Notice2023-25207
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31
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Published
November 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 219 (Wednesday, November 15, 2023)</title>
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[Federal Register Volume 88, Number 219 (Wednesday, November 15, 2023)]
[Notices]
[Pages 78422-78425]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25207]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98901; File No. SR-NYSECHX-2023-21]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 7.31
November 9, 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 31, 2023, the NYSE Chicago, Inc. (``NYSE Chicago'' 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 7.31 to provide for the use of
ALO Reserve 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 7.31 to provide for the use of
ALO Reserve Orders.
ALO Orders
Rule 7.31(e)(2) defines an ALO Order as a Non-Routable Limit Order
that, unless it receives price improvement, will not remove liquidity
from the Exchange Book. An ALO Order can be designated to be cancelled
if it would be displayed at a price other than its limit price for any
reason. An ALO Order can be designated as non-displayed.
As described in Rule 7.31(e)(2)(A), an Aggressing ALO Order to buy
(sell) will trade if its limit price crosses the working price of any
displayed or non-displayed orders to sell (buy) on the Exchange Book
priced equal to or below (above) the PBO (PBB) of an Away Market, in
which case it will trade as the liquidity taker with such orders.
As noted above, Rule 7.31(e)(2) provides that an ALO Order may be
designated to cancel if it would be displayed at a price other than its
limit price. If an ALO Order is not so designated, any untraded
quantity of such order to buy (sell) is processed as follows (Rules
7.31(e)(2)(B)(i) and (ii)):
<bullet> If the limit price of the ALO Order locks the display
price of any order to sell (buy) ranked Priority 2--Display Orders on
the Exchange Book, it will have a working price and display price (if
designated to display) one MPV below (above) the price of the displayed
order on the Exchange Book.
<bullet> If the limit price of the ALO Order locks or crosses the
PBO (PBB) of an Away Market, it will have a working price equal to the
PBO (PBB) of the Away Market and a display price (if designated to
display) one MPV below (above) the PBO (PBB) of the Away Market.
Rule 7.31(e)(2)(C) provides that any untraded quantity of an ALO
Order to buy (sell) will have a working price and display price (if
designated to display) equal to its limit price if it locks non-
displayed orders to sell (buy) on the Exchange Book. Rule 7.31(e)(2)(D)
provides that an ALO Order to buy (sell) will not be assigned a working
price or display price above (below) the limit price of such order.
Once resting on the Exchange Book, ALO Orders may be re-priced or
trade, or both, as described in Rule 7.31(e)(2)(E):
[[Page 78423]]
<bullet> If order(s) to sell (buy) ranked Priority 2--Display
Orders or the PBO (PBB) of an Away Market re-prices higher (lower), an
ALO Order to buy (sell) will trade or be priced, or both, consistent
with Rules 7.31(e)(2)(A), (e)(2)(B)(i) and (ii), and (e)(2)(C).
<bullet> If the PBO (PBB) of an Away Market re-prices lower
(higher) to be equal to or lower (higher) than its last display price
or if its limit price no longer locks or crosses the PBO (PBB) of the
Away Market, an ALO Order to buy (sell) will be priced pursuant to
Rules 7.31(e)(1)(A)(ii)(c) and (d). If the PBO (PBB) of an Away Market
re-prices lower (higher) than the working price of a non-displayed ALO
Order to buy (sell), such order will have a working price equal to the
PBO (PBB) of the Away Market.
Reserve Orders
Rule 7.31(d)(1) provides for Reserve Orders, which are Limit or
Inside Limit Orders with a quantity of the size displayed and with a
reserve quantity (``reserve interest'') of the size that is not
displayed. The displayed quantity of a Reserve Order is ranked Priority
2--Display Orders, and the reserve interest is ranked Priority 3--Non-
Display Orders. Both the display quantity and the reserve interest of
an arriving marketable Reserve Order are eligible to trade with resting
interest in the Exchange Book or to route to Away Markets. The working
price of the reserve interest of a resting Reserve Order will be
adjusted in the same manner as a Non-Displayed Limit Order, as provided
for in Rule 7.31(d)(2)(A).
