Notice2022-12941
Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Approval of a Proposed Rule Change To Amend the Provisions of NYSE Rule 7.35B
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
June 16, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 116 (Thursday, June 16, 2022)</title>
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[Federal Register Volume 87, Number 116 (Thursday, June 16, 2022)]
[Notices]
[Pages 36356-36357]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12941]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 95086; File No. SR-NYSE-2021-74]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of a Proposed Rule Change To Amend the Provisions of
NYSE Rule 7.35B
June 10, 2022.
I. Introduction
On December 14, 2021, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Rule 7.35B relating to the
cancellation of MOC, LOC, and Closing IO Orders before the Closing
Auction. The proposed rule change was published for comment in the
Federal Register on December 29, 2021.\3\ On February 8, 2022, pursuant
to Section 19(b)(2) of the Act,\4\ the Commission extended the time
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed change.\5\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 93849 (Dec. 22,
2021), 86 FR 74204 (Dec. 29, 2021 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 94181 (Feb. 8,
2022), 87 FR 8305 (Feb. 14, 2022).
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On March 22, 2022, the Commission instituted proceedings under
Section 19(b)(2)(B) of the Act to determine whether to approve or
disapprove the proposed rule change.\6\ The Commission has received one
comment on the proposed rule change.\7\ This Order approves the
proposal.
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\6\ See Securities Exchange Act Release No. 94483 (Mar. 22,
2022), 87 FR 17346 (Mar. 28, 2022) (``OIP'').
\7\ See letter to Vanessa Countryman, Secretary, Commission,
from Hope M. Jarkowski, General Counsel, New York Stock Exchange LLC
(May 24, 2022) (``NYSE Letter'').
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II. Description of the Proposal
The Exchange proposes to modify NYSE Rule 7.35B(f)(2), which sets
forth rules pertaining to the cancellation of MOC, LOC, and Closing IO
Orders before the Closing Auction Imbalance Freeze,\8\ and to make
conforming changes to NYSE Rule 7.35B(j)(2)(B).
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\8\ A ``MOC Order'' or ``Market-on-Close Order'' is a Market
Order that is to be traded only during a closing auction. See NYSE
Rule 7.31(c)(2)(B). A ``LOC Order'' or ``Limit-on-Close Order'' is a
Limit Order that is to be traded only during a closing auction. See
NYSE Rule 7.31(c)(2)(A). A ``Closing IO Order'' or ``Closing
Imbalance Offset Order'' is a Limit Order to buy (sell) an in an
Auction-Eligible Security that it to be traded only in a Closing
Auction. See NYSE Rule 7.31(c)(2)(D).
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NYSE Rule 7.35B(f)(2)(A) currently provides that, between the
Closing Auction Imbalance Freeze Time, which is 10 minutes before the
scheduled end of Core Trading Hours,\9\ and two minutes before the
scheduled end of the Core Trading Hours, MOC, LOC, and Closing IO
Orders may be canceled or reduced in size only to correct a Legitimate
Error.\10\ NYSE Rule 7.35B(f)(2)(B) currently specifies that, except as
provided for in NYSE Rule 7.35B(j)(2)(B),\11\ a request to cancel,
cancel and replace, or reduce in size a MOC, LOC, or Closing IO Order
entered two minutes or less before the scheduled end of the Core
Trading Hours will be rejected.
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\9\ See NYSE Rule 7.35(a)(8).
\10\ ``Legitimate Error'' means an error in any term of an
order, such as price, number of shares, side of the transaction (buy
or sell), or identification of the security. See NYSE Rule
7.35(a)(13).
\11\ NYSE Rule 7.35B(j)(2)(B) currently specifies the
circumstances under which the Exchange may temporarily suspend the
prohibition on canceling an MOC or LOC Order in connection with the
Closing Auction.
