Notice2023-24760
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending Rule 935NY
Primary source
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Published
November 9, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 216 (Thursday, November 9, 2023)</title>
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[Federal Register Volume 88, Number 216 (Thursday, November 9, 2023)]
[Notices]
[Pages 77376-77378]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24760]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98853; File No. SR-NYSEAMER-2023-54]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change Amending Rule
935NY
November 3, 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 October 27, 2023, NYSE American LLC (``Exchange'') filed with
the Securities and Exchange Commission (``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 Rule 935NY (Order Exposure
Requirements) to include reference to Rule 971.1NYP (Single-Leg
Electronic Cross Transactions) to exempt orders submitted to the
Customer Best Execution (``CUBE'') Auction on Pillar from the order
exposure requirements. 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 935NY (Order Exposure
Requirements) to include reference to the recently-adopted Rule
971.1NYP (Single-Leg Electronic Cross Transactions) to exempt orders
submitted to the CUBE Auction on Pillar from the order exposure
requirements.\4\
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\4\ See Securities Exchange Act Release No. 97938 (July 18,
2023), 88 FR 47536 (July 24, 2023) (NYSEAmer-2023-35) (proposing, on
an immediately effective basis, new Pillar Rule 971.1NYP (Single-Leg
Electronic Cross Transactions), which will govern single-leg CUBE
Auctions on Pillar) (the ``Pillar Single-Leg CUBE Filing'').
Beginning on October 23, 2023, the Exchange implemented Rule
971.1NYP in connection with the migration to the Exchange's Pillar
trading platform pursuant to the scheduled rollout of underlying
symbols as announced by Trader Update. See e.g., Trader Update,
October 20, 2023 (announcing that Pillar Migration Tranche 1 will
include underlying symbol Range: H, I), available here: <a href="https://www.nyse.com/trader-update/history#110000748106">https://www.nyse.com/trader-update/history#110000748106</a>; and Trader Update,
January 30, 2023 (announcing Pillar Migration Launch date of October
23, 2023, for the Exchange), available here: <a href="https://www.nyse.com/trader-update/history#110000530919">https://www.nyse.com/trader-update/history#110000530919</a> (the ``Pillar Trader Updates'').
The Exchange notes that, other than the rule change proposed herein,
all Pillar-related rules (i.e., with a ``P'' modifier) have either
been approved or are currently operative and, beginning on October
23, 2023, will apply to options traded on underlying symbols that
have been migrated to Pillar.
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Rule 971.1NY describes the CUBE Auction, which is an electronic
crossing mechanism for single-leg orders with a price improvement
auction on the Exchange (the ``CUBE'').\5\ Agency orders (or ``CUBE
Orders) submitted to the CUBE are exempt from the one-second order
exposure requirement set forth in Rule 935NY.\6\
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\5\ See generally Rule 971.1NY(Single-Leg Electronic Cross
Transactions).
\6\ Rule 935NY requires, among other things, that a User's
agency orders be exposed for at least one (1) second before such
orders may be executed against the User's principal orders, unless
such agency order is afforded an exemption pursuant to Rule
935NY(iii). See Rule 935NY(iii).
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In connection with the Exchange's migration to the Pillar trading
platform, which began on October 23, 2023, the Exchange adopted Rule
971.1NYP to describe the operation of the CUBE on Pillar (the ``Pillar
CUBE'').\7\ Pillar CUBE offers certain enhancements to the existing
CUBE Auction but the core functionality of Pillar CUBE is substantively
identical to the existing CUBE Auction.\8\
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\7\ See generally Rule 971.1NYP(Single-Leg Electronic Cross
Transactions).
\8\ See supra note 4, Pillar Single-Leg CUBE Filing. 88 FR
47536, at 47538 (stating that on Pillar, per Rule 971.1NYP, ``the
Exchange is not proposing to change the core functionality of CUBE
Auctions'').
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[[Page 77377]]
Accordingly, the Exchange believes that it would be consistent with
the Act to exempt orders submitted to Pillar CUBE from the one-second
order exposure requirement.\9\ This proposed handling would result in
consistent treatment of CUBE Orders whether submitted to the existing
CUBE or to Pillar CUBE. Like the existing CUBE Auction, Pillar CUBE
provides ATP Holders a minimum of 100 milliseconds to respond to CUBE
Orders, which should promote timely executions, while ensuring adequate
exposure of the CUBE Order seeking price improvement.\10\ Further,
consistent with Rule 935NY, Commentary .01, the ATP Holders that submit
CUBE Orders--whether to the existing CUBE Auction or to Pillar CUBE--
would do so only when there is a genuine intention to execute a bona
fide transaction.\11\ Furthermore, as with the existing CUBE Auction,
any User on the Exchange can respond to a Pillar CUBE which is the same
as the existing CUBE Auction.\12\
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\9\ See proposed Rule 935NY(iii) (excluding from the order
exposure requirement agency orders submitted to ``the Customer Best
Execution Auction (`CUBE Auction') pursuant to Rules 971.1NY,
971.1NYP, or 971.2NY'') (emphasis added).
