Notice2022-01705
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Rule 7.31 To Provide for Inside Limit Orders and Make Other Conforming Changes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 28, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 19 (Friday, January 28, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 19 (Friday, January 28, 2022)]
[Notices]
[Pages 4695-4697]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-01705]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94030; File No. SR-NYSE-2022-05]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Rule 7.31 To Provide for Inside Limit Orders and Make Other
Conforming Changes
January 24, 2022.
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 January 18, 2022, New York Stock Exchange LLC (``NYSE'' or
``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 to provide for Inside
Limit Orders and make other conforming changes. 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 modify Rule 7.31 (Orders and Modifiers) to
add new Rule 7.31(a)(3) to provide for Inside
[[Page 4696]]
Limit Orders and to make other conforming changes in connection with
the addition of this new order type on the Exchange.
Proposed Rule 7.31(a)(3) would define an Inside Limit Order as a
Limit Order that is to be traded at the best price obtainable without
trading through the NBBO. Proposed Rule 7.31(a)(3)(A) would provide
that, on arrival, a marketable Inside Limit Order to buy (sell) would
be assigned a working price of the NBO (NBB) and would trade with all
sell (buy) orders on the Exchange Book priced at or below (above) the
NBO (NBB) before routing to the NBO (NBB) on an Away Market. Once the
NBO (NBB) is exhausted, the Inside Limit Order to buy (sell) would be
displayed at its working price and be eligible to trade with incoming
sell (buy) orders at that price. When the updated NBO (NBB) is
displayed, the Inside Limit Order to buy (sell) would be assigned a new
working price of the updated NBO (NBB) and would trade with all sell
(buy) orders on the Exchange Book priced at or below the updated NBO
(NBB) before routing to the updated NBO (NBB) on an Away Market. Such
assessment would continue at each new NBO (NBB) until the order is
filled, no longer marketable, or the limit price is reached. Once the
Inside Limit Order is no longer marketable, it would be ranked and
displayed on the Exchange Book.
Proposed Rule 7.31(a)(3)(B) would provide that an Inside Limit
Order may not be designated as a Limit IOC Order but may be designated
as a Limit Routable IOC Order. An Inside Limit Order to buy (sell)
designated as a Limit Routable IOC Order would trade with sell (buy)
orders on the Exchange Book priced at or below (above) the NBO (NBB),
and the quantity not traded would be routed to the NBO (NBB). Any
unfilled quantity of the Inside Limit Order not traded on the Exchange
or an Away Market would be cancelled.
Proposed Rule 7.31(a)(3) is substantially based on rules providing
for Inside Limit Orders on the NYSE's affiliated exchanges NYSE
American LLC (``NYSE American''), NYSE Arca, Inc. (``NYSE Arca''), NYSE
Chicago, Inc. (``NYSE Chicago''), and NYSE National, Inc. (``NYSE
National'') (collectively, the ``Affiliated Exchanges''), with one
exception.\4\ The Exchange does not propose to adopt a version of NYSE
American Rule 7.31E(a)(3)(B), NYSE Arca Rule 7.31-E(a)(3)(B), NYSE
Chicago Rule 7.31(a)(3)(B), or NYSE National Rule 7.31(a)(3)(B) with
respect to designating an Inside Limit Order as a Primary Until 9:45
Order or a Primary Until 3:55 Order because the latter order types are
not offered on the Exchange.
---------------------------------------------------------------------------
\4\ See NYSE American Rule 7.31E(a)(3); NYSE Arca Rule 7.31-
E(a)(3); NYSE Chicago Rule 7.31(a)(3); and NYSE National Rule
7.31(a)(3).
---------------------------------------------------------------------------
The Exchange also proposes conforming changes to Rule 7.31(d)(1),
Rule 7.37(a)(4), and Rule 104(b)(6) to reflect the introduction of
Inside Limit Orders as follows:
<bullet> Rule 7.31(d)(1) currently defines the Reserve Order. The
Exchange proposes to modify Rule 7.31(d)(1) to provide that a Reserve
Order is a Limit Order or Inside Limit Order with a quantity of the
size displayed and with a reserve quantity of the size that is not
displayed. This proposed change is consistent with NYSE American Rule
7.31E(d)(1), NYSE Arca Rule 7.31-E(d)(1), NYSE Chicago Rule 7.31(d)(1),
and NYSE National Rule 7.31(d)(1).
