[Federal Register Volume 90, Number 76 (Tuesday, April 22, 2025)]
[Notices]
[Pages 16896-16902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-06858]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102874; File No. SR-NYSETEX-2025-05]
Self-Regulatory Organizations; NYSE Texas, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1.1,
Reinstate Article 16, Rules 1 Through 4 and Relocate Them
April 16, 2025.
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 April 14, 2025, the NYSE Texas, Inc. (``NYSE Texas'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially 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\ 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 (1) amend Rule 1.1 to adopt new
definitions relating to Market Makers and (2) reinstate Article 16,
Rules 1 through 4 relating to the registration and obligations of
Market Makers and relocate them under Rule 7, Section 2. 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
In 2019, the Exchange transitioned to trading on the NYSE Pillar
trading platform (``Pillar'').\4\ Because the Exchange did not
contemplate supporting a Market Maker function at that time, Article 16
(Market Makers), which sets forth Rules 1 through 6 relating to Market
Makers, was designated as inapplicable to trading on Pillar. In
connection with the Exchange's recent proposed change to adopt rules to
permit the listing and trading of certain Exchange Traded Products,\5\
the Exchange proposes to reinstate the rules relating to the
registration and obligation of Market Makers in Article 16, Rules 1
through 4 \6\
[[Page 16897]]
and to relocate them under Rule 7, Section 2 as Rules 7.20 through
7.23, with changes to harmonize them with rules governing Market Makers
on its affiliated exchanges, New York Stock Exchange LLC (``NYSE), NYSE
American LLC (``NYSE American''), and NYSE Arca, Inc. (``NYSE Arca'')
(collectively, the ``Affiliated Exchanges''). The Exchange also
proposes to amend Rule 1.1 to include new defined terms related to the
operation of Market Makers on the Exchange, consistent with the rules
of its Affiliated Exchanges, and to adopt new Rule 7.24 based on NYSE
Arca Rule 7.24-E. The proposed changes would provide for the operation
of Market Makers on the Exchange pursuant to rules consistent with
those of its Affiliated Exchanges and would promote displayed liquidity
and market quality on the Exchange.
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\4\ See Securities Exchange Act Release No. 87264 (October 9,
2019), 84 FR 55345 (October 16, 2019) (SR-NYSECHX-2019-08) (Notice
of Filing of Amendment No. 1 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 1, To Add
Rules To Support the Transition of Trading to the Pillar Trading
Platform).
\5\ See Securities Exchange Act Release No. 102617 (March 12,
2025), 90 FR 12578 (March 18, 2025) (SR-NYSECHX-2025-04) (Notice of
Filing of Proposed Rule Change for Amendments to Rules 1.1, 5, 7.18,
8 and Article 22, Rules 24-27).
\6\ The Exchange does not propose to reinstate Article 16, Rules
5 and 6 to promote consistency between the Exchange's rules
governing Market Makers and those of its Affiliated Exchanges.
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The Exchange proposes the following new rules to govern the
registration and obligations of Market Makers on the Exchange:
Proposed Rule 1.1(m) (definition of Lead Market Maker);
Proposed Rule 1.1(o) (definition of Market Maker);
Proposed Rule 1.1(p) (definition of Market Maker
Authorized Trader);
Proposed Rule 7.20 (Registration of Market Makers);
Proposed Rule 7.21 (Obligations of Market Maker Authorized
Traders (``MMATs''));
Proposed Rule 7.22 (Registration of Market Makers in a
Security);
Proposed Rule 7.23 (Obligations of Market Makers);
Proposed Rule 7.24 (Designated Market Maker Performance
Standards);
Rule 1.1
Rule 1.1 sets forth definitions of terms that are used throughout
the Exchange rules. The Exchange proposes to add the following
definitions to the rule:
The Exchange proposes to amend current Rule 1.1(m) to set
forth the definition of ``Lead Market Maker.'' A ``Lead Market Maker''
would be defined as a registered Market Maker that is the exclusive
Designated Market Maker in listings for which the Exchange is the
primary market. This proposed rule is based on NYSE Arca Rule 1.1
(definition of ``Lead Market Maker'').
The Exchange proposes to amend current Rule 1.1(o) to set
forth the definition of ``Market Maker.'' A ``Market Maker'' would be
defined as a Participant that acts as a Market Maker pursuant to Rule
7. This proposed rule is based on NYSE Rule 1.1(t) (which uses the term
``Non-DMM Market Maker''), NYSE American Rule 1.1E(v), and NYSE Arca
Rule 1.1 (definition of Market Maker).