\10\ See Rule 971.1NYP(c)(1)(B) (regarding a Response Time
Interval of no less than 100 milliseconds).
\11\ See Rule 935NY, Commentary .01 (``Rule 935NY prevents a
User from executing agency orders to increase its economic gain from
trading against the order without first giving other trading
interest on the Exchange an opportunity to either trade with the
agency order or to trade at the execution price when the User was
already bidding or offering on the book'').
\12\ See Rule 971.1NY(c)(2)(C) (providing that ``[a]ny ATP
Holder may respond to the RFR, provided such response is properly
marked specifying price, size and side of the market (`RFR
Response'))''; Rule 971.1NY(c)(1)(C) (same).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\13\ in general, and
furthers the objectives of Section 6(b)(5),\14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that adding a cross-reference to newly-
adopted Rule 971.1NYP and thus extending the exe4mption from the one-
second order exposure requirement set forth in Rule 935NY to include
the Pillar CUBE would remove impediments to and perfect the mechanism
of a free and open market and a national market system. Pillar CUBE was
adopted in connection with the Exchange's migration to the Pillar
trading platform and offers features that are substantively identical
to the existing CUBE Auction. Accordingly, the Exchange believes that
it would promote just and equitable principles of trade to exempt
orders submitted to Pillar CUBE from the one-second order exposure
requirement, particularly because this would result in consistent
treatment of CUBE Orders whether submitted to the existing CUBE or to
Pillar CUBE. Like the existing CUBE Auction, Pillar CUBE provides ATP
Holders a minimum of 100 milliseconds to respond to CUBE Orders, which
should promote timely executions, while ensuring adequate exposure of
Pillar CUBE Orders.\15\ Further, consistent with Rule 935NY, Commentary
.01, the ATP Holders submitting CUBE Orders--to the existing CUBE or to
Pillar CUBE--would do so only when there is a genuine intention to
execute a bona fide transaction.\16\
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\15\ See Rule 971.1NYP(c)(1)(B) (regarding a Response Time
Interval of no less than 100 milliseconds).
\16\ See Rule 935NY, Commentary .01 (``Rule 935NY prevents a
User from executing agency orders to increase its economic gain from
trading against the order without first giving other trading
interest on the Exchange an opportunity to either trade with the
agency order or to trade at the execution price when the User was
already bidding or offering on the book'').
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In addition, the proposed rule change would promote clarity and
transparency of which rules would be eligible for the exception
specified in Rule 935NY. Finally, adding the reference to Pillar CUBE
would promote internal consistency in Exchange rules and would ensure
that CUBE Orders submitted to Pillar CUBE are afforded the same
treatment as CUBE Orders submitted to the existing CUBE.
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 does not
believe that its proposed rule change will impose any burden on intra-
market competition because any User on the Exchange may utilize Pillar
CUBE and all orders submitted to Pillar CUBE would be treated in the
same manner for purposes of Rule 935NY (i.e., such orders would be
exempt from the one-second order exposure requirement).
The Exchange does not believe that its proposed rule change will
impose any burden on inter-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act because other
options exchanges are free to adopt (if they haven't already done so)
electronic crossing mechanisms with price improvement auctions and to
seek to have orders submitted to such mechanisms exempt from order
exposure requirements.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of 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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A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange states that
waiver of the operative delay would allow the Exchange to update
Exchange Rule 935NY without delay to include the Pillar CUBE, in
addition to the existing CUBE Auction, as an exception to the one-
second exposure requirement in
[[Page 77378]]
Exchange Rule 935NY. The Exchange states that the Pillar CUBE Auction
offers features that are substantively identical to the Exchange's
existing CUBE Auction.
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission finds that it is consistent with the protection of
investors and the public interest to waive the 30-day operative delay.
Exchange Rule 935NY currently allows Users to utilize the CUBE Auction
to satisfy the requirement in Exchange Rule 935NY that a User expose an
agency order on the Exchange for at least one second before trading
with the agency order as principal. The proposal would amend Exchange
Rule 935NY to allow Users to utilize the Pillar CUBE Auction in
Exchange Rule 971.1NYP for the same purpose. As discussed above, the
Exchange states that the Pillar CUBE Auction offers features that are
substantively identical to the existing CUBE Auction. The Commission
believes that the proposal does not raise new or novel regulatory
issues and that waiver of the operative delay will allow the Exchange
to immediately provide consistent treatment, for purposes of Exchange
Rule 935NY, of agency orders submitted to the CUBE and the Pillar CUBE
Auctions. Accordingly, the Commission waives the 30-day operative delay
and designates the proposal operative upon filing.\21\
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\21\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
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
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3b494e575e16585456565e554f487b485e58155c544d"><span class="__cf_email__" data-cfemail="6e1c1b020b430d0103030b001a1d2e1d0b0d40090118">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2023-54 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-2023-54. 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-2023-54 and should
be submitted on or before November 30, 2023.
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), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24760 Filed 11-8-23; 8:45 am]
BILLING CODE 8011-01-P
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