Notice2022-09955
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing of Proposed Rule Change To Modify Rule 7.31 To Add Subparagraph (f)(4) Regarding Directed Orders
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Published
May 10, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 90 (Tuesday, May 10, 2022)</title>
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[Federal Register Volume 87, Number 90 (Tuesday, May 10, 2022)]
[Notices]
[Pages 28041-28043]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-09955]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94842; File No. SR-NYSENAT-2022-06]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing of Proposed Rule Change To Modify Rule 7.31 To Add Subparagraph
(f)(4) Regarding Directed Orders
May 4, 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 April 20, 2022, 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 modify Rule 7.31 to add subparagraph
(f)(4) regarding Directed 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 subparagraph (f)(4) to provide for Directed Orders and to make
other conforming changes to its Rules in connection with the addition
of this new order type on the Exchange. The Directed Order, as further
defined below, would be an order sent to the Exchange to be routed
directly to an alternative trading system (``ATS'') specified by an ETP
Holder.
The Exchange proposes to add Rule 7.31(f)(4), which would define a
Directed Order as a Limit Order with instructions to route on arrival
at its limit price to a specified ATS with which the Exchange maintains
an electronic linkage. Proposed Rule 7.31(f)(4) would also provide that
Directed Orders would be available for all securities eligible to trade
on the Exchange and would not be assigned a working time or interact
with interest on the Exchange Book. The Exchange also proposes to
provide in Rule 7.31(f)(4) that the ATS to which a Directed Order is
routed would be responsible for validating whether the order is
eligible to be accepted, and if such ATS
[[Page 28042]]
determines to reject the order, the order would be cancelled.
Proposed Rule 7.31(f)(4)(A) would provide that a Directed Order
must be designated for the Exchange's Core Trading Session, as defined
in Rule 7.34(a)(2).\4\
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\4\ Because the Exchange proposes that Directed Orders may only
be designated for the Core Trading Session, the Exchange also
proposes conforming changes to Rule 7.34 (Trading Sessions).
Specifically, the Exchange proposes to modify Rule 7.34(c)(1)(E) to
provide that Directed Orders designated for the Early Trading
Session would be rejected and Rule 7.34(c)(3)(C) to provide that
Directed Orders designated for the Late Trading Session would be
rejected.
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Proposed Rule 7.31(f)(4)(A) would further provide that a Directed
Order must be designated with a Time in Force modifier of IOC \5\ or
Day \6\ and would be routed to the specified ATS with such modifier.
The Exchange proposes that a Directed Order designated IOC would be
traded in whole or in part on the ATS to which it is routed after
receipt of the order, and any untraded quantity would be cancelled. The
Exchange proposes that a Directed Order designated Day would expire at
the end of the Core Trading Session on the day it is entered. Proposed
Rule 7.31(f)(1)(A) would also provide that a Directed Order may not be
designated with any other modifiers defined in Rule 7.31.
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\5\ See Rule 7.31(b)(2), which provides that a Limit Order may
be designated with an Immediate-or-Cancel (``IOC'') modifier.
\6\ See Rule 7.31(b)(1), which provides that orders may be
designated with a Day modifier, and that an order to buy or sell
designated Day, if not traded, will expire at the end of the
designated session on the day on which it was entered.
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Proposed Rule 7.31(f)(4)(B) would provide that, during a trading
halt or pause, an incoming Directed Order would be rejected.
Proposed Rule 7.31(f)(4)(C) would provide that a request to cancel
a Directed Order designated Day would be routed to the ATS to which the
order was routed.
The Exchange also proposes a conforming change to Rule 7.19 (Pre-
Trade Risk Controls). The Exchange proposes to modify Rule 7.19(a)(5),
which sets forth the definition of Gross Credit Risk Limit and
currently provides that unexecuted orders in the Exchange Book, orders
routed on arrival pursuant to Rule 7.37(a)(1), and executed orders are
included for purposes of calculating the Gross Credit Risk Limit. The
Exchange proposes to modify Rule 7.19(a)(5) to specify that orders
routed on arrival pursuant to Rule 7.31(f)(4) would also be included
for purposes of the Gross Credit Risk Limit calculation.
The Exchange believes that the proposed rule change would
facilitate additional trading opportunities by offering ETP Holders the
ability to designate orders submitted to the Exchange to be routed to
an ATS of their choosing for execution. The Exchange believes the
proposed change would encourage ETP Holders to utilize the Exchange as
a venue for order entry and further believes that the proposed change
could create efficiencies for ETP Holders by enabling them to send
orders that they wish to route to an alternate destination through the
Exchange, thereby enabling them to leverage order entry protocols and
specifications already configured for their interactions with the
Exchange. The Exchange notes that the Directed Order, as proposed,
would operate similarly to the Primary Only Order already offered by
the Exchange, which is an order that is routed directly to the primary
listing market on arrival, without being assigned a working time or
interacting with interest on the Exchange Book.\7\ The Exchange also
believes that the Directed Order would offer ETP Holders functionality
akin to order types and routing options that currently exist on other
equities exchanges.\8\
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\7\ See Rule 7.31(f)(1). NYSE National also offers variations of
the Primary Only Order, including the Primary Only Until 9:45 Order,
which is a Limit or Inside Limit Order that, on arrival and until
9:45 a.m. Eastern Time, routes to the primary listing market, and
the Primary Only Until 3:55 Order, which is a Limit or Inside Limit
Order entered on the Exchange until 3:55 p.m. Eastern Time, after
which time the order is cancelled on the Exchange and routed to the
primary listing market. See Rules 7.31(f)(2) and (f)(3). The
Exchange's affiliated exchanges NYSE American LLC (``NYSE
American''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE Chicago, Inc.
