[Federal Register Volume 89, Number 152 (Wednesday, August 7, 2024)]
[Notices]
[Pages 64523-64526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17385]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100633; File No. SR-NYSENAT-2024-22]


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

August 1, 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 July 25, 2024, NYSE National, Inc. (``NYSE National'' or the 
``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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify Rule 7.31 regarding MPL-ALO 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 7.31 regarding MPL-ALO Orders.
    Rule 7.31(d)(3) defines a Mid-Point Liquidity Order (``MPL Order'') 
as a Limit Order to buy (sell) that is not displayed and does not 
route, with a working price at the lower (higher) of the midpoint of 
the PBBO or its limit price. An MPL Order is ranked Priority 3--Non-
Display Orders and is valid for any session.
    Rule 7.31(d)(3)(A) provides that an MPL Order to buy (sell) must be 
designated with a limit price in the MPV for the security and will be 
eligible to trade at the working price of the order.
    Rule 7.31(d)(3)(B) provides that if there is no PBB, PBO, or the 
PBBO is locked or crossed, both an arriving and resting MPL Order will 
wait for a PBBO that is not locked or crossed before being eligible to 
trade. If a resting MPL Order to buy (sell) trades with an MPL Order to 
sell (buy) after there is an unlocked or uncrossed PBBO, the MPL Order 
with the later working time will be the liquidity-removing order.
    Rule 7.31(d)(3)(C) provides that an Aggressing MPL Order to buy 
(sell) will trade at the working price of resting orders to sell (buy) 
when such resting orders have a working price at or below (above) the 
working price of the MPL Order. Resting MPL Orders to buy (sell) will 
trade against all Aggressing Orders to sell (buy) priced at or below 
(above) the working price of the MPL Order.
    Rule 7.31(d)(3)(D) provides that an MPL Order may be designated IOC 
(``MPL-IOC Order''). Subject to such IOC instructions, an MPL-IOC Order 
will follow the same trading and priority rules as an MPL Order, expect 
that an MPL-IOC Order will be rejected if there is no PBBO or the PBBO 
is locked or crossed. An MPL-IOC Order cannot be designated ALO or with 
a Non-Display Remove Modifier.
    Rule 7.31(d)(3)(E) and the subparagraphs thereunder define the MPL-
ALO Order, which is an MPL Order designated with an ALO Modifier.\4\ An 
Aggressing \5\ MPL-ALO

[[Page 64524]]

Order to buy (sell) will trade at the working price of resting orders 
to sell (buy) when such resting orders have a working price below 
(above) the less aggressive of the midpoint of the PBBO or the limit 
price of the MPL-ALO Order, but will not trade with resting orders to 
sell (buy) priced equal to the less aggressive of the midpoint of the 
PBBO or the limit price of the MPL-ALO Order (Rule 7.31(d)(3)(E)(i)). 
If an MPL-ALO Order to buy (sell) cannot trade with a same-priced 
resting order to sell (buy), a subsequently arriving order to sell 
(buy) eligible to trade at the working price of the MPL-ALO Order will 
trade ahead of a resting order to sell (buy) that is not displayed at 
that price; if such resting order to sell (buy) is displayed, the MPL-
ALO Order to buy (sell) will not be eligible to trade at that price 
(Rule 7.31(d)(3)(E)(ii)). An MPL-ALO Order may not be designated with a 
Non-Display Remove Modifier (Rule 7.31(d)(3)(E)(iii)).
---------------------------------------------------------------------------

    \4\ An ALO Order is a Non-Routable Limit Order that, unless it 
receives price improvement, will not remove liquidity from the 
Exchange Book. See NYSE National Rule 7.31(e)(2).
    \5\ An ``Aggressing Order'' is a buy (sell) order that is or 
becomes marketable against sell (buy) interest on the Exchange Book. 
A resting order may become an Aggressing Order if its working price 
changes, if the PBBO or NBBO is updated, because of changes to other 
orders on the Exchange Book, or when processing inbound messages. 
See Rule 7.36(a)(5).
---------------------------------------------------------------------------

