Notice2023-27913
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.62P-O
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Published
December 20, 2023
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 88 Issue 243 (Wednesday, December 20, 2023)</title>
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[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88201-88204]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27913]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99170; File No. SR-NYSEARCA-2023-85]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
6.62P-O
December 14, 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 December 8, 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 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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[[Page 88202]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.62P-O 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 6.62P-O (Orders and Modifiers)
(the ``Rule'') to provide for the use of ALO Reserve Orders.
ALO Orders
Rule 6.62P-O(e)(2) defines an ALO Order as a Non-Routable Limit
Order that will not remove liquidity from the Consolidated Book. As
described below, 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.
As described in Rule 6.62P-O(e)(2)(A)(ii), an ALO Order to buy
(sell) will be displayed at its limit price if it locks non-displayed
orders or quotes to sell (buy) on the Consolidated Book. However, per
Rule 6.62P-O(e)(2)(A), an ALO Order will not be displayed at a price
that would: lock or cross the ABBO, would lock or cross displayed
interest in the Consolidated Book, or would cross non-displayed
interest in the Consolidated Book.
Rule 6.62P-O(e)(2)(A)(i) 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, it will be repriced
as follows (per Rules 6.62P-O (e)(2)(B)(i)-(iii)):
<bullet> If the limit price of an ALO Order to buy (sell) would
lock or cross displayed orders or quotes to sell (buy) on the
Consolidated Book, it will be repriced to have a working price and
display price one MPV below (above) the lowest (highest) priced
displayed order or quote to sell (buy) on the Consolidated Book;
<bullet> If the limit price of an ALO Order to buy (sell) would
lock or cross the ABO (ABB), it will be repriced to have a working
price equal to the ABO (ABB) and a display price one MPV below (above)
that ABO (ABB);
<bullet> If the limit price of an ALO Order to buy (sell) would
cross non-displayed orders or quotes on the Consolidated Book, it will
be repriced to have a working price and display price equal to the
lowest (highest) priced non-displayed order or quote to sell (buy) on
the Consolidated Book.
Rule 6.62P-O(e)(2)(C) provides that, once resting on the
Consolidated Book, the display price of an ALO Order to buy (sell) that
has been repriced will be repriced higher (lower) only one additional
time. If, after that repricing, the display price could be repriced
higher (lower) again, the order can be designated to either remain at
its last working price and display price or be cancelled, provided that
a resting ALO Order that is a quote cannot be designated to be
cancelled.
<bullet> Per Rule 6.62P-O(e)(2)(C)(i), if the limit price of an ALO
Order to buy (sell) that has been repriced no longer locks or crosses
displayed orders or quotes in the Consolidated Book, locks or crosses
the ABBO, or crosses non-displayed orders or quotes in the Consolidated
Book, it will be assigned a working price and display price equal to
its limit price.
Rule 6.62P-O(e)(2)(D) provides that the working price of a resting
ALO Order to buy (sell) that has been repriced will be adjusted to be
equal to its display price, if:
<bullet> the ABO (ABB) re-prices to be equal to or lower (higher)
than the display price of the resting ALO Order to buy (sell) (per Rule
6.62P-O(e)(2)(D)(i)); or
<bullet> an ALO Order or Day ISO ALO to sell (buy) is displayed on
the Consolidated Book at a price equal to the working price of the
resting ALO Order to buy (sell) (per Rule 6.62P-O(e)(2)(D)(ii)).
Rule 6.62P-O(e)(2)(E) provides that when the working price and
display price of an ALO Order to buy (sell) are the same, the working
price will be adjusted higher (lower) only if the display price of the
order is adjusted.
Finally, per Rule 6.62P-O(e)(2)(F), the ALO designation will be
ignored for ALO Orders that participate in an Auction.