The Exchange proposes to amend current Rule 1.1(p) to set
forth the definition of ``Market Maker Authorized Trader'' or ``MMAT.''
A ``Market Maker Authorized Trade'' or ``MMAT'' would be defined as an
Authorized Trader (as defined in Rule 1.1(a)) who performs market
making activities pursuant to Rule 7 on behalf of a Market Maker. This
proposed rule is based on NYSE Rule 1.1(p), NYSE American Rule 1.1E(w),
and NYSE Arca Rule 1.1 (definition of Market Maker Authorized Trader).
To accommodate the addition of these definitions, the Exchange also
proposes to adjust the lettering in Rule 1.1. Specifically, current
Rule 1.1(m) defining the term ``Marketable'' would become Rule 1.1(n),
current Rule 1.1(n) defining ``NBBO, Best Protected Bid, Best Protected
Offer, Protected Best Bid and Offer (PBBO)'' would become Rule 1.1(q),
and so forth, with no changes to the substance of the definitions.
Rule 7, Section 2
The Exchange proposes to amend Rule 7, Section 2, which is
currently designated as ``Reserved,'' and rename it ``Market Makers.''
As discussed below, the Exchange proposes new Rules 7.20 through 7.24
to reinstate Article 16, Rules 1 through 4 as Rules 7.20 through 7.23,
and to add new Rule 7.24 under Section 2 of Rule 7, which would locate
the Exchange's proposed rules concerning Market Makers in the same
section as the rules of its Affiliated Exchanges. In addition to
changes as noted below, the Exchange proposes to use ``will'' rather
than ``shall'' in reinstating the text of Article 16, Rules 1 through
4.
Rule 7.20
The Exchange proposes to add Rule 7.20, ``Registration of Market
Makers,'' to set forth the requirements for Participants to apply for
registration as Market Makers. Proposed Rule 7.20 is based on Article
16, Rule 1, except as noted below to harmonize the format and language
of the rule with NYSE Rule 7.20, NYSE American Rule 7.20E, and NYSE
Arca Rule 7.20-E, which set forth substantially similar requirements
for the registration of Market Makers. Proposed Rule 7.20 would require
Participants interested in acting as Market Makers to submit an
application to the Exchange, as well as set forth the criteria the
Exchange may consider in determining whether to approve or disapprove a
prospective Market Maker's application and specify how a Market Maker's
registration may be suspended, terminated, or withdrawn. Proposed Rule
7.20 would also provide that Market Makers are designated as dealers on
the Exchange for all purposes under the Securities Exchange Act of 1934
and the rules and regulations thereunder.
In proposed Rule 7.20(a), the Exchange proposes to adopt the
language of NYSE Rule 7.20(a), NYSE American Rule 7.20E(a), and NYSE
Arca Rule 7.20-E(a) rather than the substantially similar language of
Article 16, Rule 1(a) in providing that Participants may not act as
Market Makers in securities on the Exchange unless they are registered
as a Market Maker in such securities and the Exchange has not suspended
or canceled their registration. Proposed Rule 7.20(a) would also
provide that registered Market Makers are designated as dealers on the
Exchange for all purposes under the Securities Exchange Act of 1934 and
the rules and regulations thereunder, reflecting language from Article
16, Rule 1(f). This proposed change would promote consistency with the
rules of the same number on the Affiliated Exchanges.
The Exchange next proposes to locate part of the text of Article
16, Rule 1(a) in proposed Rule 7.20(b), with non-substantive changes to
conform with NYSE Rule 7.20(b), NYSE American Rule 7.20E(b), and NYSE
Arca Rule 7.20-E(b). Specifically, the Exchange proposes that Rule
7.20(b) would provide that an applicant for registration as a Market
Maker will file an application in writing on such form as the Exchange
may prescribe and that such applications will be reviewed by the
Exchange, considering factors including, but not limited to, a
Participant's capital, operations, personnel, technical resources, and
disciplinary history. Proposed Rule 7.20(b) would also provide that,
after reviewing a Participant's application, the Exchange will either
approve or disapprove the Participant's registration as a Market Maker,
consistent with NYSE Rule 7.20(b), NYSE American Rule 7.20E(b), and
NYSE Arca Rule 7.20-E(b).
In proposed Rule 7.20(c), the Exchange proposes to reflect text
from Article 16, Rules 1(b) \7\ and 1(c), with
[[Page 16898]]
non-substantive conforming changes to harmonize the text with NYSE Rule
7.20(c), NYSE American Rule 7.20E(c), and NYSE Arca Rule 7.20-E(c) and
to update the reference to Article 15. Proposed Rule 7.20(c) would
provide that an applicant's registration as a Market Maker will become
effective upon receipt by the Participant of notice of an approval of
registration by the Exchange and that if an application is disapproved
by the Exchange, the applicant will have an opportunity to be heard
upon the specific grounds for the denial, in accordance with the
provisions of the Rule 10.9500 Series.