Proposed Rule Change
    Currently, Aggressing MPL-ALO Orders to buy (sell) may trade with 
resting orders priced below (above) the less aggressive of the midpoint 
of the PBBO or the limit price of the MPL-ALO Order (i.e., priced below 
(above) the MPL-ALO Order's working price), regardless of the amount of 
price improvement the Aggressing MPL-ALO Order would receive. The 
Exchange proposes to amend Rule 7.31(d)(3)(E)(i) to provide that an 
Aggressing MPL-ALO Order would only be eligible to trade with resting 
orders when it would receive price improvement over the MPL-ALO Order's 
working price of at least one MPV. This proposed change would not 
impact non-Aggressing MPL-ALO Orders (e.g., MPL-ALO Orders resting on 
the Exchange Book). A non-Aggressing MPL-ALO Order would continue to 
provide liquidity at its working price unless it would not be eligible 
to trade as outlined in Rules 7.31(d)(3)(E)(ii)(a) and (b), as amended 
below.
    The Exchange next proposes to amend Rule 7.31(d)(3)(E)(ii) to 
provide that an MPL-ALO Order not eligible to trade as described in 
proposed Rule 7.31(d)(3)(E)(i) would be ranked in the Exchange Book at 
its working price and would not trade at that price if it would lock or 
cross displayed interest or cross non-displayed interest on the 
Exchange Book. Specifically, the Exchange proposes to add new Rules 
7.31(d)(3)(E)(ii)(a) and (b) to provide that resting MPL-ALO Orders 
would not be eligible to trade (a) at a price equal to or above (below) 
any sell (buy) orders that are displayed and that have a working price 
equal to or below (above) the working price of the MPL-ALO Order, or 
(b) at a price above (below) any sell (buy) orders that are not 
displayed and that have a working price below (above) the working price 
of the MPL-ALO Order. The Exchange notes that the circumstances under 
which such orders would not be able to trade are consistent with the 
Exchange's existing priority and ranking rules.
    The Exchange further proposes to renumber current Rule 
7.31(d)(3)(E)(ii) as Rule 7.31(d)(3)(E)(iii) and to amend the text of 
the rule to provide that if an MPL-ALO Order to buy (sell) cannot trade 
with a same-priced resting order to sell (buy) that is not displayed, a 
subsequently arriving order to sell (buy) eligible to trade at the 
working price of the MPL-ALO Order will trade ahead of such resting 
order to sell (buy). This proposed change is not intended to change the 
meaning of the rule, but rather to clarify that, if an MPL-ALO Order is 
resting at the same price as resting non-displayed interest, a 
subsequently arriving order that is eligible to trade with that MPL-ALO 
Order would, as currently, be permitted to trade ahead of such 
interest. The Exchange further proposes to delete the last sentence of 
current Rule 7.31(d)(3)(E)(ii), which provides that an MPL-ALO Order 
would not be eligible to trade at the price of a displayed resting 
order to buy (sell), as duplicative of proposed Rule 
7.31(d)(3)(E)(ii)(a) described above.
    The following example demonstrates how an arriving Aggressing MPL-
ALO Order would trade or be ranked on the Exchange Book, as proposed:
     Assume the PBBO \6\ is $10.00 x $10.05 (midpoint is 
$10.025). On the Exchange Book, there is a Limit Order to sell 90 
shares at $10.02 (``Order 1'') and an MPL Order to sell 100 shares at 
$10.00 (``Order 2''). Order 1 is displayed at its working price of 
$10.02. Order 2 is non-displayed and has a working price at the 
midpoint, $10.025.
---------------------------------------------------------------------------

