Notice2022-02437
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules To Add New Subparagraph (i)(4) to Rule 7.31-E
Primary source
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Published
February 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 25 (Monday, February 7, 2022)</title>
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[Federal Register Volume 87, Number 25 (Monday, February 7, 2022)]
[Notices]
[Pages 6900-6902]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-02437]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94121; File No. SR-NYSEARCA-2022-07]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its Rules
To Add New Subparagraph (i)(4) to Rule 7.31-E
February 1, 2022.
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 January 27, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 amend its rules to add new subparagraph
(i)(4) to Rule 7.31-E (Orders and Modifiers) regarding orders
designated with a ``retail'' modifier. 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-E (Orders and Modifiers) regarding orders
designated with a ``retail'' modifier.
Proposed Rule Change
Currently, the Exchange's Fee Schedule provides specified fees and
credits for agency orders that originate from a natural person and are
submitted to the Exchange by an ETP Holder,\4\ 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.\5\ The Exchange's rules concerning such
orders are set out in the 2012 Filing but do not presently appear in
Rule 7.31-E (Orders and Modifiers).
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\4\ See Rules 1.1(n) (definition of ETP) & (o) (definition of
ETP Holder).
\5\ See Securities Exchange Act Release No. 67540 (July 30,
2012), 77 FR 46539 (August 3, 2012) (SR-NYSEArca-2012-77) (the
``2012 Filing'').
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The Exchange now proposes to amend Rule 7.31-E to add new
subparagraph (i)(4) pertaining to this ``retail'' modifier. The
proposed rule is consistent with the existing requirements as set out
in the 2012 Filing, except as set forth below, and is substantively
identical to rules currently in effect on the Exchange's affiliates New
York Stock Exchange LLC (``NYSE''), NYSE American LLC (``NYSE
American''), and NYSE National, Inc. (``NYSE National'').\6\
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\6\ See Securities Exchange Act Release Nos. 93850 (December 22,
2021), 86 FR 74119 (December 29, 2021) (SR-NYSE-2021-75) (relocating
``retail'' order modifier from NYSE Rule 13 to NYSE Rule
7.31(i)(6)); 92254 (June 24, 2021), 86 FR 34819 (June 30, 2021) (SR-
NYSEAMER-2021-31) (adding ``retail'' order modifier at NYSE American
Rule 7.31E(i)(4)); and 92446 (July 20, 2021), 86 FR 40108 (July 26,
2021) (SR-NYSENAT-2021-15) (adding ``retail'' order modifier at NYSE
National Rule 7.31(i)(4)).
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Proposed Rule 7.31-E(i)(4)(A) would specify that an order
designated with a ``retail'' modifier is 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. It would also specify that an order with a ``retail''
modifier is separate and distinct from a ``Retail Order'' under Rule
7.44-E. This proposed rule is based on NYSE Rule 7.31(i)(6)(A), NYSE
American Rule 7.31E(i)(4)(A), and NYSE National 7.31(i)(4)(A), without
any substantive differences.\7\
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\7\ The proposed rule is identical to NYSE Rule 7.31(i)(6)(A),
except that the term ``member organization'' in the NYSE rule would
be replaced with the term ``ETP Holder'' in the proposed rule, and
the reference to Rule 7.44 in the NYSE rule would be replaced with a
reference to NYSE Arca Rule 7.44-E. The proposed rule is also
identical to NYSE American Rule 7.31E(i)(4)(A) and NYSE National
7.31(i)(4)(A), except that the term ``Retail Order'' in the NYSE
American and NYSE National rules would be replaced with the phrase
``order designated with a `retail' modifier'' in the proposed rule.
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Proposed Rule 7.31-E(i)(4)(B) would specify that an ETP Holder
would be required to designate an order as ``retail'' in the form and/
or manner prescribed by the Exchange. This proposed rule is based on
NYSE Rule 7.31(i)(6)(B), NYSE American Rule 7.31E(i)(4)(B), and NYSE
National 7.31(i)(4)(B), without any substantive differences.\8\
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\8\ The proposed rule is identical to NYSE Rule 7.31(i)(6)(B),
except that the term ``member organization'' in the NYSE rule would
be replaced with the term ``ETP Holder'' in the proposed rule. The
proposed rule is also identical to NYSE American Rule 7.31E(i)(4)(B)
and NYSE National 7.31(i)(4)(B), except that the phrase ``designate
an order as a Retail Order'' in the NYSE American and NYSE National
rules would be replaced with the phrase ``designate an order as
`retail' '' in the proposed rule.
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Proposed Rule 7.31-E(i)(4)(C) would specify that in order to submit
an order with a ``retail'' modifier, an ETP Holder must submit an
attestation, in a form prescribed by the Exchange, that substantially
all orders designated as ``retail'' would meet the requirements set out
in paragraph (A) above. This proposed rule is based on NYSE Rule
7.31(i)(6)(C), NYSE American Rule 7.31E(i)(4)(C), and NYSE National
7.31(i)(4)(C), without any substantive differences.\9\
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\9\ The proposed rule is identical to NYSE Rule 7.31(i)(6)(C),
except that the term ``member organization'' in the NYSE rule would
be replaced with the term ``ETP Holder'' in the proposed rule. The
proposed rule is also identical to NYSE American Rule 7.31E(i)(4)(C)
and NYSE National 7.31(i)(4)(C), except that the phrase ``Retail
Order'' in the NYSE American and NYSE National rules would be
replaced with the phrase `` `retail' order'' in the proposed rule.
