Notice2023-19127
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify Rule 900.3NYP
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Published
September 6, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 171 (Wednesday, September 6, 2023)</title>
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[Federal Register Volume 88, Number 171 (Wednesday, September 6, 2023)]
[Notices]
[Pages 61001-61004]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-19127]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98247; File No. SR-NYSEAMER-2023-42]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify Rule
900.3NYP
August 30, 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 August 23, 2023, NYSE American LLC (``NYSE American'' 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 900.3NYP (Orders and
Modifiers) regarding the handling of certain Market Orders subject to
Trading Collars and conforming changes to Rule 952NYP (Auction
Process). 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.
[[Page 61002]]
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 900.3NYP (Orders and
Modifiers) regarding the handling of certain Market Orders subject to
Trading Collars and conforming changes to Rule 952NYP (Auction
Process).\4\ The Exchange notes that an identical rule change was
recently adopted on its affiliated exchange, NYSE Arca, Inc. (``NYSE
Arca'') and therefore this proposal raises no new or novel issues not
previously considered by the Commission.\5\
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\4\ The Exchange notes that this proposed change modifies a
Pillar rule (i.e., with a ``P'' modifier) that has not yet been
implemented. The Exchange anticipates migrating to its Pillar
trading platform beginning on October 23, 2023. As is the case with
all Pillar rules, this proposed rule change (as well as the entire
Rule 900.3NYP) will not be implemented until all other Pillar-
related rule filings are approved or operative, as applicable, and
the Exchange announces the migration of underlying symbols to Pillar
by Trader Update.
\5\ See Securities Exchange Act Release No. 98113 (August 11,
2023), 88 FR 55791 (August 16, 2023) (SR-NYSEARCA-2023-54)
(immediately effective rule change to allow market participants to
reduce the time at which Market Orders are ``collared'' from 500
milliseconds to zero, per Rule 6.62P-O).
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The Exchange employs Trading Collar functionality that is designed
to provide ATP Holders price protection for Market Orders and Limit
Orders traded on the Exchange.\6\ In particular, the Trading Collar
applies a static ceiling price (for a buy order) or floor price (for a
sell order) at which such order may be traded or routed that is
determined at the time of entry (or after a series opens or reopens)
and which is applicable until the order is traded or cancelled.\7\ As
described below, the Exchange proposes to modify the application of
Trading Collars to Market Orders.
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\6\ See Rules 900.3NYP(a)(1) (defining Market Order), (a)(2)
(defining Limit Order).
\7\ See Rule 900.3NYP(a)(4)(A)-(C) (describing Trading Collar
functionality, including how such Collars are assigned and
calculated).
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Currently, Rule 900.3NYP(a)(4)(D) describes how the Trading Collar
is applied and provides that if an order to buy (sell) would trade or
route above (below) the Trading Collar or would have its working price
repriced to a Trading Collar that is below (above) its limit price, the
order will be added to the Consolidated Book at the Trading Collar for
500 milliseconds and if not traded within that period, will be
cancelled (each a ``collared'' order).\8\ Further, once the 500-
millisecond timer begins for a collared order (the ``collar timer''),
such order will be cancelled at the end of the timer even if it
repriced or was routed to an Away Market during that period, in which
case any portion of the collared order that is returned unexecuted is
cancelled.
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\8\ See Rule 964NYP(a)(3) (providing that the ``working price''
of an order or quote means the price at which it is eligible to
trade at any given time, which may be different from the limit price
or display price of the order or quote). The ``display price'' means
the price at which an order or quote ranked Priority 2--Display
Orders or Market Order is displayed, which may be different from the
limit price or working price of the order. See Rule 964NYP(a)(1).
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Pursuant to the proposed rule change, Market Orders that are
collared would no longer be held for the duration of the collar time
(i.e., for 500 milliseconds). Instead, as proposed, if a Market Order
to buy (sell) would trade or route above (below) the Trading Collar,
such Market Orders would be cancelled.\9\ Thus, a collared Market Order
that can trade within the Trading Collar will trade on the Exchange or
route. Collared Market Orders will no longer be held and displayed on
the Consolidated Book for the duration of the collar timer.
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\9\ See proposed Rule 900.3NYP(a)(4)(D)(i). The Exchange notes
that once an order has been cancelled, the Exchange will likewise
cancel any unexecuted portion of the cancelled order that returns to
the Exchange after having been routed away.
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The Exchange is not proposing to modify the handling of Limit
Orders and such collared orders would continue to be subject to the
above-described handling, per Rule 900.3NYP(a)(4)(D)(i).\10\ The
current rule treats collared Market Orders and collared Limit Orders
the same whereas the Exchange proposes to alter only the handling of
collared Market Orders. Unlike Market Orders, Limit Orders include a
specific price at which an ATP Holder is willing to trade (i.e., the
limit price). Market Orders do not include a price and tend to be
utilized to access liquidity. As such, the Exchange believes that the
proposal to cancel back those Market Orders that have been collared
would benefit ATP Holders because it would enable the order sender to
reevaluate, on a timelier basis how best to handle this trading
interest.
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\10\ See proposed Rule 900.3NYP(a)(4)(D)(i).
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The Exchange notes that it proposes to make this change in response
to ATP Holders' preference to have Market Orders for which they are
agent immediately cancel back for handling--rather than have such
collared Market Orders first post at aggressive prices for 500
milliseconds.
Conforming Changes
Consistent with the proposed change to the handling of collared
Market Orders--i.e., that such orders will not be held and displayed on
the Consolidated Book for the duration of the collar timer, the
Exchange proposes the following conforming changes.