    \6\ ``Best Protected Bid'' or ``PBB'' means the highest 
Protected Bid, ``Best Protected Offer'' or ``PBO'' means the lowest 
Protected Offer, and ``Protected Best Bid and Offer'' or ``PBBO'' 
means the Best Protected Bid and the Best Protected Offer, as those 
terms are defined in Rule 600(b)(57) of Regulation NMS. See Rule 
1.1(t).
---------------------------------------------------------------------------

     Order 3 is an incoming MPL-ALO Order to buy 100 shares at 
$10.05. Order 3, as an Aggressing MPL-ALO Order, would not trade with 
either Order 1 or Order 2 because it would receive less than $0.01 
price improvement over the midpoint. Pursuant to proposed Rule 
7.31(d)(3)(E)(ii), Order 3 would be ranked on the Exchange Book at its 
working price, $10.025 (which is the midpoint, as the working price of 
an MPL-ALO Order to buy is the lower of the midpoint or the order's 
limit price).
     Order 4 is an incoming MPL-IOC Order to sell 100 shares at 
$10.00. Order 4 would not trade with Order 3 (which is now ranked on 
the Exchange Book at its working price) at $10.025 per proposed Rule 
7.31(d)(3)(E)(ii)(a) because an execution at that price would be at a 
price above displayed interest on the Exchange Book (Order 1 at 
$10.02). Order 4, as an IOC Order, would be cancelled because it does 
not execute.
     Assume Order 1 is cancelled, and Order 5 is an incoming 
MPL-IOC Order to sell 100 shares at $10.00. Order 5 would trade with 
Order 3 (where Order 3 is the liquidity provider) at $10.025, 
consistent with proposed Rule 7.31(d)(3)(E)(iii), because the trade 
would execute at a price that is not above the price of any displayed 
or non-displayed interest on the Exchange Book, although it would be at 
the same price as Order 2 (non-displayed interest on the Exchange 
Book).\7\
---------------------------------------------------------------------------

    \7\ As noted above, Rule 7.31(d)(3)(E)(iii), as amended, 
reflects current Rule 7.31(d)(3)(E)(ii), which provides that an MPL-
ALO Order that is resting at the same price as resting non-displayed 
interest would be permitted to trade with a subsequently arriving 
order that is eligible to trade with that MPL-ALO Order, ahead of 
the non-displayed interest.
---------------------------------------------------------------------------

    The following example demonstrates how an MPL-ALO Order that is 
resting on the Exchange Book and subsequently becomes an Aggressing 
MPL-ALO Order (in this example, when the PBBO is updated) would trade, 
as proposed:
     Assume the PBBO is $10.00 x $10.05 (midpoint is $10.025). 
Order 1 is a non-displayed Limit Order to sell 100 shares at $10.03, 
resting on the Exchange Book at its working price of $10.03. Order 2 is 
an MPL-ALO Order to buy 100 shares at $10.05. Order 2 is resting non-
displayed on the Exchange Book at its working price of $10.025 (which 
is the midpoint, as the working price of an MPL-ALO Order to buy is the 
lower of the midpoint or the order's limit price).
     Assume the PBBO updates to $10.03 x $10.05 (midpoint is 
$10.04). Order 2 reprices to the new midpoint, $10.04, and becomes an 
Aggressing Order because its working price has changed and the PBBO has 
updated. Order 2 will trade as an Aggressing Order (as the liquidity 
taker) with Order 1 at $10.03 because it would receive

[[Page 64525]]

$0.01 price improvement over its working price.
    Finally, the Exchange proposes to renumber current Rule 
7.31(d)(3)(E)(iii) as Rule 7.31(d)(3)(E)(iv) to reflect the addition of 
the new rule text described above, without any changes to the text of 
the rule.
    The Exchange believes that the proposed change, which would allow 
an Aggressing MPL-ALO Order to trade only when it would receive price 
improvement over its working price of at least one MPV, would promote 
higher-quality executions for ETP Holders and provide ETP Holders with 
greater certainty regarding the amount of price improvement such 
executions would receive, thereby encouraging increased order flow to 
the Exchange and enhanced opportunities for order execution for all 
market participants. The Exchange notes that evaluating the economic 
benefit of an execution is not a novel concept on equity exchanges.\8\ 
Accordingly, the Exchange believes that this proposed change, which 
would consider the amount of price improvement that an Aggressing MPL-
ALO Order would receive upon execution, would offer ETP Holders a 
similar benefit to that available on at least one other equity exchange 
for an order type similar to the MPL-ALO Order and could thus promote 
competition among equity exchanges.
---------------------------------------------------------------------------

