Notice2021-15822
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Rules To Add New Subparagraph (i)(4) to Rule 7.31
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Published
July 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 140 (Monday, July 26, 2021)</title>
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[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40108-40110]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15822]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92446; File No. SR-NYSENAT-2021-15]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Amending Its
Rules To Add New Subparagraph (i)(4) to Rule 7.31
July 20, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on July 6, 2021, 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,
II and III 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 its rules to add new subparagraph (i)(4)
to Rule 7.31 (Orders and Modifiers) regarding orders designated as
``Retail Orders.'' The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 its rules to add new subparagraph
(i)(4) to Rule 7.31 (Orders and Modifiers) to add a description of a
Retail Order modifier.
Proposed Rule Change
The Exchange proposes to amend Rule 7.31 to add new subparagraph
(i)(4) to provide for ETP Holders \4\ to designate an order with a
retail modifier (``Retail Order''). The Exchange proposes that the new
``Retail Order'' modifier would be used only for purposes of such
orders being eligible for different rates on its Schedule of Fees and
Rebates (``Fee Schedule''), and is not proposing to add a retail price-
improvement program for orders designated as ``Retail Orders'' pursuant
to proposed Rule 7.31(i)(4). Instead, by adding the proposed Retail
Modifier to proposed Rule 7.31(i)(4) now, the Exchange will have
flexibility in the future to amend its Fee Schedule to add rates
designated for ``Retail Orders.''
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\4\ See Rules 1.1(h) (definition of ETP) & (i) (definition of
ETP Holder).
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[[Page 40109]]
Proposed Modifier for ``Retail Orders''
To define ``Retail Orders,'' the Exchange proposes to amend Rule
7.31 (Orders and Modifiers) to add a new subsection (i)(4), titled
``Retail Modifier'' to establish requirements for Retail Orders on the
Exchange. These requirements are based on the requirements to enter
orders with ``retail'' modifiers for purposes of rates available for
such orders on the Exchange's affiliates, NYSE American LLC (``NYSE
American''), New York Stock Exchange, LLC (``NYSE''), and NYSE Arca,
Inc. (``NYSE Arca'').\5\
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\5\ See Securities Exchange Act Release Nos. 92254 (June 24,
2021) (SR-NYSEAMER-2021-31) (approving the addition of ``retail''
order modifier at NYSE American Rule 7.31E(i)(4)); 72253 (May 27,
2014), 79 FR 31353 (June 2, 2014) (SR-NYSE-2014-26) (approving the
addition of ``retail'' order modifier at NYSE Rule 13(f)); and 67540
(July 30, 2012), 77 FR 46539 (August 3, 2012) (SR-NYSEArca-2012-77)
(approving the addition of ``retail'' order modifier on NYSE Arca).
These requirements are distinct from, but related to, the
requirements for a ``Retail Order'' on the Retail Liquidity Programs
available on NYSE and NYSE Arca. See NYSE Rule 7.44 and NYSE Arca
Rule 7.44-E. The Exchange does not offer a ``Retail Liquidity
Program.''
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Proposed Rule 7.31(i)(4)(A) would define ``Retail Order'' as an
agency order or a riskless principal order that meets the criteria of
FINRA Rule 5320.03 that originates from a natural person and is
submitted to the Exchange by an ETP Holder, provided that no change is
made to the terms of the order with respect to price or side of market
and the order does not originate from a trading algorithm or any other
computerized methodology. This proposed rule is based on NYSE American
Rule 7.31E(i)(4)(A) without any differences.
Proposed Rule 7.31(i)(4)(B) would specify that in order for an ETP
Holder to access the proposed Retail Order pricing, the ETP Holder
would be required to designate an order as a Retail Order in the form
and/or manner prescribed by the Exchange. This proposed rule is based
on NYSE American Rule 7.31E(i)(4)(B) without any differences.
Proposed Rule 7.31(i)(4)(C) would specify that in order to submit a
Retail Order, an ETP Holder must submit an attestation, in a form
prescribed by the Exchange, that substantially all orders designated as
``Retail Orders'' would meet the requirements set out in the definition
above. This proposed rule is based on NYSE American Rule 7.31E(i)(4)(C)
without any differences.
Proposed Rule 7.31(i)(4)(D) would specify that an ETP Holder must
have written policies and procedures reasonably designed to assure that
it would only designate orders as ``Retail Orders'' if all requirements
of a Retail Order are met. Such written policies and procedures must
require the ETP Holder to (i) exercise due diligence before entering a
Retail Order to assure that entry as a Retail Order is in compliance
with the requirements specified by the Exchange, and (ii) monitor
whether orders entered as Retail Orders meet the applicable
requirements. If an ETP Holder represents Retail Orders from another
broker-dealer customer, the ETP Holder's supervisory procedures must be
reasonably designed to assure that the orders it receives from such
broker-dealer customer that it designates as Retail Orders meet the
definition of a Retail Order. The ETP Holder must (i) obtain an annual
written representation, in a form acceptable to the Exchange, from each
broker-dealer customer that sends it orders to be designated as Retail
Orders that entry of such orders as Retail Orders would be in
compliance with the requirements specified by the Exchange, and (ii)
monitor whether its broker-dealer customer's Retail Order flow
continues to meet the applicable requirements. This proposed rule is
based on NYSE American Rule 7.31E(i)(4)(D) without any differences.