<bullet> First, the Exchange proposes to modify Rule
900.3NYP(a)(1)(A)(ii), which provides, in relevant part, that ``[a]
Market Order to sell will be cancelled if it was assigned a Trading
Collar, routed, and when it returns unexecuted, it has no resting
portion to join and there is no NBB, regardless of the price of the
NBO.'' The Exchange proposes to modify this provision to instead
provide that ``[a] Market Order to sell that was assigned a Trading
Collar, routed, and returned unexecuted, will be cancelled if there is
no NBB, regardless of the price of the NBO.'' \11\
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\11\ See proposed Rule 900.3NYP(a)(1)(A)(ii). See also Rule
900.3NYP(a)(1)(A)(i)-(iv) (setting forth pricing validations that a
Market Order that arrives during continuous trading or that was
routed, returns unexecuted, and has no resting quantity to join must
pass to prevent being rejected or cancelled, as applicable).
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<bullet> Next, the Exchange proposes to modify Rule
900.3NYP(a)(1)(B), which provides, in relevant part, that ``[a]fter
trading or routing, or both, the Market Order will be displayed at the
Trading Collar, subject to paragraph (a)(1)(C),'' which provision
provides that a Market Order will be cancelled before being displayed
if there are no remaining contra-side Market Maker quotes on the
Exchange or contra-side ABBO.\12\ Proposed Rule 900.3NYP(a)(1)(B) would
provide that ``[a]fter trading or routing, or both, the Market Order
will be cancelled.''
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\12\ See Rule 900.3NYP(a)(1)(C).
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<bullet> In addition, the Exchange also proposes to delete as
inapplicable Rule 900.3NYP(a)(1)(C).\13\ The Exchange proposes to
modify Rule
[[Page 61003]]
952NYP(f)(3)(A)(vi), which cross references the to-be-deleted
provision, and to provide that ``[u]nexecuted Market Orders will be
cancelled.'' \14\
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\13\ See Rule 900.3NYP(a)(1)(C) (providing that a Market Order
will be cancelled before being displayed if there are no remaining
contra-side Market Maker quotes on the Exchange or contra-side
ABBO).
\14\ Compare proposed Rule 952NYP(f)(3)(A)(vi) with Rule
952NYP(f)(3)(A)(vi) (providing that Market Orders received during a
pre-open state will be subject to the validation specified in Rule
900.3NYP(a)(1)(C)).
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<bullet> Finally, the Exchange also proposes to delete as
inapplicable Rule 900.3NYP(a)(1)(D).\15\
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\15\ See Rule 900.3NYP(a)(1)(D) (providing that after being
displayed at its Trading Collar, a Market Order will be cancelled if
there ceases to be a contra-side NBBO). The Exchange proposes the
non-substantive change to re-number current paragraph (a)(1)(E) of
the Rule to new paragraph (a)(1)(C) to account for the
aforementioned deletions.
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The Exchange believes that the proposed functionality would provide
greater determinism for Market Orders that have been collared, which
would provide ATP Holders that send Market Orders as agent greater
control over, and more certainty regarding, the Exchange's handling of
such orders.
Implementation
This proposed change modifies a Pillar rule (i.e., with a ``P''
modifier). As is the case with all Pillar rules, this proposed rule
change (as well as the entire Rule 900.3NYP) will not be implemented
until all other Pillar-related rule filings are approved or operative,
as applicable, and the Exchange announces the migration of underlying
symbols to Pillar by Trader Update.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\16\ in general, and
furthers the objectives of section 6(b)(5),\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed change to modify the handling of
collared Market Orders, which is being made in response to ATP Holders'
preference to have Market Orders for which they are agent immediately
cancel back for handling--rather than have such collared Market Orders
first post at aggressive prices for 500 milliseconds, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because the proposed handling would refine the
Trading Collar functionality in a manner that would enable ATP Holders
to have more certainty regarding, and more control over, the handling
of their Market Orders.\18\
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\18\ As discussed supra, the proposal would alter the handling
of collared Market Orders (but not collared Limit Orders) because
Market Orders (unlike Limit Orders) do not include a price and tend
to be utilized to access liquidity. Thus, the proposal to cancel
back collared Market Orders would benefit ATP Holders because it
would enable the order sender to reevaluate, on a timelier basis how
best to handle this trading interest.
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The proposed conforming changes would remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system and, in general, would protect investors and the public interest
because such changes would add clarity, transparency, and internal
consistency to Exchange rules.
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 is proposing a
market enhancement that would provide ATP Holders with greater control
over, and more certainty regarding, collared Market Orders that such
ATP Holders have submitted as agent. The proposal would apply to all
similarly-situated ATP Holders and would not impose a competitive
burden on any participant. The Exchange does not believe that the
proposed change to the Trading Collar functionality would impose a
burden on competing options exchanges. Rather, the availability of the
modified Trading Collar functionality may foster more competition.
Specifically, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. When an exchange offers enhanced functionality that
distinguishes it from the competition and participants find it useful,
it has been the Exchange's experience that competing exchanges will
move to adopt similar functionality. Thus, the Exchange believes that
this type of competition amongst exchanges is beneficial to the
marketplace as it can result in enhanced processes, functionality, and
technologies.
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 \19\ and Rule 19b-4(f)(6) thereunder.\20\
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.\21\
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\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 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 under
section 19(b)(2)(B) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
[[Page 61004]]
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7b090e171e56181416161e150f083b081e18551c140d"><span class="__cf_email__" data-cfemail="2d5f584148004e4240404843595e6d5e484e034a425b">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-42 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-NYSEAMER-2023-42.
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="https://www.sec.gov/rules/sro.shtml">https://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 a.m. and 3 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-NYSEAMER-2023-42 and
should be submitted on or before September 27, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19127 Filed 9-5-23; 8:45 am]
BILLING CODE 8011-01-P
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