Notice2024-03774
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending Rule 7.31E(a)(2)(B) Regarding Limit Order Price Protection
Primary source
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Published
February 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 38 (Monday, February 26, 2024)</title>
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[Federal Register Volume 89, Number 38 (Monday, February 26, 2024)]
[Notices]
[Pages 14123-14125]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03774]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99566; File No. SR-NYSEAMER-2024-11]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change Amending Rule
7.31E(a)(2)(B) Regarding Limit Order Price Protection
February 20, 2024.
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 9,2024, 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 amend Rule 7.31E(a)(2)(B) regarding Limit
Order Price Protection. 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 7.31E(a)(2)(B) (``Limit Order
Price Protection'') to provide for the application of Limit Order Price
Protection during the Core Trading Session even where a contra-side NBB
(NBO) has not been established.
Currently, Rule 7.31E(a)(2)(B) provides that a Limit Order to buy
(sell) will be rejected if it is priced at or above (below) the greater
of $0.15 or a specified percentage away from the National Best Offer
(National Best Bid) (``NBO'' and ``NBB,'' respectively),\4\ and that
Limit Order Price Protection will not be applied to an incoming Limit
Order to buy (sell) if there is no NBO (NBB).
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\4\ For securities with a reference price between $0.00 and
$25.00, the specified percentage is 10%; for securities with a
reference price between $25.01 and $50.00, the specified percentage
is 5%; and for securities with a reference price greater than
$50.00, the specified percentage is 3%.
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The Exchange has recently received requests from market
participants to modify this rule so that during the Core Trading
Session, Limit Order Price Protection would apply even when no contra-
side NBB or NBO has been established. In such cases, market
participants have suggested that the Limit Order Price Protection
calculation should use an alternate reference price, such as the last
consolidated round-lot price of the trading day or the prior trading
day's official closing price. That way, even if no contra-side NBB or
NBO has been established, the Exchange would still apply Limit Order
Price Protection using the best-available alternate reference price,
thereby offering market participants greater protections against the
execution of Limit Orders with aberrant prices during the Core Trading
Session. The Exchange is aware that the Limit Order Price Protection
rule on the MIAX Pearl equities exchange (``MIAX Pearl'') currently
features such a hierarchy of reference prices, so that Limit Order
Price Protection is applied to all Limit Orders, even where no contra-
side NBB or NBO has been established.\5\
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\5\ Under current MIAX Pearl rules, a Limit Order to buy (sell)
will be rejected if it is priced at or above (below) the greater of
a specified dollar and percentage away from (1) the PBO (PBB), or,
if unavailable, (2) the consolidated last sale price disseminated
during the Regular Trading Hours on trade date, or, if unavailable,
(3) the prior day's Official Closing Price. See MIAX Pearl Rule
2614(a)(1)(ix)(A).
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In light of these requests from market participants, the Exchange
now proposes to amend Rule 7.31E(a)(2)(B) to provide a hierarchy of
reference prices against which Limit Order Price Protection would apply
during the Core Trading Session. As in the current rule, during the
Core Trading Session, a Limit Order to buy (sell) would be rejected if
it is priced at or above (below) the greater of $0.15 or a specified
percentage (as set forth in the accompanying table) away from the NBO
(NBB). But if such NBO (NBB) has not yet been established, the Exchange
would use as the reference price the last consolidated round-lot price
of that trading day, or, if none, the prior trading day's Official
Closing Price.\6\
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\6\ The Exchange's proposed hierarchy of reference prices is
substantially similar to the hierarchy in the MIAX Pearl rules. The
only differences are that the Exchange's proposal (a) would continue
to reference the NBO (NBB) instead of the PBO (PBB), as the
Exchange's Limit Order Price Protection mechanism has always done;
and (b) unlike the MIAX Pearl rule, which permits an odd lot to
serve as ``the consolidated last sale price disseminated during the
Regular Trading Hours on trade date,'' the Exchange's proposal would
instead use the last consolidated round-lot price of that trading
day, which the Exchange believes is a better indication of actual
market conditions. Both the MIAX Pearl rule and the Exchange's
proposed rule would use the prior trading day's Official Closing
Price as the reference price of last resort.
