[Federal Register Volume 89, Number 57 (Friday, March 22, 2024)]
[Notices]
[Pages 20511-20515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06070]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99761; File No. SR-NYSENAT-2024-08]


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

March 18, 2024.
    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 March 6, 2024, NYSE National, Inc. (``NYSE National'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 7.31 to provide for the use of 
Day ISO Reserve 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 amend Rule 7.31 to provide for the use of 
Day ISO Reserve Orders and make

[[Page 20512]]

conforming changes in Rule 7.11 (Limit Up-Limit Down Plan and Trading 
Pauses in Individual Securities Due to Extraordinary Market Volatility) 
and Rule 7.37 (Order Execution and Routing).
Day ISO Orders
    Rule 7.31(e)(3) defines an Intermarket Sweep Order (``ISO'') as a 
Limit Order that does not route and meets the requirements of Rule 
600(b)(38) of Regulation NMS. As described in Rules 7.31(e)(3)(A) and 
subparagraphs (i) and (ii) thereunder, an ISO may trade through a 
protected bid or offer and will not be rejected or cancelled if it 
would lock, cross, or be marketable against an Away Market, provided 
that (1) it is identified as an ISO and (2) simultaneously with its 
routing to the Exchange, the ETP Holder that submits the ISO also 
routes one or more additional Limit Orders, as necessary, to trade 
against the full displayed size of any protected bids (for sell orders) 
or protected offers (for buy orders) on Away Markets.
    Rule 7.31(e)(3)(C) provides that an ISO designated Day (``Day 
ISO''), if marketable on arrival, will immediately trade with contra-
side interest on the Exchange Book up to its full size and limit price. 
Any untraded quantity of a Day ISO will be displayed at its limit price 
and may lock or cross a protected quotation that was displayed at the 
time the order arrived.
Reserve Orders
    Rule 7.31(d)(1) provides for Reserve Orders, which are Limit or 
Inside Limit Orders with a quantity of the size displayed and with a 
reserve quantity (``reserve interest'') of the size that is not 
displayed. The displayed quantity of a Reserve Order is ranked Priority 
2--Display Orders, and the reserve interest is ranked Priority 3--Non-
Display Orders. Both the display quantity and the reserve interest of 
an arriving marketable Reserve Order are eligible to trade with resting 
interest in the Exchange Book or to route to Away Markets. The working 
price of the reserve interest of a resting Reserve Order will be 
adjusted in the same manner as a Non-Displayed Limit Order, as provided 
for in Rule 7.31(d)(2)(A).
    As described in Rule 7.31(d)(1)(A), the display quantity of a 
Reserve Order must be entered in round lots, and the displayed portion 
of a Reserve Order will be replenished when the display quantity is 
decremented to below a round lot. The replenish quantity will be the 
minimum display size of the order or the remaining quantity of the 
reserve interest if it is less than the minimum display quantity.
    Rule 7.31(d)(1)(B) provides that each time the display quantity of 
a Reserve Order is replenished from reserve interest, a new working 
time is assigned to the replenished quantity (each display quantity 
with a different working time is referred to as a ``child'' order), 
while the reserve interest retains the working time of the original 
order entry. In addition, when a Reserve Order is replenished from 
reserve interest and already has two child orders that equal less than 
a round lot, the child order with the later working time will rejoin 
the reserve interest and be assigned the new working time assigned to 
the next replenished quantity. If a Reserve Order is not routable, the 
replenish quantity will be assigned a display and working price 
consistent with the instructions for the order.
    Rule 7.31(d)(1)(C) provides that a Reserve Order must be designated 
Day and may only be combined with a Non-Routable Limit Order or Primary 
Pegged Order.
    Rule 7.31(d)(1)(D) provides that routable Reserve Orders will be 