<bullet> Rule 7.37(a) specifies that an Aggressing Order will be
matched for execution against contra-side orders in the Exchange Book
as provided for in Rule 7.37(b), subject to the provisions of Rule
7.37(a)(1) through (4). Rule 7.37(a)(4) currently provides that Market
Orders will be executed at prices that are equal to or better than the
NBBO. The Exchange proposes to modify Rule 7.37(a)(4) to provide that
Inside Limit Orders will also be executed at prices that are equal to
or better than the NBBO, consistent with the parameters of the Inside
Limit Order as set forth in proposed Rule 7.31(a)(3). This proposed
change is based on NYSE American Rule 7.37E(a)(4), NYSE Arca Rule 7.37-
E(a)(4), NYSE Chicago Rule 7.37(a)(4), and NYSE National Rule
7.37(a)(4).
<bullet> The Exchange proposes to modify Rule 104(b)(6), which
specifies the orders and modifiers that DMM units are not permitted to
enter. The Exchange proposes to add Inside Limit Orders to Rule
104(b)(6) as an order type that DMM units may not enter.\5\
---------------------------------------------------------------------------
\5\ The Exchange also proposes a non-substantive change to Rule
104(b)(6) to replace the reference to ``Buy Minus Zero Plus
Instructions'' with ``Last Sale Peg Orders'' to reflect the updated
terminology used in its rules for such order type. See, e.g., Rule
7.31(i)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change would provide
enhanced opportunities for trading by adding a new order type and would
promote consistency between the Exchange's rules and the rules of its
Affiliated Exchanges governing the same order type. In addition,
because the purpose of an Inside Limit Order is to assess away market
displayed interest on a price-by-price basis, thereby slowing down the
routing of such order rather than simultaneously routing the order to
away markets at potentially multiple prices, the order would be routed
to the market participant with the best displayed price, and any
unfilled portion would not be routed to the next best price level until
all quotes at the current best bid or offer are exhausted. Accordingly,
the Inside Limit Order would offer market participants an opportunity
to obtain improved executions by waiting for changes to the NBBO.
Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date by
Trader Update. Subject to approval of this proposed rule change, the
Exchange anticipates that the proposed changes will be implemented in
February 2022.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\6\ in general, and furthers the
objectives of Section 6(b)(5),\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 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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market because it would make an additional order type available on the
Exchange. Moreover, the Inside Limit Order would offer market
participants opportunities to obtain better execution prices because it
would wait and adjust for changes to the NBBO (i.e., the order would be
routed to the market participant with the best displayed price, and any
unfilled portion would not be routed to the next best price level until
all quotes at the current best bid or offer are exhausted). The
Exchange also believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market, as
well as protect investors and the public interest, because it is based
on the rules of the Affiliated Exchanges and would therefore promote
market quality by providing uniformity and continuity across the
Affiliated exchanges with respect to the same order type.
[[Page 4697]]
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 rules would promote competition because they would provide
for an additional order type on the Exchange, thereby offering
additional trading opportunities for market participants. The Exchange
further believes that the proposed rules would not impose any burden on
competition that is not necessary or appropriate because they are
designed to provide its members with consistency across the Affiliated
Exchanges, thereby enabling the Exchange to compete with unaffiliated
exchange competitors that similarly operate multiple exchanges on the
same trading platforms.
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)(iii) of the Act \8\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange 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) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ 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 to allow the
Exchange to implement the proposal when the technology associated with
the proposed change is available, which is anticipated to be less than
30 days from the date of this filing. The Exchange states that waiver
of the operative delay would allow the Exchange to provide a new order
type that would provide opportunities for improved executions and
promote consistency with the rules of its Affiliated Exchanges. The
Commission notes that the operation of the proposed order type is
substantively similar to that of order types offered by the Exchange's
affiliates. The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest. Accordingly, the Commission waives the 30-day operative delay
and designates the proposal operative upon filing.\12\
---------------------------------------------------------------------------
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission has 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 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 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
<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#2c5e594049014f4341414942585f6c5f494f024b435a"><span class="__cf_email__" data-cfemail="b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce">[email protected]</span></a>. Please include
File Number SR-NYSE-2022-05 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-NYSE-2022-05. 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 (<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-NYSE-2022-05, and should be submitted on
or before February 18, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01705 Filed 1-27-22; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on January 28, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.