    \8\ See, e.g., Nasdaq Stock Market LLC, Equity 4, Rule 
4702(b)(5)(A) (defining the Midpoint Peg Post-Only Order, which is 
priced at the midpoint between the NBBO and will execute upon entry 
only in circumstances where economically beneficial to the party 
entering such order).
---------------------------------------------------------------------------

    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 fourth 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would promote just 
and equitable principles of trade, remove impediments to, and perfect 
the mechanism of, a free and open market and a national market system, 
and protect investors and the public interest because allowing an 
Aggressing MPL-ALO Order to trade only when it would receive price 
improvement over its working price of at least one MPV would promote 
higher-quality executions for ETP Holders, thereby encouraging 
increased order flow to the Exchange and enhanced trading opportunities 
for all market participants. The Exchange also believes that the 
proposed conforming changes to Rule 7.31(d)(3)(E) would remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, and protect investors and the public 
interest by clarifying how Aggressing MPL-ALO Orders that would not be 
eligible to trade based on the amount of price improvement would be 
ranked and would trade once resting, in accordance with the Exchange's 
priority and ranking rules. Finally, the Exchange notes that 
considering the economic benefit of an execution is not a novel concept 
and believes that this proposed change would remove impediments to, and 
perfect the mechanism of, a free and open market and a national market 
system by providing ETP Holders with greater certainty as to the amount 
of price improvement they would receive when an Aggressing MPL-ALO 
Order executes, as well as by promoting competition among equity 
exchanges.\11\
---------------------------------------------------------------------------

    \11\ See note 8, supra.
---------------------------------------------------------------------------

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 proposed rule change 
would amend Exchange rules to permit Aggressing MPL-ALO Orders to trade 
only when they would receive price improvement of at least one MPV over 
their working price, thereby providing a minimum amount of price 
improvement for ETP Holders entering such orders. To the extent the 
proposed rule change promotes higher-quality executions on the 
Exchange, the proposed change could encourage increased order flow to 
the Exchange and facilitate additional trading opportunities for all 
market participants. In addition, at least one other equity exchange 
considers the economic benefit to the entering party when evaluating 
whether a similar order type may trade, and the Exchange's proposal 
would thus promote competition among exchanges by providing a minimum 
amount of price improvement to Aggressing MPL-ALO Orders.\12\ The 
Exchange also believes that, to the extent the proposed change would 
increase 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.
---------------------------------------------------------------------------

    \12\ See note 8, supra.
---------------------------------------------------------------------------

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 after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) \14\ thereunder.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \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.
---------------------------------------------------------------------------

    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 proposed 
rule change may become operative upon filing. The Exchange is 
requesting the waiver because it will allow the Exchange to implement 
the proposed change as soon as the associated technology is available, 
which is anticipated to be less than 30 days from

[[Page 64526]]

the date of this filing. The Exchange believes the proposed change 
would provide member organizations with greater certainty regarding the 
amount of price improvement their Aggressing MPL-ALO Orders would 
receive, thereby promoting higher-quality executions and encouraging 
increased order flow to the Exchange for the benefit of all market 
participants. For these reasons, and because the proposed rule change 
does not raise any novel legal or regulatory issues, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\17\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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).
---------------------------------------------------------------------------

    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 to 
determine whether the proposed rule should be approved or disapproved.

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-2024-22 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-2024-22. 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-2024-22 and should 
be submitted on or before August 28, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17385 Filed 8-6-24; 8:45 am]
BILLING CODE 8011-01-P