evaluated for routing both on arrival and each time their display 
quantity is replenished.
    Rule 7.31(d)(1)(E) provides that a request to reduce the size of a 
Reserve Order will cancel the reserve interest before cancelling the 
display quantity, and, if the Reserve Order has more than one child 
order, the child order with the latest working time will be cancelled 
first.
    Rule 7.31(d)(1)(F) provides that, if the PBBO is crossed and the 
display quantity of a Reserve Order to buy (sell) that is a Non-
Routable Limit Order is decremented to less than a round lot, the 
display price and working price of such Reserve Order will not change 
and the reserve interest that replenishes the display quantity will be 
assigned a display price one MPV below (above) the PBO (PBB) and a 
working price equal to the PBO (PBB). Rule 7.31(d)(1)(F) further 
provides that, when the PBBO uncrosses, the display price and working 
price will be adjusted as provided for under Rule 7.31(e)(1) relating 
to Non-Routable Limit Orders or, for an ALO Order designated as 
Reserve, as provided for under Rule 7.31(e)(2)(E).
Day ISO Reserve Orders
    The Exchange proposes to amend Rule 7.31 to provide for the use of 
Day ISO Reserve Orders. The proposed change is not intended to modify 
any current functionality, but would instead facilitate the combination 
of two order types currently offered by the Exchange to offer increased 
efficiency to ETP Holders. As proposed, Day ISO Reserve Orders would, 
except as otherwise noted, operate consistent with current Rule 
7.31(d)(1) regarding Reserve Orders and current Rule 7.31(e)(3)(C) 
regarding Day ISO Orders. To allow for the use of Day ISO Reserve 
Orders, the Exchange first proposes to amend Rule 7.31(d)(1)(C) to 
include Day ISO Orders among the order types that may be designated as 
Reserve Orders.
    The proposed change is intended to allow Day ISO Orders, as 
described in Rule 7.31(e)(3)(C),\4\ to have a displayed quantity, along 
with non-displayed reserve interest, as described in Rule 7.31(d)(1). 
The display quantity of a Day ISO Reserve Order would be replenished as 
provided in Rules 7.31(d)(1)(A) and (B), except that the Exchange 
proposes to add new rule text to Rule 7.31(d)(1)(B)(ii), which 
currently provides that the replenish quantity of a non-routable 
Reserve Order will be assigned a display and working price consistent 
with the instructions for the order. Because Day ISO Reserve Orders 
would be non-routable but could not be replenished at their limit price 
given the specific requirements for ISOs (as described above),\5\ the 
Exchange proposes to amend Rule 7.31(d)(1)(B)(ii) to specify that the 
replenish quantity of a Day ISO Reserve Order would be assigned a 
display price and working price in the same manner as a Non-Routable 
Limit Order, as provided for under paragraph (e)(1) of this Rule.
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    \4\ The Exchange does not currently propose to allow Day ISO ALO 
Orders (as defined in Rule 7.31(e)(3)(D)) to be designated as 
Reserve Orders. Accordingly, the Exchange proposes to amend Rule 
7.31(e)(3)(D) to specify that Day ISO ALOs may not be so designated.
    \5\ Consistent with the requirements for ISOs and the Exchange's 
existing rules governing Day ISOs, a Day ISO Reserve Order, as 
proposed, would only behave as an ISO upon arrival and would not 
otherwise be permitted to trade through a protected bid or offer or 
lock or cross an Away Market.
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    As currently described in Rule 7.31(e)(3)(C), a Day ISO Reserve 
Order, if marketable on arrival, would immediately trade with contra-
side interest on the Exchange Book up to its full size and limit price. 
Currently, Rule 7.31(e)(3)(C) further provides that any untraded 
quantity of a Day ISO will be displayed at its limit price and may lock 
or cross a protected quotation that was displayed at the time of 
arrival of the Day ISO. The Exchange proposes two changes to Rule 
7.31(e)(3)(C) to reflect the operation of Day ISO Reserve Orders:
     The Exchange proposes to amend the second sentence of Rule

[[Page 20513]]