Reserve Orders
Rule 6.62P-O(d)(1) provides for Reserve Orders, which are Limit
Orders with a quantity of the size displayed and with a reserve
quantity of the size (``reserve interest'') 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 Consolidated Book or to route to Away Markets, unless
they are designated as a Non-Routable Limit Order. The working price of
the reserve interest of a resting Reserve Order to buy (sell) will be
adjusted in the same manner as a Non-Displayed Limit Order, as provided
for in paragraph (d)(2)(A) of this Rule, provided that it will never be
priced higher (lower) than the working price of the display quantity of
the Reserve Order.\4\
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\4\ See infra regarding the proposed non-substantive change to
Rule 6.62P-O(d)(1) to remove the cross-reference to paragraph
(d)(2)(A) of Rule 6.62P-O and replace it with the specific text from
that paragraph regarding how the working price for resting interest
is adjusted. See proposed Rule 6.62P-O(d)(1).
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<bullet> Rule 6.62P-O(d)(1)(A) provides that the displayed portion
of a Reserve Order will be replenished when the display quantity is
decremented to zero. 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.
<bullet> Rule 6.62P-O(d)(1)(B) provides that each time the display
quantity of a Reserve Order is replenished from reserve interest, a new
working time will be assigned to the replenished quantity.
<bullet> Rule 6.62P-O(d)(1)(C) provides that a Reserve Order may be
designated as a Non-Routable Limit Order. If so designated, the reserve
interest that replenishes the display quantity will be assigned a
display price and working price consistent with the instructions for
the order.
<bullet> Rule 6.62P-O(d)(1)(D) provides that a routable Reserve
Order will be evaluated for routing both on arrival and each time the
display quantity is replenished.\5\
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\5\ See Rule 6.62P-O(d)(1)(D)(i)-(ii) (providing that for a
routable Reserve Order, ``[i]f routing is required, the Exchange
will route from reserve interest before publishing the display
quantity'' and that ``[a]ny quantity of a Reserve Order that is
returned unexecuted will join the working time of the reserve
interest. If there is no reserve interest to join, the returned
quantity will be assigned a new working time'', respectively.)''
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[[Page 88203]]
<bullet> Rule 6.62P-O(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.
<bullet> Finally, Rule 6.62P-O(d)(1)(F) provides that a Reserve
Order may be designated Day or GTC; this provision also currently
provides that a Reserve Order may not be designated as an ALO Order.
Proposed ALO Reserve Orders
The Exchange proposes to amend Rule 6.62P-O 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 operate consistent
with current Rule 6.62P-O (d)(1) regarding Reserve Orders and current
Rule 6.62P-O(e)(2) regarding ALO Orders. To allow for the use of ALO
Reserve Orders, the Exchange first proposes to amend Rule 6.62P-
O(d)(1)(F) to delete the clause in the latter half of the 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 6.62P-O(e)(2) and the paragraphs thereunder, to have a
displayed quantity, along with non-displayed reserve interest, as
described in Rule 6.62P-O(d)(1). The display quantity of an ALO Reserve
Order would be replenished as provided in Rule 6.62P-O(d)(1)(A) and
(B). For an ALO Reserve Order that is designated as a Non-Routable-
Limit Order, per Rule 6.62P-O(d)(1)(C), the replenish quantity of such
non-routable 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. The Exchange proposes to modify Rule 6.62P-
O(d)(1)(C) to add a cross reference to the paragraphs (i.e., to
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of the Rule) that describe how
the working price and display price of Non-Routable Limit Orders and
ALO Orders--which are a subset of Non-Routable Limit Orders are
assigned, which would benefit investors by making the rule easier to
navigate and comprehend.\6\
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\6\ See proposed Rule 6.62P-O(d)(1)(C) (providing that for
Reserve Orders designated as Non-Routable Limit Orders (inclusive of
ALO Orders), ``the reserve interest that replenishes the display
quantity will be assigned a display price and working price
consistent with the instructions for the order, as provided for in
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of this Rule.'' (emphasis
added).