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\7\ The Exchange does not propose to retain the last sentence of
Article 16, Rule 1(b), which provides that a Market Maker may only
make markets in securities to which it has been assigned, to promote
consistency with the rules of the Affiliated Exchanges.
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In proposed Rule 7.20(d), the Exchange proposes to reflect the
first sentence of Article 16, Rule 1(d), with non-substantive
conforming changes to harmonize the text with NYSE Rule 7.20(d), NYSE
American Rule 7.20E(d), and NYSE Arca Rule 7.20-E(d) and update the
reference to Rule 4. Proposed Rule 7.20(d) would provide that the
registration of a Market Maker may be suspended or terminated by the
Exchange upon a determination of any substantial or continued failure
by such Market Maker to engage in dealings in accordance with Rule
7.23.
The Exchange proposes to base Rule 7.20(e) on NYSE Rule 7.20(e),
NYSE American Rule 7.20E(e), and NYSE Arca Rule 7.20-E(e). Proposed
Rule 7.20(e) would provide that a Market Maker may withdraw its
registration by written notice to the Exchange, with such withdrawal
becoming effective on the tenth business day following the Exchange's
receipt of the notice, and that a Market Maker that fails to provide
such notice may be subject to formal disciplinary action pursuant to
the Rule 10.9200 Series. In addition, subsequent to withdrawal, the
Participant will not be permitted to re-register as a Market Maker for
a period of six months. Proposed Rule 7.20(e) is similar to Article 16,
Rule 1(d),\8\ with changes to add clarity and specificity in the
Exchange's rules with respect to the notice requirement for a Market
Maker to withdraw its resignation and to promote consistency with the
rules of the Affiliated Exchanges.
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\8\ The Exchange does not propose to reinstate the portions of
Article 16, Rule 1(d) providing (1) that the rule is not intended to
limit any other power of the Exchange to discipline a Participant
pursuant to Exchange rules, (2) that a Participant whose Market
Maker registration has been involuntarily suspended, terminated or
otherwise limited may seek review under the provisions of Article
15, or (3) that the Exchange may involuntarily withdraw a
Participant from one or more assigned securities without suspending
or terminating the Participant's registration as a Market Maker, to
promote consistency with the rules of the Affiliated Exchanges.
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The Exchange does not propose to reinstate Article 16, Rule 1(e),
as it does not believe such emergency procedures are necessary, and to
harmonize proposed Rule 7.20 with the Affiliated Exchanges' rules. The
Exchange also does not propose to reinstate Article 16, Rule 1(f)
(except for the portion noted above in proposed Rule 7.20(a)), in
conformity with the rules of the Affiliated Exchanges.
Rule 7.21
The Exchange proposes to add Rule 7.21 and title it ``Obligations
of Market Maker Authorized Traders (``MMATs'').'' Proposed Rule 7.21
reflects the text of Article 16, Rule 3, with certain changes discussed
below to harmonize the format and language of the rule with NYSE Rule
7.21, NYSE American Rule 7.21E, and NYSE Arca Rule 7.21-E, which set
forth substantially similar requirements. Proposed Rule 7.21 would
provide that Market Maker Authorized Traders (``MMATs'') are permitted
to enter orders only for the account of the Market Maker for which they
are registered. In addition, the proposed rule would specify the
registration requirements for MMATs and the procedures for suspension
and withdrawal of registration of MMATs. Specifically, the proposed
rule would provide that a Market Maker must submit an application to
the Exchange to register an associated person as an MMAT. An MMAT must
meet certain requirements, and a Market Maker must ensure that its
MMATs are qualified to perform market making activities. Proposed Rule
7.21 also provides that the Exchange may suspend or withdraw an MMAT's
registration.
To promote consistency between proposed Rule 7.21 and rules of the
same number on the Affiliated Exchanges, the Exchange proposes the
following changes.
In proposed Rule 7.21(b)(2), to align the original text of Article
16, Rule 3(b)(2) with NYSE Rule 7.21(b)(2), NYSE American Rule
7.21E(b)(2), and NYSE Arca Rule 7.21-E(b)(2), the Exchange proposes to
replace the requirement that an MMAT complete the Securities Trader
Examination (``Series 57''), Securities Industry Essentials
qualification examination, and any other training and/or certification
program as may be required by the Exchange with the requirement that an
MMAT complete the Series 57 and a training and certification program
sponsored by the Exchange. The Exchange further proposes that the
requirement to complete the Series 57 may be waived by the Exchange if
the applicant MMAT has served as a dealer-specialist or market maker on
a registered national securities exchange or association for at least
two consecutive years within three years of the date of application.