7.31(e)(3)(C) to specify that reserve interest of a Day ISO Reserve 
Order would not be displayed at its limit price because reserve 
interest is, by definition, non-displayed and would instead rest non-
displayed on the Exchange Book at the order's limit price.
     The Exchange proposes to add new subparagraph (i) under 
Rule 7.31(e)(3)(C) to offer ETP Holders the ability to designate a Day 
ISO Reserve Order to be cancelled if, upon replenishment, it would be 
displayed at a price other than its limit price for any reason. The 
Exchange notes that it does not offer this option for Day ISOs not 
designated as Reserve Orders because such orders would never be 
displayed at a price other than their limit price. By contrast, a Day 
ISO Reserve Order could be repriced upon replenishment as described in 
Rule 7.31(d)(1)(B)(ii) (as modified by this filing to include Day ISOs 
designated as Reserve Orders, discussed below).
    This proposed change would provide ETP Holders with increased 
flexibility with respect to order handling and the ability to have 
greater determinism regarding order processing when Day ISO Reserve 
Orders would be repriced to display at a price other than their limit 
price upon replenishment. This designation would be optional, and if 
not designated to cancel, Day ISO Reserve Orders would function as 
otherwise described in this filing. The Exchange notes that it already 
makes this option available for other order types and believes that 
offering it to Day ISO Reserve Orders would promote consistency in 
Exchange rules.\6\
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    \6\ See, e.g., Rules 7.31(e)(1), 7.31(e)(2), and 7.31(e)(3)(D) 
(permitting Non-Routable Limit Orders, displayed ALO Orders, and Day 
ISO ALO Orders, respectively, to be designated to cancel if they 
would be displayed at a price other than their limit price for any 
reason).
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    The working price of the reserve interest of a resting Day ISO 
Reserve Order would be adjusted as provided for in Rule 7.31(d)(1). 
Rule 7.31(d)(1)(E) would also apply to requests to reduce the size of 
Day ISO Reserve Orders.
    Rule 7.31(d)(1)(F) provides that, if the PBBO is crossed and the 
display quantity of a Reserve Order to buy (sell) that is a Non-
Routable Limit Order is decremented to less than a round lot, the 
display price and working price of the order would not change, but the 
reserve interest that replenishes the display quantity would be 
assigned a display price one MPV below (above) the PBO (PBB) and a 
working price equal to the PBO (PBB). When the PBBO uncrosses, the 
display price and working price of a Reserve Order will be adjusted as 
provided for under paragraph (e)(1) of this Rule relating to Non-
Routable Limit Orders. The Exchange proposes to amend Rule 
7.31(d)(1)(F) to provide that the rule would likewise apply to a 
Reserve Order that is a Day ISO. The Exchange further notes that this 
proposed change is consistent with the proposed change to Rule 
7.31(d)(1)(B)(ii), which similarly provides that the replenish quantity 
of a Day ISO Reserve Order would be assigned a display price and 
working price in the same manner as a Non-Routable Limit Order.
    Finally, the Exchange proposes conforming changes to Rule 
7.11(a)(5) and Rule 7.37(g)(2) to reflect the operation of Day ISO 
Reserve Orders.
    Rule 7.11(a)(5) sets forth rules governing how Exchange systems 
will reprice or cancel buy (sell) orders that are priced or could be 
traded above (below) the Upper (Lower) Price Bands consistent with the 
Limit Up-Limit Down Plan. Rule 7.11(a)(5)(ii) currently provides that 
if the Price Bands move and the working price of a resting Market Order 
or Day ISO to buy (sell) is above (below) the updated Upper (Lower) 
Price Band, such orders will be cancelled. The Exchange proposes to 
amend Rule 7.11(a)(5)(ii) to clarify its applicability to any portion 
of a resting Day ISO that is designated Reserve. Thus, if the Price 
Bands move and the working price of any portion of a resting Day ISO 
Reserve Order to buy (sell) is above (below) the updated Upper (Lower) 
Price Band, the entirety of the Day ISO Reserve Order would be 
cancelled.
    Rule 7.37(f)(2) describes the ISO exception to the Order Protection 
Rule. Rule 7.37(f)(2)(A) provides that the Exchange will accept ISOs to 
be executed in the Exchange Book against orders at the Exchange's best 
bid or best offer without regard to whether the execution would trade 
through another market's Protected Quotation. Rule 7.37(f)(2)(B) 
provides that, if an ISO is marked as ``Immediate-or-Cancel,'' any 
portion of the order not executed upon arrival will be automatically 
cancelled; if an ISO is not marked as ``Immediate-or-Cancel,'' any 
balance of the order will be displayed without regard to whether that 
display would lock or cross another market center, so long as the order 
complies with Rule 7.37(e)(3)(C).\7\ The Exchange proposes to amend 
Rule 7.37(f)(2)(B) to specify that, for an ISO not marked as 
``Immediate-or-Cancel,'' any displayed portion of such order would be 
displayed, and any non-displayed portion would remain on the Exchange 
Book. This proposed change is intended to clarify that the reserve 
interest of a Day ISO Reserve Order would not be displayed, but could, 
on arrival only, rest non-displayed at a price that would lock or cross 
another market center if the member organization has complied with Rule 
7.37(e)(3)(C).
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    \7\ Rule 7.37(e)(3)(C) provides that the prohibition against 
Locking and Crossing Quotations described in Rule 7.37(e)(2) does 
not apply when the Locking or Crossing Quotation was an Automated 
Quotation, and the ETP Holder displaying such Automated Quotation 
simultaneously routed an ISO to execute against the full displayed 
size of any locked or crossed Protected Quotation.
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    The proposed change is intended to facilitate the combined use of 
two existing order types available on the Exchange, thereby providing 
ETP Holders with enhanced flexibility, optionality, and efficiency when 
trading on the Exchange. The proposed change could also promote 
increased liquidity and trading opportunities on the Exchange, to the 
benefit of all market participants. The Exchange also believes the 
proposed change would permit the Exchange to offer functionality 
similar to that available on at least one other equities exchange, 
thereby promoting competition among equities exchanges.\8\
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    \8\ See, e.g., Nasdaq Stock Market LLC Rule 4702(b)(1)(C) 
(describing Price to Comply Order, which may be designated with both 
reserve size and as an ISO).
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    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update, which, subject to effectiveness of this proposed rule 
change, will be no later than in the second quarter of 2024.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Act,\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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 allow for the combined use of two existing 
order types available on the Exchange and permit the Exchange to offer 
functionality similar to that already