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Proposed Rule 7.31-E(i)(4)(D) would specify that an ETP Holder must
have
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written policies and procedures reasonably designed to assure that it
will only designate orders as ``retail'' if all requirements of Rule
7.31-E(i)(4)(A) 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 will be in compliance with the requirements specified
by the Exchange, and (ii) monitor whether its broker-dealer customer's
``retail'' order flow meets the applicable requirements. This proposed
rule is based on NYSE Rule 7.31(i)(6)(D), NYSE American Rule
7.31E(i)(4)(D), and NYSE National 7.31(i)(4)(D), without any
substantive differences.\10\
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\10\ The proposed rule is identical to NYSE Rule 7.31(i)(6)(D),
except that the term ``member organization'' in the NYSE rule would
be replaced with the term ``ETP Holder'' in the proposed rule. The
proposed rule is also identical to NYSE American Rule 7.31E(i)(4)(D)
and NYSE National 7.31(i)(4)(D), except that the term ``Retail
Order'' in the NYSE American and NYSE National rules would be
replaced with the term `` `retail' order'' in the proposed rule.
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Proposed Rule 7.31-E(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-E would not be eligible for the ``retail'' rates for
orders it designates as ``retail'' orders. This proposed rule is based
on NYSE Rule 7.31(i)(6)(E), NYSE American Rule 7.31E(i)(4)(E), and NYSE
National 7.31(i)(4)(E), without any substantive differences.\11\
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\11\ The proposed rule is identical to NYSE Rule 7.31(i)(6)(E),
except that the term ``member organization'' in the NYSE rule would
be replaced with the term ``ETP Holder'' in the proposed rule, and
the reference to paragraphs (i)(6)(A)-(D) in the NYSE rule would be
replaced with a reference to paragraphs (i)(4)(A)-(D) in the
proposed rule. The proposed rule is also identical to NYSE American
Rule 7.31E(i)(4)(E) and NYSE National 7.31(i)(4)(E), except that the
term ``Retail Order'' in the NYSE American and NYSE National rules
would be replaced with the term `` `retail' order'' in the proposed
rule. Note that orders that do not meet the requirements specified
in paragraphs (i)(4)(A)-(D) of Rule 7.31-E would still be eligible
to trade pursuant to the non-``retail'' fees in the NYSE Arca
Equities Schedule of Fees and Charges (``Fee Schedule'').
The Exchange does not propose to add to the proposed rule the
provision of the 2012 Filing requiring an ETP Holder to designate
certain of its order entry ports at the Exchange as ``Retail Order
Ports.'' Under the Exchange's current Pillar trading system, there
is no need for ETP Holders to use designated ports to submit orders
eligible for ``retail'' pricing, since Pillar identifies such orders
by coded tags, not by the port through which they were submitted. As
such, the requirement in the 2012 Filing that ETP Holders use
``Retail Order Ports'' to submit ``retail'' orders is now obsolete.
Under the proposal, all orders that meet the requirements of the
proposed rule would be eligible for preferential ``retail'' order
pricing as set out in the Exchange's Fee Schedule, regardless of
which order entry port the ETP Holder uses.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\13\ 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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendment to Rule 7.31-
E(i)(4) 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'' for purposes of fees and credits on the Exchange (in the
2012 Filing), NYSE, NYSE American, and NYSE National, 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 the Exchange (in the 2012 Filing),
NYSE, NYSE American, and NYSE National, and therefore are not novel.
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 orders designated with a ``retail''
modifier.
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because they are substantively identical to
the requirements for designating orders with a ``retail'' modifier that
are currently in place on NYSE, NYSE American, and NYSE National, and
therefore would harmonize the requirements for designating orders as
``retail'' across the four affiliated exchanges. Such uniformity will
enhance market participants' understanding of the process for
designating orders as ``retail'' across the exchanges, and will
minimize any potential confusion that could result from having
different programs on each exchange.
The Exchange believes that omitting the provision of the 2012
Filing requiring an ETP Holder to designate certain of its order entry
ports at the Exchange as ``Retail Order Ports'' would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because such requirement is obsolete under the
Exchange's current Pillar trading system, which identifies ``retail''
orders by coded tag and not by the port through which they were
submitted. As such, there is no longer any reason to require ETP
Holders to submit ``retail'' orders through designated ports. Under the
proposal, all orders that meet the requirements of proposed Rule 7.31-
E(i)(4)(A)-(D) would be eligible for preferential ``retail'' order
pricing as set out in the Exchange's Fee Schedule, regardless of the
order entry port used.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\14\ 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. The proposed rule change is not intended to
address competition at all, but merely moves the Exchange's existing
requirements for orders designated as ``retail'' into Rule 7.31-E and
conforms those requirements to those currently in place on the
Exchange's affiliate exchanges NYSE, NYSE American, and NYSE National.
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\14\ 15 U.S.C. 78f(b)(8).
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[[Page 6902]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 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 such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#6012150c054d030f0d0d050e1413201305034e070f16"><span class="__cf_email__" data-cfemail="2e5c5b424b034d4143434b405a5d6e5d4b4d00494158">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2022-07 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2022-07. 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-NYSEARCA-2022-07 and should be submitted
on or before February 28, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02437 Filed 2-4-22; 8:45 am]
BILLING CODE 8011-01-P
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