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The proposed change is intended to facilitate the combined use of
two existing order types available on the Exchange, thereby providing
OTP Holders and OTP Firms 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 the Exchange's affiliated (five) equities
exchanges and at least one other (non-NYSE) equities exchange, thereby
promoting uniformity in order types/functionality across our equity and
options markets.\7\
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\7\ See Securities Exchange Act Release Nos.; 98892 (November 8,
2023), 88 FR 78398 (November 15, 2023) (SR-NYSEAmer-2023-56)
(adopting ALO Reserve Orders on immediately effective basis); 98899
(November 9, 2023), 88 FR 78413 ((November 15, 2023) SR-NYSEArca-
2023-77) (same); and 98891 (November 8, 2023), 88 FR 78407 (November
15, 2023) (SR-NYSE-2023-40) (same); 98893 (November 9, 2023), 88 FR
78401(November 15, 2023) (SR-NYSENAT-2023-25) (same); 98901
(November 9, 2023), 88 FR 78422 (November 15, 2023) (SR-NYSECHX-
2023-21) (same). 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 p. 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.
Proposed Non-Substantive Change To Reserve Orders
The Exchange proposes to modify Rule 6.62P-O(d)(1) to add rule text
specifying how the reserve interest of a resting Reserve Order to buy
(sell) will be adjusted, which text would replace the existing text
that directs the reader to another rule provision. Specifically, Rule
6.62P-O(d)(1) states that ``[t]he working price of the reserve interest
of a resting Reserve Order to buy (sell) will be adjusted in the same
manner as a Non-Displayed Limit Order, as provided for in paragraph
(d)(2)(A) of this Rule, provided that it will never be priced higher
(lower) than the working price of the display quantity of the Reserve
Order.'' The Exchange proposes to replace the cross reference to
``paragraph (d)(2)(A) of the Rule'' with the relevant text from that
paragraph (i.e., that the working price for the reserve interest of a
resting Reserve Order to buy (sell) will be adjusted ``to be the lower
(higher) of the limit price, or the NBO (NBB) . . . .'' \8\ The
Exchange deems this proposed change as non-substantive because it
merely copies the text that is being cross-referenced in the approved
rule without any changes.
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\8\ See proposed Rule 6.62P-O(d)(1) (providing, in relevant
part, that ``[t]he working price of the reserve interest of a
resting Reserve Order to buy (sell) will be adjusted to be the lower
(higher) of the limit price, or the NBO (NBB), provided that it will
never be priced higher (lower) than the working price of the display
quantity of the Reserve Order.). (emphasis added).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\
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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\9\ 15 U.S.C. 78f(b).
\10\ 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 the Exchange's
(five) affiliated equities exchanges and at least one other (non-NYSE)
equities exchange.\11\ The Exchange believes that offering ALO Reserve
Orders on the Exchange would promote uniformity in order types and
functionality across the NYSE equity and options markets. OTP Holders
and OTP Firms 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 OTP Holders
[[Page 88204]]
and OTP Firms when trading on the Exchange and promoting increased
liquidity and additional trading opportunities for all market
participants.
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\11\ See note 7, supra (citing to equities markets that offer
this functionality).
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The proposed non-substantive change to Rule 6.62P-O(d)(1) to
specify how the working price of the reserve interest of a resting
Reserve Order is adjusted would add clarity and transparency to
Exchange rules to the benefit of investors.
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. Specifically, the Exchange's
proposal to adopt Reserve ALO Orders--which combine two existing orders
available on the Exchange--would not impose a burden on intramarket
competition because the proposed ALO Reserve Order is available to all
market participants that trade on the Exchange.
The Exchange believes that the proposed change would enhance inter-
market competition as other options exchanges that do not currently
offer this functionality are free to do so. 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.
The Exchange believes the proposed non-substantive change to Rule
6.62P-O(d)(1) to specify how the working price of the reserve interest
of a resting Reserve Order is adjusted, would not impose an undue
burden on competition. This proposed change is not meant to be
competitive but is instead designed to add clarity, transparency, and
internal consistency to Exchange rules.
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization 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 pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
it may implement the ALO Reserve order type without delay. The
Commission believes that waiver of the operative delay is consistent
with the protection of investors and the public interest because the
proposal raises no novel or controversial issues in permitting the
proposed combination of two order types already in use on the Exchange,
as well as replacing a cross-reference to improve clarity in the
Exchange's rules. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\15\
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\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 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#e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f"><span class="__cf_email__" data-cfemail="1260677e773f717d7f7f777c6661526177713c757d64">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2023-85 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-2023-85. 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-NYSEARCA-2023-85 and should
be submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27913 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P
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