Proposed Rule 7.31(i)(4)(E) would specify that an ETP Holder that
fails to abide by the requirements specified in paragraphs (i)(4)(A)-
(D) of Rule 7.31 would not be eligible for the Retail Order rates for
orders it designates as ``Retail Orders.'' This proposed rule is based
on NYSE American Rule 7.31E(i)(4)(E) without any differences.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\7\ 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 regulating,
clearing, settling, processing information with respect to, and
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
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendment to Rule 7.31(i)
to add a Retail Modifier would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed requirements are based on existing requirements
for orders designated as ``retail'' on NYSE American, NYSE, and NYSE
Arca for purposes of fees and credits on those exchanges, and therefore
are not novel. In addition, the proposed designation, attestation, and
written policies and procedures are also based on existing procedures
for similarly-defined orders on NYSE American, NYSE, and NYSE Arca, and
therefore are not novel.\8\ The Exchange believes that the proposed
requirements to submit attestations and to maintain written policies
and procedures are not unfairly discriminatory, because they would
apply equally to all ETP Holders that seek to enter Retail Orders.
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\8\ As noted above (see supra note 5), the proposed changes are
based not on the Retail Liquidity Programs available on NYSE and
NYSE Arca, but on the availability of retail fees on those exchanges
for orders properly designated as ``retail'' orders.
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The Exchange further believes that adding the proposed Retail
Modifier to its rules in advance of amending its Fee Schedule to add
rates for Retail Orders would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because by adding the Retail Modifier now, the Exchange will have more
flexibility in the future to amend its Fee Schedule to add rates
specific to Retail Orders pursuant to a proposed rule change filed
under Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(2) \10\
thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
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The proposed retail modifier for purposes of providing different
rates for ``Retail Orders'' is also based in part on the availability
of such modifiers on the Nasdaq Stock Market LLC (``Nasdaq'') and Cboe
EDGX Exchange, Inc. (``EDGX''), which both offer pricing for orders
designated as ``retail'' under their respective rules, even in the
absence of a retail price improvement program. For example, Nasdaq
defines the term ``Designated Retail Order'' on its Price List as:
[A]n agency or riskless principal order that meets the criteria of
FINRA Rule 5320.03 and that originates from a natural person and is
submitted to Nasdaq by a member that designates it pursuant to this
section, provided that no change is made to the terms of the order with
respect to price or side of market and the order does not originate
[[Page 40110]]
from a trading algorithm or any other computerized methodology. An
order from a ``natural person'' can include orders on behalf of
accounts that are held in a corporate legal form--such as an Individual
Retirement Account, Corporation, or a Limited Liability Company--that
has been established for the benefit of an individual or group of
related family members, provided that the order is submitted by an
individual. Members must submit a signed written attestation, in a form
prescribed by Nasdaq, that they have implemented policies and
procedures that are reasonably designed to ensure that substantially
all orders designated by the member as ``Designated Retail Orders''
comply with these requirements. Orders may be designated on an order
by-order basis, or by designating all orders on a particular order
entry port as Designated Retail Orders.\11\
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\11\ Nasdaq Equity 7, section 118; see also Cboe EDGX Rule 11.21
(defining ``Retail Order'' and establishing attestation requirement
to access preferential pricing for such orders).
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Nasdaq does not have a corresponding definition of ``Designated
Retail Order'' in its trading rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\12\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, the Exchange believes that the proposed
rule change would promote competition because it is based on the
availability of similar ``retail'' modifiers on NYSE American, NYSE,
NYSE Arca, Nasdaq, and EDGX. More specifically, multiple other cash
equity exchanges offer pricing for orders designated as ``retail''
orders, even in the absence of a retail price improvement program on
those exchanges.\13\ The Exchange believes that the proposed change
could promote competition between the Exchange and other execution
venues, including those that currently offer similar order types and
comparable transaction pricing, by providing the Exchange with the
flexibility to amend its Fee Schedule to similarly provide pricing for
orders designated as Retail Orders.
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\12\ 15 U.S.C. 78f(b)(8).
\13\ See supra notes 5, 11.
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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 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 Act \14\ and Rule 19b-
4(f)(6) \15\ thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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 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 will institute proceedings to
determine whether the proposed rule change 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#ed9f988188c08e8280808883999ead9e888ec38a829b"><span class="__cf_email__" data-cfemail="c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5">[email protected]</span></a>. Please include
File Number SR-NYSENAT-2021-15 on the subject line.
Paper Comments
<bullet> 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-2021-15. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSENAT-2021-15 and should be submitted
on or before August 16, 2021.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15822 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P
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