This proposed change would harmonize proposed Rule 7.21(b)(2) with the
Affiliated Exchanges' rules of the same number, while maintaining
requirements substantially similar to those outlined in Article 16,
Rule 3(b)(2) for individuals to qualify as MMATs on the Exchange.
In proposed Rule 7.21(b)(3), the Exchange proposes stylistic
changes to the text of Article 16, Rule 3(b)(3) that would not alter
the requirement set forth therein but would harmonize the text of the
rule with NYSE Rule 7.21(b)(3), NYSE American Rule 7.21E(b)(3), and
NYSE Arca Rule 7.21-E(b)(3). Specifically, the Exchange proposes that
the rule would provide that the Exchange may require a Market Maker to
provide additional information the Exchange considers necessary to
establish whether registration should be granted, rather than that the
Exchange may require a Market Maker to provide any and all additional
information the Exchange deems necessary to establish whether
registration should be granted.
To align the original text of Article 16, Rule 3(c)(1)(D) with NYSE
Rule 7.21(c)(1)(D), NYSE American Rule 7.21E(c)(1)(D), and NYSE Arca
Rule 7.21-E(c)(1)(D), the Exchange proposes that Rule 7.21(c)(1)(D)
provide that the Exchange may suspend or withdraw the registration of
an MMAT if the Exchange believes doing so is in the interest of
maintaining fair and orderly markets. This proposed change does not
reflect any substantive differences from Article 16, Rule 3(c)(1)(D)
and would harmonize proposed Rule 7.21(c)(1)(D) with the Affiliated
Exchanges' rules of the same number.
Finally, the Exchange proposes the following non-substantive
conforming changes. In proposed Rule 7.21(b), to conform with the text
of NYSE Rule 7.21(b), NYSE American Rule 7.21E(b), and NYSE Arca Rule
7.21-E(b), the Exchange proposes to omit the phrase ``consistent with
the following minimum requirements.'' To eliminate outdated rule
references and conform proposed Rule 7.21 with the rules of the
Affiliated Exchanges, the Exchange proposes to omit the reference to
Rule 1 in proposed Rule 7.21(b)(1) and the reference to Article 13,
Rule 2 in proposed Rule 7.21(c)(1). In proposed Rule 7.21(c) and the
paragraphs thereunder, the Exchange proposes to use the term
``withdraw'' rather than
[[Page 16899]]
``terminate'' when referring to the discontinuation of an MMAT's
registration. In proposed Rule 7.21(c)(1)(A), the Exchange proposes to
add the words ``and regulations'' to harmonize the text of this Rule
with the text of the Affiliated Exchanges' rules of the same number. In
proposed Rule 7.21(c)(2), the Exchange proposes to replace the outdated
reference to the ``Matching System'' with a reference to the
``Exchange.''
Rule 7.22
The Exchange proposes to add Rule 7.22 and title it ``Registration
of Market Makers in a Security.'' Proposed Rule 7.22 reflects the text
of Article 16, Rule 2, with certain changes and additions discussed
below to harmonize the format and language of the rule with NYSE Rule
7.22, NYSE American Rule 7.22E, and NYSE Arca Rule 7.22-E, which set
forth substantially similar requirements. The Exchange proposes to
title Rule 7.22 ``Registration of Market Makers in a Security,'' rather
than keeping the title of Article 16, Rule 2 (``Assignment of
Securities to Market Makers''), which is a non-substantive change that
would promote consistency with the rules of the Affiliated Exchanges.
Proposed Rule 7.22 would set forth the process for Market Makers to
become registered in a security and the factors the Exchange may
consider in approving such registration. Specifically, Market Makers
may submit a request to the Exchange to be registered in a security,
and the Exchange will evaluate whether to approve such registration,
taking into consideration factors including the Market Maker's
financial resources, experience in making markets, operational
capability, and the character of the market for the security. The
proposed rule would also describe both termination of a Market Maker's
registration in a security by the Exchange and voluntary termination by
a Market Maker.
To promote consistency between proposed Rule 7.22 and rules of the
same number on the Affiliated Exchanges, the Exchange proposes the
following changes.