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[[Page 14124]]
The Exchange does not propose for this change to apply during the
Early and Late Trading Sessions. This is because with respect to both
the Early and Late Trading Sessions, there is a higher likelihood that
overnight news developments may move the market more than the
percentages specified in the Limit Order Price Protection rule. If, in
the absence of an NBO (NBB), such percentages were applied to the prior
trading day's Official Closing Price, this might lead the Exchange to
reject orders that are appropriately trying to establish a quote at the
new market level. For this reason, the Exchange believes the current
rule should continue to govern during the Early and Late Trading
Sessions, such that if there is no contra-side NBO (NBB), Limit Order
Price Protection will not be applied.
Accordingly, the Exchange proposes to amend and reorganize Rule
7.31E(a)(2)(B) into three sub-sections, with sub-section (i) describing
the relevant reference prices during the Core Trading Session, sub-
section (ii) describing the relevant reference price during the Early
and Late Trading Sessions, and sub-section (iii) describing the balance
of the current rule.
Specifically, the Exchange proposes that new sub-section (i) of
Rule 7.31E(a)(2)(B) would provide that during the Core Trading Session,
a Limit Order to buy (sell) will be rejected if it is priced at or
above (below) the greater of $0.15 or a specified percentage (as set
forth in the accompanying table) away from ``(a) the NBO (NBB), or, if
none, (b) the last consolidated round-lot price of that trading day,
or, if none, (c) the prior trading day's Official Closing Price.''
The Exchange proposes that new sub-section (ii) of the rule would
provide that during the Early and Late Trading Sessions, a Limit Order
to buy (sell) will be rejected if it is priced at or above (below) the
greater of $0.15 or a specified percentage (as set forth in the
accompanying table) away from the NBO (NBB), and that Limit Order Price
Protection will not be applied to an incoming Limit Order to buy (sell)
if there is no NBO (NBB).
Finally, the Exchange proposes that the balance of the current rule
be moved to new sub-section (iii) after the new subtitle
``Applicability.''
The Exchange does not propose to make any other changes to the
rule, nor does it propose any changes to the $0.15 or specified
percentages used in the calculation of Limit Order Price Protection.
Implementation
The Exchange anticipates implementing the proposed change in the
first quarter of 2024 and, in any event, will implement the proposed
rule change no later than the end of June 2024. The Exchange will
announce the timing of such changes by Trader Update.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and with Section
6(b)(5),\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and in general, protect investors and the
public interest, because the use a substantially similar hierarchy of
reference prices for the application of Limit Order Price Protection
when no contra-side NBO or NBB has been established is currently in
effect on MIAX Pearl and therefore is not novel.\9\ The Exchange
further believes that the proposed change would enhance the Exchange's
Limit Order Price Protection mechanism during the Core Trading Session,
because it would apply using the best-available alternate reference
price when a contra-side NBO or NBB has not been established, thereby
offering market participants greater protection from aberrant prices
and improving continuous trading and price discovery. In addition, the
proposal to enhance Limit Order Price Protection by adding alternative
reference prices to apply to the Core Trading Session would assist with
the maintenance of fair and orderly markets because such mechanisms
protect investors from potentially receiving executions away from the
prevailing market prices.
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\9\ See supra notes 5 and 6.
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The Exchange also believes that it would protect investors and the
public interest for the Exchange to maintain the current Limit Order
Price Protection rule for the Early and Late Trading Sessions. With
respect to both the Early and Late Trading Sessions, there is a higher
likelihood that overnight news developments may move the market more
than the percentages specified in the Limit Order Price Protection
rule. If, in the absence of an NBO (NBB), such percentages were applied
to the prior trading day's Official Closing Price, this might lead the
Exchange to reject orders that are appropriately trying to establish a
quote at the new market level. For this reason, the Exchange believes
that, for the protection of investors and the public interest, the
current rule should continue to govern during the Early and Late
Trading Sessions, such that if there is no contra-side NBO (NBB), Limit
Order Price Protection will not be applied.
Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change would
not address competitive issues but rather would enhance the Exchange's
Limit Order Price Protection mechanism, to further protect market
participants from aberrant prices and improve continuous trading and
price discovery.
B. 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
[[Page 14125]]
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#681a1d040d450b0705050d061c1b281b0d0b460f071e"><span class="__cf_email__" data-cfemail="7301061f165e101c1e1e161d0700330016105d141c05">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-11 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-2024-11.
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-2024-11 and
should be submitted on or before March 18, 2024.
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. 2024-03774 Filed 2-23-24; 8:45 am]
BILLING CODE 8011-01-P
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