(``NYSE Chicago'') (collectively, the ``Affiliated Exchanges'') also
offer the Primary Only Order and variations thereof. See NYSE
American Rules 7.31E(f)(1)-(f)(3); NYSE Arca Rules 7.31-E(f)(1)--
(f)(3); NYSE Chicago Rules 7.31(f)(1)--(f)(3).
\8\ See, e.g., Nasdaq Stock Market LLC (``Nasdaq''), Equity 4,
Equity Trading Rules, Rule 4758(a)(ix) (defining the Nasdaq Directed
Order as an order designed to use a routing strategy under which the
order is directed to an automated trading center other than Nasdaq,
as directed by the entering party, without checking the Nasdaq
Book); Cboe EDGX Exchange, Inc. (``EDGX'') Rules 11.8(c)(7)
(defining the Routing/Directed ISO order type as an ISO that
bypasses the EDGX system and is immediately routed by EDGX to a
specified away trading center for execution) and 11.11(g)(2)
(providing for the DRT routing option, in which an order is routed
to an alternative trading system as instructed); Cboe EDGA Exchange,
Inc. (``EDGA'') Rules 11.8(c)(7) (defining the Routing/Directed ISO
order type as an ISO that bypasses the EDGA system and is
immediately routed by EDGA to a specified away trading center for
execution) and 11.11(g)(2) (providing for the DRT routing option, in
which an order is routed to an alternative trading system as
instructed); Cboe BZX Exchange, Inc. (``BZX'') Rules 11.13(b)(3)(D)
(providing for the DRT routing option, in which an order is routed
to an alternative trading system as instructed) and 11.13(b)(3)(F)
(defining the Directed ISO routing option, under which an ISO order
would bypass the BZX system and be sent to a specified away trading
center); Cboe BYX Exchange, Inc. (``BYX'') Rules 11.13(b)(3)(D)
(providing for the DRT routing option, in which an order is routed
to an alternative trading system as instructed) and 11.13(b)(3)(F)
(defining the Directed ISO routing option, under which an ISO order
would bypass the BYX system and be sent to a specified away trading
center). The Exchange also believes that the Directed Order would
provide functionality similar to the C-LNK routing strategy formerly
offered by EDGA, in which C-LNK orders bypassed EDGA's local book
and routed directly to a specified Single Dealer Platform
destination. See Securities Exchange Act Release No. 82904 (March
20, 2018), 83 FR 12995 (March 26, 2018) (SR-CboeEDGA-2018-004)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Expand an Offering Known a Cboe Connect To Provide
Connectivity to Single-Dealer Platforms Connected to the Exchange's
Network and To Propose a Per Share Executed Fee for Such Service).
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Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date by
Trader Update.\9\ Subject to effectiveness of this proposed rule
change, the Exchange anticipates that the proposed change will be
implemented in the second quarter of 2022.
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\9\ The Exchange will also provide information regarding the
ATS(s) to which a Directed Order may be designated to route by
Trader Update.
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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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market and promote just and equitable principles of trade because the
Directed Order would offer ETP Holders access to additional trading
opportunities by permitting them to designate orders submitted to the
Exchange to be routed directly to a specified ATS for execution. The
Exchange further believes that the proposed change would remove
impediments to and perfect the mechanism of a free and open market by
offering ETP Holders the option to send orders that they wish to route
to an alternate destination for execution through the Exchange, which
would create efficiencies to the extent
[[Page 28043]]
ETP Holders are able to leverage existing protocols and specifications.
Finally, the Exchange notes that the proposed functionality is not
novel, as both the Exchange and other exchanges offer their members
functionality whereby an exchange routes orders on behalf of a member
to a specified trading center without such order interacting with the
exchange's book.\12\
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\12\ See notes 7 & 8, supra.
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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 Exchange believes that
the proposed rules governing Directed Orders would promote competition
because they would provide for an order type on the Exchange that would
facilitate additional trading opportunities for market participants.
The Exchange further believes that the proposed rules would allow it to
offer its ETP Holders functionality similar to order types and routing
options that exist on other equities exchanges, thereby enabling the
Exchange to compete with such exchanges.\13\
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\13\ See note 8, supra.
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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
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="354740595018565a5858505b4146754650561b525a43">[email protected]</span></a>. Please include
File Number SR-NYSENAT-2022-06 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-2022-06.
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-2022-06 and should
be submitted on or before May 31, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09955 Filed 5-9-22; 8:45 am]
BILLING CODE 8011-01-P
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