As described in Rule 7.31(d)(1)(A), the display quantity of a
Reserve Order must be entered in round lots, and the displayed portion
of a Reserve Order will be replenished when the display quantity is
decremented to below a round lot. The replenish quantity will be the
minimum display size of the order or the remaining quantity of the
reserve interest if it is less than the minimum display quantity.
Rule 7.31(d)(1)(B) provides that each time the display quantity of
a Reserve Order is replenished from reserve interest, a new working
time is assigned to the replenished quantity (each display quantity
with a different time is referred to as a ``child'' order), while the
reserve interest retains the working time of the original order entry.
In addition, when a Reserve Order is replenished from reserve interest
and already has two child orders that equal less than a round lot, the
child order with the later working time will rejoin the reserve
interest and be assigned the new working time assigned to the next
replenished quantity. If a Reserve Order is not routable, the replenish
quantity will be assigned a display and working price consistent with
the instructions for the order.
Rule 7.31(d)(1)(C) provides that a Reserve Order must be designated
Day and may only be combined with a Non-Routable Limit Order or Primary
Pegged Order. Rule 7.31(d)(1)(C) also currently provides that a Reserve
Order may not be designated as an ALO Order.
Rule 7.31(d)(1)(D) provides that routable Reserve Orders will be
evaluated for routing both on arrival and each time their display
quantity is replenished.
Rule 7.31(d)(1)(E) provides that a request to reduce the size of a
Reserve Order will cancel the reserve interest before cancelling the
display quantity, and, if the Reserve Order has more than one child
order, the child order with the latest working time will be cancelled
first.
Rule 7.31(d)(1)(F) provides that, if the PBBO is crossed and the
display quantity of a Reserve Order to buy (sell) that is a Non-
Routable Limit Order is decremented to less than a round lot, the
display price and working price of such Reserve Order will not change
and the reserve interest that replenishes the display quantity will be
assigned a display price one MPV below (above) the PBO (PBB) and a
working price equal to the PBO (PBB). Rule 7.31(d)(1)(F) further
provides that, when the PBBO uncrosses, the display price and working
price will be adjusted as provided for under Rule 7.31(e)(1) relating
to Non-Routable Limit Orders.
ALO Reserve Orders
The Exchange proposes to amend Rule 7.31 to provide for the use of
ALO Reserve Orders. The proposed change is not intended to introduce
any new functionality or modify any current functionality, but rather
to facilitate the combination of two order types currently offered by
the Exchange. As proposed, ALO Reserve Orders would, except as
otherwise noted, operate consistent with current Rule 7.31(d)(1)
regarding Reserve Orders and current Rule 7.31(e)(2) regarding ALO
Orders. To allow for the use of ALO Reserve Orders, the Exchange first
proposes to amend Rule 7.31(d)(1)(C) to delete the last sentence of
such rule, which currently provides that a Reserve Order may not be
designated as an ALO Order.
The proposed change is intended to allow ALO Orders, as described
in Rule 7.31(e)(2) and the paragraphs thereunder,\4\ to have a
displayed quantity, along with non-displayed reserve interest, as
described in Rule 7.31(d)(1). The display quantity of an ALO Reserve
Order would be replenished as provided in Rules 7.31(d)(1)(A) and (B).
As ALO Reserve Orders are non-routable, under Rule 7.31(d)(1)(B)(ii),
the replenish quantity of an ALO Reserve Order would be assigned a
display price and working price consistent with the behavior of ALO
Orders as described in current Exchange rules.
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\4\ The Exchange does not propose to allow non-displayed ALO
Orders to be designated as Reserve Orders, given that a Reserve
Order must have both displayed and non-displayed portions, and thus
proposes to amend Rule 7.31(e)(2) to specify accordingly.
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Aggressing ALO Reserve Orders would trade in accordance with
current Rule 7.31(e)(2)(A). If an ALO Reserve Order is designated to
cancel, it will cancel if it would be displayed at a price other than
its limit price for any reason, as described in Rule 7.31(e)(2).
