trading Session, sub-
section (ii) describing the relevant reference price during the Early 
and Late Trading Sessions, and sub-section (iii) describing the balance 
of the current rule.
    Specifically, the Exchange proposes that new sub-section (i) of 
Rule 7.31(a)(2)(B) would provide that during the Core Trading Session, 
a Limit Order to buy (sell) will be rejected if it is priced at or 
above (below) the greater of $0.15 or a specified percentage (as set 
forth in the accompanying table) away from ``(a) the NBO (NBB), or, if 
none, (b) the last consolidated round-lot price of that trading day, 
or, if none, (c) the prior trading day's Official Closing Price.''
    The Exchange proposes that new sub-section (ii) of the rule would 
provide that during the Early and Late Trading Sessions, a Limit Order 
to buy (sell) will be rejected if it is priced at or above (below) the 
greater of $0.15 or a specified percentage (as set forth in the 
accompanying table) away from the NBO (NBB), and that Limit Order Price 
Protection will not be applied to an incoming Limit Order to buy (sell) 
if there is no NBO (NBB).
    Finally, the Exchange proposes that the balance of the current rule 
be moved to new sub-section (iii) after the new subtitle 
``Applicability.''
    The Exchange does not propose to make any other changes to the 
rule, nor does it propose any changes to the $0.15 or specified 
percentages used in the calculation of Limit Order Price Protection.
Implementation
    The Exchange anticipates implementing the proposed change in the 
first quarter of 2024 and, in any event, will implement the proposed 
rule change no later than the end of June 2024. The Exchange will 
announce the timing of such changes by Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\7\ in general, and with section 
6(b)(5),\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and in general, protect investors and the 
public interest, because the use a substantially similar hierarchy of 
reference prices for the application of Limit Order Price Protection 
when no contra-side NBO or NBB has been established is currently in 
effect on MIAX Pearl and is the subject of an immediately-effective 
rule filing on NYSE American, and therefore is not novel.\9\ The 
Exchange further believes that the proposed change would enhance the 
Exchange's Limit Order Price Protection mechanism during the Core 
Trading Session, because it would apply using the best-available 
alternate reference price when a contra-side NBO or NBB has not been 
established, thereby offering market participants greater protection 
from aberrant prices and improving continuous trading and price 
discovery. In addition, the proposal to enhance Limit Order Price 
Protection by adding alternative reference prices to apply to the Core 
Trading Session would assist with the maintenance of fair and orderly 
markets because such mechanisms protect investors from potentially 
receiving executions away from the prevailing market prices.
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    \9\ See supra notes 5 and 6.
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    The Exchange also believes that it would protect investors and the 
public interest for the Exchange to maintain the current Limit Order 
Price Protection rule for the Early and Late Trading Sessions. With 
respect to both the Early and Late Trading Sessions, there is a higher 
likelihood that overnight news developments may move the market more 
than the percentages specified in the Limit Order Price Protection 
rule. If, in the absence of an NBO (NBB), such percentages were applied 
to the prior trading day's Official Closing Price, this might lead the 
Exchange to reject orders that are appropriately trying to establish a 
quote at the new market level. For this reason, the Exchange believes 
that, for the protection of investors and the public interest, the 
current rule should continue to govern during the Early and Late 
Trading Sessions, such that if there is no contra-side NBO (NBB), Limit

[[Page 16073]]

Order Price Protection will not be applied.

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

    The Exchange believes that the proposed rule change will not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change would 
not address competitive issues but rather would enhance the Exchange's 
Limit Order Price Protection mechanism, to further protect market 
participants from aberrant prices and improve continuous trading and 
price discovery.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
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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 under 
section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSENAT-2024-04 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-2024-04. 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 
10:00 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. 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-NYSENAT-2024-04, and 
should be submitted on or before March 27, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04699 Filed 3-5-24; 8:45 am]
BILLING CODE 8011-01-P