First, in proposed Rule 7.22(a), the Exchange proposes to update
the description set forth in Article 16, Rule 2(a) of the process by
which Market Makers may seek assignment in securities to conform with
the description set forth in NYSE Rule 7.22(a), NYSE American Rule
7.22E(a), and NYSE Arca Rule 7.22-E(a). In addition, to promote
consistency with the subparagraph numbering under NYSE Rule 7.22, NYSE
American Rule 7.22E, and NYSE Arca Rule 7.22-E, the Exchange proposes
to include the text of Article 16, Rule 2(b) and the subparagraphs
thereunder in proposed Rule 7.22(a), with non-substantive stylistic
changes to harmonize the rule text with the rules of the Affiliated
Exchanges.
Next, the Exchange proposes new Rules 7.22(b) through (d), which do
not have analogues in Article 16, Rule 2, but would serve to conform
proposed Rule 7.22 with rules of the same number on the Affiliated
Exchanges.
Proposed Rule 7.22(b) provides that a Market Maker's registration
in a security may be terminated by the Exchange if the Market Maker
fails to enter quotations in the security within five business days
after the Market Maker's registration in the security becomes
effective. This proposed rule is based on NYSE Rule 7.22(b), NYSE
American Rule 7.22E(b), and NYSE Arca Rule 7.22-E(b), without any
changes.
Proposed Rule 7.22(c) is based on NYSE Arca Rule 7.22-E(c), with a
non-substantive change to reference ``Participants'' instead of ``ETP
Holders.'' Proposed Rule 7.22(c) provides that the Exchange may limit
the number of Designated Market Makers in a security upon prior written
notice to Participants. Proposed Rule 7.22(c) also incorporates rule
text from Interpretations and Policies .01 under Article 16, Rule 2,
which similarly provides that the Exchange may limit the number of
Market Makers assigned to any security at its discretion.\9\
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\9\ The Exchange does not propose to incorporate the first
sentence of Interpretations and Policies .01 under Article 16, Rule
2 (which provides that there may be more than one Market Maker
assigned to a security traded on the Exchange) in proposed Rule
7.22.
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Proposed Rule 7.22(d) is based on NYSE Arca Rule 7.22-E(d), without
any changes. Proposed Rule 7.22(d) would provide that Designated Market
Makers and Lead Market Makers shall be selected by the Exchange, with
such selection based on factors including experience with making
markets in equities; adequacy of capital; willingness to promote the
Exchange as a marketplace; issuer preference; operational capacity;
support personnel; and history of adherence to Exchange rules and
securities laws.
Proposed Rule 7.22(e) reflects the text of Article 16, Rule 2(c),
with non-substantive changes to conform with NYSE Rule 7.22(e), NYSE
American Rule 7.22E(e), and NYSE Arca Rule 7.22-E(e). Proposed Rule
7.22(e) would be subtitled ``Voluntary Termination of Security
Registration,'' consistent with the rules of the Affiliated Exchanges.
In the first paragraph of proposed Rule 7.22(e), the Exchange proposes
to specify that a Market Maker may voluntarily terminate its
registration in a security by providing the Exchange with a one-day
written notice of such termination. This proposed change would reflect
the use of ``terminate'' instead of ``withdraw'' (similar to changes
proposed in Rule 7.21) and provide clarity in proposed Rule 7.22(e)
with respect to the timing of a Market Maker's voluntary termination
notice, in both cases aligning this rule with the Affiliated Exchanges'
rule of the same number. The Exchange further proposes to include a
reference to the Rule 10.9200 Series for added clarity with respect to
the formal disciplinary action that may apply to a Market Maker that
fails to give advanced written notice of termination. Finally, to
promote consistency with NYSE Rule 7.22(e), NYSE American Rule
7.22E(e), and NYSE Arca Rule 7.22-E(e), the Exchange does not propose
to retain the second, third, or fifth sentences of Article 16, Rule
2(c) in proposed Rule 7.22(e).
In proposed Rule 7.22(f), which corresponds to Article 16, Rule
2(e), the Exchange similarly proposes non-substantive, stylistic
changes to conform with NYSE Rule 7.22(f), NYSE American Rule 7.22E(f),
and NYSE Arca Rule 7.22-E(f). The Exchange proposes to omit the
subtitle of Article 16, Rule 2(e) and subparagraph (1) under Article
16, Rule 2(e), collapse the text of subparagraph (2) under Article 16,
Rule 2(e) into proposed Rule 7.22(f), and update the language of
Article 16, Rule 2(e) to harmonize it with the language of NYSE Rule
7.22(f), NYSE American Rule 7.22E(f), and NYSE Arca Rule 7.22-E(f).
Proposed Rule 7.22(f) would thus provide that the Exchange may suspend
or terminate any registration of a Market Maker in a security or
securities under this Rule whenever, in the Exchange's judgment, the
interests of a fair and orderly market are best served by such action.