Otherwise, any untraded quantity of an ALO Reserve Order would continue
to be processed as ALO Orders are currently, as described in Rules
7.31(e)(2)(B) and (C). Similarly, the working price of the reserve
interest of a resting ALO Reserve Order would be adjusted as provided
for in Rule 7.31(d)(1) (i.e., in accordance with Rule 7.31(d)(2)(A)).
Rule 7.31(d)(1)(E) would also apply to requests to reduce the size of
ALO Reserve Orders.
As described in Rule 7.31(d)(1)(F), when the PBBO is crossed and
the display quantity of an ALO Reserve Order to buy (sell) is
decremented to less than a round lot, the display price and working
price of the order would not change, but the reserve interest that
replenishes the display quantity would be assigned a display price one
MPV below (above) the PBO (PBB) and a working price equal to the PBO
(PBB). The Exchange proposes to amend Rule 7.31(d)(1)(F) to add new
rule text describing how the display price and working price of an ALO
Reserve Order would be adjusted when a previously crossed PBBO
uncrosses. Specifically, the Exchange proposes to add text to the last
sentence of Rule 7.31(d)(1)(F) providing that the display price and
working price of an ALO Reserve Order would be adjusted in accordance
with Rule 7.31(e)(2)(E), which describes how ALO Orders resting on the
Exchange Book are repriced and/or traded. Because ALO Orders behave
differently from other Non-Routable Limit Orders and may only trade
when they receive price improvement, the Exchange proposes to add text
to Rule
[[Page 78424]]
7.31(e)(2)(F) clarifying that ALO Reserve Orders would have their
display price and working price adjusted consistent with the rules
applicable to ALO Orders when the PBBO uncrosses.
The proposed change is intended to facilitate the combined use of
two existing order types available on the Exchange, thereby providing
Participants with enhanced flexibility and optionality when trading on
the Exchange. The proposed change could also promote increased
liquidity and trading opportunities on the Exchange, to the benefit of
all market participants. The Exchange also believes the proposed change
would permit the Exchange to offer functionality already available on
at least one other equities exchange, thereby promoting competition
among equities exchanges.\5\
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\5\ See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing that a
Limit Order may include a reserve quantity and may be designated
with a Post Only instruction); see also MEMX User Manual, available
at <a href="https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf">https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf</a>, at 9 (providing that a Limit Order
designated Day may have both reserve quantity and Post Only
instructions).
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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, which, subject to effectiveness of this proposed rule
change, will be in the fourth quarter of 2023.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\
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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\6\ 15 U.S.C. 78f(b).
\7\ 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 because it would allow for the combined use of two existing
order types available on the Exchange and permit the Exchange to offer
functionality similar to that already available on at least one other
equities exchange.\8\ Participants would be free to choose to use the
proposed ALO Reserve Order type or not, and the proposed change would
not otherwise impact the operation of the Reserve Order or ALO Order as
described in current Exchange rules. The Exchange also believes that
the proposed rule change would remove impediments to and perfect the
mechanism of a free and open market, as well as protect investors and
the public interest, by expanding the options available to Participants
when trading on the Exchange and promoting increased liquidity and
additional trading opportunities for all market participants.
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\8\ See note 5, 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. In addition, as noted above,
Exchange believes the proposed rule change would allow the Exchange to
offer functionality already available on at least one other equities
exchange \9\ and thus would promote competition among equities
exchanges. The Exchange also believes that, to the extent the proposed
change increases opportunities for order execution, the proposed change
would promote competition by making the Exchange a more attractive
venue for order flow and enhancing market quality for all market
participants.
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\9\ See id.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 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) \13\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 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
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#354740595018565a5858505b4146754650561b525a43"><span class="__cf_email__" data-cfemail="0270776e672f616d6f6f676c7671427167612c656d74">[email protected]</span></a>. Please include
file number SR-NYSECHX-2023-21 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-NYSECHX-2023-21. 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
[[Page 78425]]
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-NYSECHX-2023-21 and should
be submitted on or before December 6, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25207 Filed 11-14-23; 8:45 am]
BILLING CODE 8011-01-P
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