Notice2023-04687
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Rule 6.76AP-O
Primary source
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Published
March 8, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 45 (Wednesday, March 8, 2023)</title>
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[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14414-14416]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-04687]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97026; File No. SR-NYSEARCA-2023-19]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Amend Rule
6.76AP-O
March 2, 2023.
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 February 23, 2023, 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, 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 amend Rule 6.76AP-O (Order Execution and
Routing) regarding the treatment of routable 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 Rule 6.76AP-O (Order Execution and
Routing) regarding the treatment of routable orders.
Background
Rule 6.76AP-O describes the Exchange's process for order execution
and routing. First, subject to certain pricing parameters and
allocation guarantees, the Exchange will match eligible interest (i.e.,
an Aggressing Order or Aggressing Quote) \4\ against contra-side
interest according to the price-time priority ranking of the resting
interest, per Rule 6.76P-O (Order Ranking and Display).\5\ Per Rule
6.76AP-O(b), after being matched to the extent possible with local
interest (on the Consolidated Book) per paragraph (a) of this Rule,
routable orders (or portions thereof) may be routed to Away Market(s)
if marketable.\6\ The Exchange proposes to amend Rule 6.76AP-O(b) to
add new text regarding the handling of such orders as set forth below.
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\4\ See Rule 6.76P-O(a)(5) defining ``Aggressing Order'' or
``Aggressing Quote'' as referring to ``a buy (sell) order or quote
that is or becomes marketable against sell (buy) interest on the
Consolidated Book.''
\5\ See Rule 6.76AP-O(a)(1)(A)-(D) (setting forth the criteria
for executing incoming interest against the quote of an LMM, up to
40% of the incoming interest, up to the size of the LMM's quote (the
``LMM Guarantee'')).
\6\ See Rule 6.76AP-O(b)(2) (providing that orders with an
instruction not to route are processed per Rule 6.62P-O (Orders and
Modifiers)).
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Proposed Rule Change
The Exchange's current order handling and routing system was
recently implemented in connection with the Exchange's migration to the
Pillar trading platform in July 2022.\7\ The Exchange has been
operating on Pillar for approximately six months and has identified a
performance optimization that will reduce unnecessary processing by
Pillar.
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\7\ The Exchange announced the migration of the fifth and final
tranche of symbols to the Pillar trading platform, via Trader
Update, available here: <a href="https://www.nyse.com/trader-update/history#110000440092">https://www.nyse.com/trader-update/history#110000440092</a>.
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Specifically, the Exchange proposes that once an order needs to be
routed to an Away Market, Pillar will then determine the venue(s) to
which the order should be routed. Currently, this evaluation of
price(s) and volume(s) on Away Markets is constantly available in
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Pillar regardless of whether an order needs to be routed. The Exchange
believes that limiting this evaluation solely to when Pillar determines
that an order is eligible for routing would optimize Pillar performance
because it would eliminate inefficient processing within Pillar. The
Exchange believes that the proposed optimization change to process
routing information more efficiently would result in faster order
processing to the benefit of all market participants.
To effect this change, the Exchange proposes to specify how it will
handle marketable routable orders during the discrete period that such
orders are being evaluated for routing.\8\ If such an order is deemed
marketable against Away Market interest,\9\ Pillar will make a
determination as to the destination, price and size for each routed
portion of the order pursuant to Rule 6.94-O(a) (Order Protection).\10\
To clarify this proposed order handling, the Exchange proposes to add
rule text to Rule 6.76AP-O(b), which would provide that ``[w]hile
determining the venue(s) to which the order(s) will be routed, such
order(s) may \11\ be held non-displayed at the contra-side ABBO \12\
and ranked in its respective priority category, per Rule 6.76P-O(e),
behind any displayed interest at that price.\13\ The Exchange notes
that such marketable orders remain executable against incoming interest
and interest in the Consolidated Book.
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\8\ The Exchange's routing determination typically takes a few
microseconds.
\9\ See Rule 1.1. (defining ``Away Market'' as referring to any
Trading Center (1) with which the Exchange maintains an electronic
linkage, and (2) that provides instantaneous responses to orders
routed from the Exchange).
\10\ See Rule 6.94-O(a) (providing that, subject to exceptions,
``[m]embers shall not effect Trade-Throughs''.)
\11\ To avoid creating a locked or crossed market, the Exchange
will hold a routable order in a non-displayed state while making the
routing determination. However, when a previously displayed order is
to be routed, such order will remain displayed while Pillar makes
its routing determination.
\12\ See Rule 1.1. (defining ``ABBO'' (or ``Away Market BBO'')
as referring to the best bid(s) or offer(s) disseminated by Away
Markets and calculated by the Exchange based on market information
the Exchange receives from OPRA).
\13\ See Rule 6.76P-O(e) (providing that at each price, trading
interest is assigned to one of three priority categories: Priority
1--Market Orders; Priority 2--Display Orders; and Priority 3--Non-
Display Orders'').
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Market participants have the option of designating their orders as
non-routable (and executable solely against interest on the Exchange)
or routable (and executable against interest available on the Exchange
or an Away Market). For participants that choose the latter, proposed
Rule 6.76AP-O(b) will clarify the status of such orders in the
Consolidated Book during evaluation.
The Exchange anticipates implementing the applicable technology
changes in the second quarter of 2023 and will announce by Trader
Update the implementation date of this proposed rule change.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\14\ in general, and
furthers the objectives of Section 6(b)(5),\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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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 it is designed to optimize performance
on the Pillar trading platform, and would specify the Exchange's
handling of marketable routable orders during the discrete period that
such orders are being evaluated for routing. The Exchange believes that
the proposed optimization change to process routing information more
efficiently would result in faster order processing to the benefit of
all market participants. In addition, the Exchange believes the
proposed change would remove impediments to and perfect the mechanism
of a free and open market and a national market system by adding
clarity and transparency to Exchange rules that a routable order may
\16\ be held non-displayed at the ABBO during the period that it is
being evaluated for routing.
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\16\ See supra note 11.
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Further, the Exchange notes that market participants have the
option of designating their orders as non-routable (and executable
solely against interest on the Exchange) or routable (and executable
against interest available on the Exchange or an Away Market). The
proposed change would remove impediments to, and perfect the mechanism
of, a free and open market and a national market system because it will
clarify the status of such orders in the Consolidated Book during
evaluation.
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 proposed change is not
intended to address competition, but rather is being made in connection
with technology changes designed to optimize performance on the Pillar
trading platform. The proposed change would apply to all similarly-
situated market participants that trade on the Exchange.
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 \17\ and Rule 19b-4(f)(6) thereunder.\18\
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.\19\
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii). 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
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under Section 19(b)(2)(B) \20\ of the Act to determine whether the
proposed rule change should be approved or disapproved.
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\20\ 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#7f0d0a131a521c1012121a110b0c3f0c1a1c51181009"><span class="__cf_email__" data-cfemail="3240475e571f515d5f5f575c4641724157511c555d44">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2023-19 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-NYSEARCA-2023-19. 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-2023-19 and should be submitted
on or before March 29, 2023.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04687 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P
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