Finally, the Exchange proposes that the last sentence of Article
16, Rule 2(e), which provides that a Participant whose assignment to
one or more securities has been suspended or terminated may seek review
under Article 15, be reflected in proposed Rule 7.22(g), with a non-
substantive change to update an outdated rule reference. Proposed Rule
7.22(g) would thus provide that a Participant may seek review of any
action taken by the Exchange pursuant to this Rule, including the
denial of the application for, or the termination or suspension of, a
Market Maker's registration in a security or securities, in
[[Page 16900]]
accordance with the Rule 10.9500 Series.
The Exchange does not propose to reinstate the text of Article 16,
Rule 2(d), which provides for the temporary withdrawal of a Market
Maker in assigned securities, in Rule 7.22 and instead proposes to
include rule text relating to the temporary withdrawal of Market Makers
in assigned securities in proposed Rule 7.23, as discussed below.
Rule 7.23
The Exchange proposes to add Rule 7.23 and title it ``Obligations
of Market Makers.'' Proposed Rule 7.23 reflects the text of Article 16,
Rule 4, with certain changes as noted below to harmonize the format and
language of the rule with NYSE Rule 7.23, NYSE American Rule 7.23E, and
NYSE Arca Rule 7.23-E, which provide for substantially similar Market
Maker obligations. Proposed Rule 7.23 would set forth the obligation of
Market Makers to engage in a course of dealings for their own account
to assist in the maintenance, insofar as reasonably practicable, of
fair and orderly markets on the Exchange. The proposed rule would
delineate the specific responsibilities and duties of Market Makers,
including the Two-Sided Obligation applicable to securities in which
the Market Maker is registered and the requirement that the interest
satisfying the Two-Sided Obligation be not more than the Designated
Percentage (as defined in Proposed Rule 7.23) away from the National
Best Bid or Offer (``NBBO''). Proposed Rule 7.23 also provides that
Market Makers will be subject to certain minimum capital requirements
and sets forth the circumstances under which a Market Maker could be
subject to disciplinary action or suspension or revocation of
registration by the Exchange for failure to comply with the course of
dealings obligations set forth in this proposed rule.
In adapting Article 16, Rule 4 into proposed Rule 7.23, the
Exchange proposes the following non-substantive changes to the original
text of Article 16, Rule 4 to conform with the format and language used
in NYSE Rule 7.23, NYSE American Rule 7.23E, and NYSE Arca Rule 7.23-E.
First, in proposed Rule 7.23(a)(1), the Exchange proposes to update
the text of Article 16, Rule 4(a)(1) to conform with the language in
NYSE Rule 7.23(a)(1), NYSE American Rule 7.23E(a)(1), and NYSE Arca
Rule 7.23-E(a)(1) providing that a Market Maker will maintain a Two-
Sided Obligation in securities in which the Market Maker is registered
to trade and, for consistency with the format of the Affiliated
Exchanges' rules, to relocate the rule text under Article 16, Rule 4(d)
below proposed Rule 7.23(a)(1). In proposed Rules 7.23(a)(1)(A) and (B)
(corresponding to Article 16, Rules 4(d)(1) and (2), respectively), the
Exchange proposes to replace references to ``Open Trading State'' with
``Core Trading Hours'' to reflect the current terminology used by the
Exchange. The Exchange similarly proposes to delete an obsolete
reference to ``SNAP Cycle'' in proposed Rule 7.23(a)(1)(A)
(corresponding to Article 16, Rule 4(d)). The Exchange next proposes to
collapse the text of Article 16, Rules 4(d)(2)(A) and (B), which set
forth requirements relating to Bid Quotations and Offer Quotations,
into proposed Rule 7.23(a)(1)(B)(i) relating to Bid (Offer) Quotations,
which would streamline the rule text and promote consistency with NYSE
Rule 7.23(a)(1)(B)(i), NYSE American Rule 7.23E(a)(1)(B)(i), and NYSE
Arca Rule 7.23-E(a)(1)(B)(i).
The Exchange proposes that Rule 7.23(a)(1)(B)(ii) would reflect the
text of Article 16, Rule 4(d)(2)(C).
Next, in proposed Rules 7.23(a)(1)(B)(iii) and (iv), which
correspond to Article 16, Rules 4(d)(2)(D) and (E), respectively, the
Exchange proposes to update the rule text to replace outdated
references to Article 20 and otherwise conform the text of the rules
with NYSE Rules 7.23(a)(1)(B)(iii) and (iv), NYSE American Rules
7.23E(a)(1)(B)(iii) and (iv), and NYSE Arca Rules 7.23-E(a)(1)(B)(iii)
and (iv).