[[Page 20514]]

available on at least one other equities exchange.\11\ ETP Holders 
would be free to choose to use the proposed Day ISO Reserve Order type 
or not, and the proposed change would not otherwise impact the 
operation of the Reserve Order or Day ISO Order as described in current 
Exchange rules. 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, 
by expanding the options available to ETP Holders when trading on the 
Exchange and promoting increased liquidity and additional trading 
opportunities for all market participants.
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    \11\ See note 8, supra.
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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. In addition, as noted above, 
Exchange believes the proposed rule change would allow the Exchange to 
offer functionality already available on at least one other equities 
exchange \12\ and thus would promote competition among equities 
exchanges. The Exchange also believes that, to the extent the proposed 
change increases opportunities for order execution, the proposed change 
would promote competition by making the Exchange a more attractive 
venue for order flow and enhancing market quality for all market 
participants.
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    \12\ See id.
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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 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)(iii) of the Act \13\ and Rule 
19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization 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) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ 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.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 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. 
The proposal would allow the Exchange to offer functionality similar to 
that already available on at least one other equities exchange.\17\ ETP 
Holders would have the option to use the proposed Day ISO Reserve Order 
type, and the proposed change would not otherwise impact the operation 
of the Reserve Order or Day ISO Order as described in current Exchange 
rules. Waiver of the operative delay would allow the Exchange to more 
expeditiously offer increased flexibility to ETP Holders and promote 
additional trading opportunities for all market participants. 
Therefore, the Commission waives the 30-day operative delay and 
designates the proposal operative upon filing.\18\
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    \17\ See note 8, supra.
    \18\ 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 the 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-2024-08 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-2024-08. 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-NYSENAT-2024-08 and should 
be submitted on or before April 12, 2024.


[[Page 20515]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06070 Filed 3-21-24; 8:45 am]
BILLING CODE 8011-01-P