[Federal Register Volume 89, Number 60 (Wednesday, March 27, 2024)]
[Notices]
[Pages 21302-21304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99827; File No. SR-NYSEAMER-2024-21]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend Rule 
7.31E

March 21, 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 March 1, 2024, NYSE American LLC (``NYSE American'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described

[[Page 21303]]

in Items I, II, and III 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 7.31E regarding Discretionary 
Pegged Orders. 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 7.31E(h)(3) to modify the 
operation of the Discretionary Pegged Order.
    The Discretionary Pegged Order is a non-displayed order to buy 
(sell) that is pegged to the same side of the PBBO and assigned a 
working price equal to the lower (higher) of the midpoint of the PBBO 
(the ``Midpoint Price'') or the limit price of the order.\3\ A 
Discretionary Pegged Order will exercise the least amount of discretion 
necessary from its working price to its discretionary price (defined as 
the lower (higher) of the Midpoint Price or the limit price of the 
order) to trade with contra-side interest. Rule 7.31E(h)(3)(A) provides 
that a Discretionary Pegged Order must be designated Day.\4\ Rule 
7.31E(h)(3)(B) provides that when exercising discretion, Discretionary 
Pegged Orders maintain their time priority at their working price as 
Priority 3--Non-Display Orders and are prioritized behind Priority 3--
Non-Display Orders with a working price equal to the discretionary 
price of a Discretionary Pegged Order at the time of execution. If 
multiple Discretionary Pegged Orders are exercising price discretion 
during the same book processing action, they maintain their relative 
time priority at the discretionary price.
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    \3\ See Rule 7.31E(h)(3). As defined in NYSE American Rule 1.1, 
``PBBO'' means the Best Protected Bid and the Best Protected Offer.
    \4\ The Exchange also proposes a non-substantive change to Rule 
7.31E(h)(3)(A) to delete an extraneous comma.
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    Rule 7.31E(h)(3)(C) currently provides that a Discretionary Pegged 
Order will not exercise discretion if the PBBO is determined to be 
unstable via a ``quote instability calculation'' that assesses the 
probability of a change to the PBB or PBO. Specifically, as set forth 
in current Rule 7.31E(h)(3)(D), the Exchange uses the quote instability 
calculation along with real-time relative quoting activity of protected 
quotations to assess the probability of an imminent change to the PBBO 
(the ``quote instability factor''). When the quoting activity meets 
predefined criteria described in Rule 7.31E(h)(3)(D)(i)(A) through (C) 
and the quote instability factor calculated is greater than the 
Exchange's quote instability threshold (defined in Rule 
7.31E(h)(3)(D)(i)(D)(2)), the Exchange treats the quote as unstable. 
The quote stability calculation utilizes quote stability coefficients 
and quote stability variables, as defined in Rules 
7.31E(h)(3)(D)(i)(D)(1)(a) and (b). In July 2022, the Exchange modified 
the quote stability calculation to incorporate updated quote stability 
coefficients that would allow the quote stability calculation to 
identify changes to the PBBO more accurately.\5\
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    \5\ See Securities Exchange Act Release No. 95153 (June 24, 
2022), 87 FR 39139 (June 30, 2022) (SR-NYSEAMER-2022-15) (Notice of 
Filing of Amendment No. 2 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 2, To Amend 
Rule 7.31E(h)(3) Relating to Discretionary Pegged Orders); see also 
https://www.nyse.com/trader-update/history#110000436857 (Trader 
Update announcing implementation of updated quote stability 
calculation).
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    The Exchange proposes to amend Rule 7.31E(h)(3) to modify the 
operation of Discretionary Pegged Orders based on the Exchange's 
assessment of the order type's impact on system performance, including 
the system resources required to perform the quote stability 
calculation. Specifically, the Exchange proposes to modify Rule 
7.31E(h)(3) to provide that the Discretionary Pegged Order would not be 
restricted from exercising discretion during periods of quote 
instability, thereby eliminating the need to perform the quote 
stability calculation.
    As proposed, the Discretionary Pegged Order would operate as 
defined in Rule 7.31E(h)(3) and as specified in current Rules 
7.31E(h)(3)(A) and (B), without any changes except that the order would 
continue to exercise the least amount of price discretion necessary 
from its working price to its discretionary price to trade with contra-
side orders on the Exchange Book without regard to potential quote 
instability. The Exchange thus proposes to delete the clause beginning 
with ``except'' in the last sentence of current Rule 7.31E(h)(3). In 
addition, because the Exchange proposes to permit Discretionary Pegged 
Orders to exercise discretion without considering potential quote 
instability, the Exchange would no longer perform the quote instability 
calculation to assess the probability of an imminent change to the PBBO 
or identify periods of quote instability. To effect this change, the 
Exchange proposes to delete current Rules 7.31E(h)(3)(C) and (D), 
including the subparagraphs thereunder. The Exchange also proposes to 
renumber current Rule 7.31E(h)(3)(E) as Rule 7.31E(h)(3)(C) to reflect 
those deletions.
    Although the Discretionary Pegged Order, as modified, would no 
longer provide price protection during periods of quote instability, 
the Exchange believes that it would still provide ETP Holders with the 
flexibility and benefits of an order type that can exercise discretion 
to trade with contra-side interest. The Exchange notes that the 
Discretionary Pegged Order, as modified, would operate identically to 
the Discretionary Pegged Order offered by its affiliated exchange, NYSE 
Arca, Inc. (``NYSE Arca''), and similarly to order types currently 
offered by other equities exchanges.\6\
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    \6\ See NYSE Arca Rule 7.31-E(h)(3) (defining Discretionary 
Pegged Order); see also, e.g., Cboe EDGA Exchange, Inc. Rule 11.8(e) 
(defining the MidPoint Discretionary Order as a limit order to buy 
or sell that is pegged to the NBBO with discretion to execute at 
prices up or down to and including the midpoint of the NBBO); Cboe 
EDGX Exchange, Inc. Rule 11.8(g) (same).
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    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation of the 
proposed change by Trader Update. Subject to effectiveness of this rule 
filing, the Exchange will implement the proposed rule change no later 
than in the third quarter of 2024.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\7\ in general, and furthers the objectives of

[[Page 21304]]

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 to modify the 
operation of the Discretionary Pegged Order, further to the Exchange's 
assessment of the order type's impact on system performance, would 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system, as well as protect investors and 
the public interest, by continuing to provide ETP Holders with the 
benefits of an order type that can exercise discretion to trade with 
contra-side interest, without performing a quote instability 
calculation that would restrict such order from exercising discretion 
during periods of quote instability. The Exchange also believes that 
the proposed modification of the Discretionary Pegged Order would 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system by modifying the Discretionary 
Pegged Order to function similarly to discretionary orders currently 
offered by other equities exchanges.\9\
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    \9\ See note 7, 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. The Exchange believes that 
the proposed change would promote competition by permitting the 
Exchange to offer ETP Holders an order type that can exercise 
discretion to trade with contra-side interest and would not be 
restricted from doing so by a quote stability calculation. The Exchange 
also believes that the proposed modifications to the operation of the 
Discretionary Pegged Order could promote competition because the order 
type would function similarly to order types currently offered by other 
equities exchanges.\10\
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    \10\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 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-NYSEAMER-2024-21 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-2024-21. 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-NYSEAMER-2024-21, and 
should be submitted on or before April 17, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06454 Filed 3-26-24; 8:45 am]
BILLING CODE 8011-01-P