In proposed Rule 7.23(a)(1)(C), which corresponds to Article 16,
Rule 4(d)(2)(F), the Exchange proposes a non-substantive conforming
change to update the rule text to replace ``quoting'' with ``entering
trading interest'' to harmonize the text of the rule with NYSE Rule
7.23(a)(1)(C), NYSE American Rule 7.23E(a)(1)(C), and NYSE Arca Rule
7.23-E(a)(1)(C).
The Exchange does not propose to include the text of Article 16,
Rule 4(d)(2)(G) in proposed Rule 7.23, as the terms ``System
Securities'' and ``System'' are no longer applicable to trading on the
Exchange.
In proposed Rule 7.23(a)(2), which corresponds to Article 16, Rule
4(e), the Exchange proposes non-substantive conforming changes to
harmonize the text of Article 16, Rule 4(e) with NYSE Rule 7.23(a)(2),
NYSE American Rule 7.23E(a)(2), and NYSE Arca Rule 7.23-E(a)(2). The
Exchange proposes to omit the ``Adequate capital'' subtitle and further
proposes that Rule 7.23(a)(2) would provide that ``A Market Maker will
maintain adequate minimum net capital'' rather than ``Each Market Maker
must have and maintain minimum net capital.'' The Exchange proposes to
locate the requirement set forth in Article 16, Rule 4(e) as
subparagraph (a)(2) of Rule 7.23 to conform with the formatting of NYSE
Rule 7.23, NYSE American Rule 7.23E, and NYSE Arca Rule 7.23-E, thereby
promoting consistency among the rules of Affiliated Exchanges.
To account for proposed Rule 7.23(a)(2) as described above, the
Exchange proposes that Article 16, Rules 4(a)(2), (3), and (5)
correspond to proposed Rules 7.23(a)(3) through (5). In adapting
Article 16, Rules 4(a)(2), (3), and (5) to be Rules 7.23(a)(3) through
(5), the Exchange proposes a non-substantive change to begin each rule
with the phrase ``A Market Maker will'' to conform with the format of
NYSE Rule 7.23(a)(3) through (5), NYSE American Rule 7.23E(a)(3)
through (5), and NYSE Arca Rule 7.23-E(a)(3) through (5). The Exchange
does not propose to reinstate Article 16, Rules 4(a)(4) or (a)(6) in
proposed Rule 7.23 to promote consistency with NYSE Rule 7.23, NYSE
American Rule 7.23E, and NYSE Arca Rule 7.23-E.
The Exchange proposes Rule 7.23(b), which is based on NYSE Rule
7.23(b), NYSE American Rule 7.23E(b), and NYSE Arca Rule 7.23-E(b).
Proposed Rule 7.23(b) would provide that a Market Maker must satisfy
the responsibilities and duties as set forth in paragraph (a) of this
Rule during the Core Trading Hours on all days in which the Exchange is
open for business.
The Exchange does not propose to reinstate the text of Article 16,
Rule 4(b) in proposed Rule 7.23 to promote consistency with NYSE Rule
7.23, NYSE American Rule 7.23E, and NYSE Arca Rule 7.23-E.
The Exchange proposes Rule 7.23(c), which reflects the text of
Article 16, Rule 4(c), with certain changes to conform with NYSE Rule
7.23(c), NYSE American Rule 7.23E(c), and NYSE Arca Rule 7.23-E(c). In
proposed Rule 7.23(c), the Exchange proposes to add a reference to
paragraph (a) of this Rule, to omit the references to Rule 1(d) and
Rule 2(e), and to provide that Market Makers may be subject to
disciplinary action, suspension, or revocation of registration by the
Exchange, consistent with NYSE Rule 7.23(c), NYSE American Rule
7.23E(c), and NYSE Arca Rule 7.23-E(c). The Exchange further proposes
to replace references to ``this Rule 4'' with ``this Rule.'' The
Exchange also proposes to include in proposed Rule 7.23(c) that a
Participant may seek review of actions taken by the Exchange taken
pursuant to this Rule in
[[Page 16901]]
accordance with the Rule 10.9200 Series, in conformity with NYSE Rule
7.23(c), NYSE American Rule 7.23E(c), and NYSE Arca Rule 7.23-E(c).