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The Exchange proposes to modify NYSE Rule 7.35B(f)(2) to provide
that any requests to cancel, cancel and replace, or reduce in size a
MOC, LOC, or Closing IO Order that is entered between the beginning of
the Auction Imbalance Freeze and the scheduled end of Core Trading
Hours would be rejected. Thus, as proposed, requests to cancel,
replace, or reduce in size a MOC, LOC, or Closing IO Order would have
to be received before the beginning of the Auction Imbalance Freeze
(i.e., 10 minutes prior to the scheduled end of Core Trading Hours),
even in the case of a Legitimate Error. The Exchange represents that,
since August 2021, the Exchange has not received any requests to
cancel, cancel and replace, or reduce in size a MOC, LOC, or Closing IO
Order between the beginning of the Auction Imbalance Freeze and two
minutes before the scheduled end of Core Trading Hours.\12\
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\12\ See Notice, supra note 3, 86 FR at 74205.
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Additionally, NYSE proposes to make the following conforming
changes to make NYSE Rule 7.35B(j)(2)(B) consistent with the proposed
changes described above: (1) replace the reference to ``two minutes
before the scheduled end of Core Trading Hours'' with ``the beginning
of the Auction Imbalance Freeze,'' and (2) replace the reference to
``paragraph (f)(2)(B)'' with ``paragraph (f)(2).'' Thus, NYSE Rule
7.35B(j)(2)(B), as amended, would provide that the Exchange may
temporarily suspend the prohibition on cancelling an MOC or LOC Order
after the beginning of the Auction Imbalance Freeze (as such
prohibition would be set forth in NYSE Rule 7.35B(f)(2), as amended).
III. Discussion and Commission Findings
After careful review of the proposal and the comment letter, the
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\13\ In particular, the
Commission finds that the proposed rule change is consistent with
Section
[[Page 36357]]
6(b)(5) of the Act,\14\ which requires, among other things, that the
rules of a national securities exchange be 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, and that the rules of a national
securities exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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In the OIP, the Commission noted that the Exchange had separately
proposed a different set of changes to its Closing Auction process,\15\
and that the Commission was instituting proceedings to allow for
additional analysis and input concerning the instant proposed rule
change's consistency with requirements of the Act and to evaluate the
proposal in light of of other pending proposed changes to the Closing
Auction.\16\ In response to the OIP, the Exchange states that, because
the two filings set forth independent proposed changes with distinct
purposes, the Commission should approve the proposed rule change.\17\
The Exchange states that, while the instant proposal addresses certain
orders that participate in the NYSE Closing Auction, the instant
proposal is otherwise unrelated to changes proposed under the Closing
Auction Filing.\18\ The Exchange further states that whereas the
Closing Auction Filing proposed to modify how the Closing Auction Price
would be determined and how Designated Market Makers would be able to
participate in the Closing Auction, the proposed rule change in this
instance proposes a discrete change pertaining only to the cancellation
of MOC, LOC, and Closing IO Orders after the Auction Imbalance Freeze
for the Closing Auction.\19\ In addition, the Exchange has withdrawn
the Closing Auction Filing.\20\
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\15\ See Securities Exchange Act Release No. 93037 (Sept. 16,
2021), 86 FR 52719 (Sept. 22, 2021) (SR-NYSE-2021-44) (``Closing
Auction Filing'').
\16\ See OIP, supra note 8, 87 FR at 17347.
\17\ See NYSE Letter, supra note 9 at 2.
\18\ See NYSE Letter, supra note 9 at 1.
\19\ See NYSE Letter, supra note 9 at 1-2.
\20\ See Securities Exchange Act Release No. 94835 (May 3,
2022), 87 FR 27669 (May 9, 2022).
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The Commission finds that the proposed rule change is consistent
with Section 6(b)(5) of the Act, because it is reasonably designed to
provide greater certainty regarding MOC, LOC, and Closing IO Orders
represented in the Exchange's auction imbalance information by
requiring that any changes to those orders to correct a Legitimate
Error be made by 10 minutes before the scheduled end of Regular
Trading, which is the existing deadline for entering a MOC, LOC, or
Closing IO Order, and because the restriction will apply equally to all
users of MOC, LOC, or Closing IO Orders.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-NYSE-2021-74) be, and hereby
is, approved.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12941 Filed 6-15-22; 8:45 am]
BILLING CODE 8011-01-P
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