Finally, the Exchange proposes Rule 7.23(d), which is based on NYSE
Rule 7.23(d), NYSE American Rule 7.23E(d), and NYSE Arca Rule 7.23-
E(d). Proposed Rule 7.23(d) would provide that a Market Maker may apply
to the Exchange to withdraw temporarily from its Market Maker status in
the securities in which it is registered, based on demonstrated legal
or regulatory requirements that necessitate its temporary withdrawal,
or provide the Exchange an opinion of counsel certifying that such
legal or regulatory basis exists. In such event, the Exchange will act
promptly on a Market Maker's request and, if the request is granted,
the Exchange may temporarily reassign the securities to another Market
Maker. The Exchange proposes to adopt this rule text in lieu of the
substantially similar text of Article 16, Rule 2(d) and to locate it
under Rule 7.23, to promote consistency with the rules of its
Affiliated Exchanges.
The Exchange does not propose to reinstate Article 16, Rule 4(f),
which describes the LEAD Market Maker Program. The LEAD Market Maker
Program related to the Liquidity Enhancing Access Delay as described in
Article 20, Rule 8(h), which rule is no longer effective.
Rule 7.24
Proposed Rule 7.24 would set forth minimum performance standards
for Designated Market Makers, to be determined by the Exchange from
time to time, including (i) percent of time at the NBBO; (ii) percent
of executions better than the NBBO; (iii) average displayed size; (iv)
average quoted spread; and (v) in the event the security is a
derivative security, the ability of the Designated Market Maker to
transact in underlying markets. Proposed Rule 7.24 would also provide
that Lead Market Makers (as defined in proposed Rule 1.1(m)) would be
held to higher performance standards in the securities in which they
are registered as Lead Market Maker than Designated Market Makers that
are not Lead Market Makers. Proposed Rule 7.24 is based on NYSE Arca
Rule 7.24-E, without any changes.
Article 16
The Exchange proposes to designate Article 16 as ``Reserved'' and
to delete the preamble in Article 16 designating the Article as
inapplicable to trading on Pillar. Further to the proposed changes
described above to relocate the content of Article 16 under Rule 7,
Section 2, the Exchange also proposes to delete Article 16, Rules 1
through 6.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\10\ in general, and furthers the
objectives of Section 6(b)(5),\11\ 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. The Exchange believes that
the proposed rules would remove impediments to and perfect the
mechanism of a free and open market because they propose rules
governing Market Makers that are based on existing rules in the
Exchange's rulebook and/or on rules governing Market Makers on the
Exchange's affiliated markets, NYSE, NYSE American, and NYSE Arca, all
of which have been previously approved by the Commission. The proposed
rule change would therefore remove impediments to and perfect the
mechanism of a free and open market and a national market system by
promoting consistency across the rules of affiliated exchanges, as well
as continuity that would enable market makers on the Exchange's
affiliated markets to also become Market Makers on the Exchange by
meeting the same registration requirements and by agreeing to be
subject to the same obligations. The proposed rule change also removes
impediments to and perfects the mechanism of a free and open market and
a national market system by providing for Market Makers to support
trading in Exchange Traded Products that could be listed on the
Exchange, further to the Exchange's recent filing. The Exchange also
believes that providing for a Market Maker role on the Exchange would
allow Participants that are market makers on other exchanges to
leverage their existing market-making strategies on the Exchange. The
proposed rules are also intended to serve investor protection and
public interest goals by providing for a Market Maker function on the
Exchange. The restoration of the Market Maker role would providing for
a new category of market participant on the Exchange that will
contribute to displayed liquidity and price discovery, thereby
promoting competition and market quality on the Exchange to the benefit
of all market participants.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change
sets forth rules governing Market Makers on the Exchange, which rules
are based on rules previously approved on the Exchange for Market
Makers, as well as on the approved rules of its Affiliated Exchanges
pertaining to Market Makers. The Exchange believes that the proposed
rules would promote competition because they would provide for
obligations relating to Market Makers that are based on established
rules, thereby reducing any potential barriers to entry for market
makers registered on other exchanges to be approved as a Market Maker
on the Exchange. The Exchange also believes that the proposed rule
change would promote competition by providing Participants that are
registered as market makers on other exchanges with the opportunity to
similarly register as a Market Maker on the Exchange. The Exchange
therefore believes that the proposed rule change would promote
competition by providing for market making activity on the Exchange,
encouraging additional displayed liquidity, and facilitating price
discovery for all market participants.
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
[[Page 16902]]
Act \12\ and Rule 19b-4(f)(6) \13\ thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ 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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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii). 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 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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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-NYSETEX-2025-05 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-NYSETEX-2025-05. 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-NYSETEX-2025-05 and should
be submitted on or before May 13, 2025.
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), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06858 Filed 4-21-25; 8:45 am]
BILLING CODE 8011-01-P