Notice2024-04925
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Rule 7.31
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Published
March 8, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 47 (Friday, March 8, 2024)</title>
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[Federal Register Volume 89, Number 47 (Friday, March 8, 2024)]
[Notices]
[Pages 16806-16808]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-04925]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99663; File No. SR-NYSE-2024-11]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Rule 7.31
March 4, 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 26, 2024, New York Stock Exchange LLC (``NYSE'' 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify Rule 7.31 regarding Discretionary
Orders and Primary Pegged 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 regarding Discretionary
Orders (``D Orders'') and Primary Pegged Orders.
D Orders
Rule 7.31(d)(4) defines a D Order as a Limit Order that may trade
at an undisplayed discretionary price. A D Order must be designated
Day, may be designated as routable or non-routable, and on entry, must
have a minimum of one round lot displayed. D Orders are available only
to Floor Brokers and are eligible to be traded in the Core Trading
Session only.
Rule 7.31(d)(4)(A) and subparagraphs (i) and (ii) thereunder
provide that, on arrival, a Floor Broker must specify that a D Order be
a Limit Price D Order or Midpoint Price D Order.\4\ Rule 7.31(d)(4)(B)
provides that the working and display price of a D Order to buy (sell)
will be pegged to the PBB (PBO). If the PBB (PBO) is higher (lower)
than the limit price of a D Order to buy (sell), the working and
display price will be the limit price of the order. A D Order to buy
(sell) will be cancelled if there is no PBB (PBO) against which to peg.
At its display price, a D Order is ranked Priority 2--Display Orders.
As set forth in Rule 7.31(d)(4)(B)(i), if after arrival, the PBBO
becomes locked or crossed, a D Order will wait for a PBBO that is not
locked or crossed before the display and working price are adjusted and
remains eligible to trade at its current working price.
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\4\ On arrival, a Limit Price D Order to buy (sell) will trade
with sell (buy) orders on the Exchange Book or, if designated as
routable, route to an Away Market, up (down) to the limit price of
the order. If after trading and routing the PBBO is locked or
crossed or there is no PBB (PBO), a Limit Price D Order will be
cancelled. For a Limit Price D Order that is partially routed to an
Away Market on arrival, any returned quantity of such D Order will
join the working price of the resting odd-lot quantity of the D
Order. See Rule 7.31(d)(4)(A)(i). On arrival, a Midpoint Price D
Order to buy (sell) will trade with sell (buy) orders on the
Exchange Book up (down) to the lower (higher) of the midpoint of the
PBBO (``Midpoint Price'') or the limit price of the order. A
Midpoint Price D Order will not route on arrival, even if designated
as routable. If the PBBO is locked or crossed or if the Midpoint
Price is unavailable, a Midpoint Price D Order will be rejected. See
Rule 7.31(d)(4)(A)(ii).
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A resting D Order to buy (sell) is eligible to exercise discretion
up (down) to the limit price of the order, as described in Rule
7.31(d)(4)(C). A D Order will not exercise discretion if the PBBO is
locked or crossed or if there is no Midpoint Price. Rule
7.31(d)(4)(C)(i) further provides that a D Order to buy (sell) will be
triggered to exercise discretion if the price of an Aggressing Order to
sell (buy) is above (below) the PBB (PBO) and at or below (above) the
Midpoint Price (the ``discretionary price range''). Rule
7.31(d)(4)(C)(ii) provides that the discretionary price at which a
[[Page 16807]]
D Order to buy (sell) will trade will be the price of the sell (buy)
order, provided that, if there is other interest to buy (sell) on the
Exchange Book priced equal to or higher (lower) than the price of the
sell (buy) order, the discretionary price will be one MPV higher
(lower) than the highest (lowest) priced resting order to buy (sell),
capped by the Midpoint Price.
Rule 7.31(d)(4)(D) and subparagraphs (i) through (iii) thereunder
describe a D Order's ranking and working time. The trigger to exercise
discretion does not change the working time of a D Order's display and
working price. At the discretionary price, a D Order will be assigned a
new temporary working time that is later than any same-side resting
interest at that price. Multiple D Orders eligible to trade at the same
discretionary price will be ranked by limit price and time. Any
quantity of a D Order that does not execute at a discretionary price
will return to the working time associated with its working and display
price.
Rule 7.31(d)(4)(E) provides that, after the PBBO unlocks or
uncrosses or a Midpoint Price becomes accessible, resting D Orders to
buy (sell) will be ranked based on the lower (higher) of the Midpoint
Price or limit price of the order to determine whether such D Order is
marketable within the discretionary price range with contra-side orders
on the Exchange Book.
Finally, as provided in Rule 7.31(d)(4)(F), a D Order may be
designated with an STPN or STPO modifier and will be rejected if
combined with any other modifiers or if the same-side PBBO is zero.
Primary Pegged Orders
Rule 7.31(h) defines a Pegged Order as a Limit Order that does not
route with a working price that is pegged to a dynamic reference price.
If the designated reference price is higher (lower) than the limit
price of a Pegged Order to buy (sell), the working price will be the
limit price of the order. Pegged Orders are available only to Floor
brokers.
Rule 7.31(h)(2) defines a Primary Pegged Order as a Pegged Order to
buy (sell) with a working price that is pegged to the PBB (PBO), with
no offset allowed. A Primary Pegged Order to buy (sell) will be
rejected on arrival, or cancelled when resting, if there is no PBB
(PBO) against which to peg. A Primary Pegged Order is eligible to
participate in opening and reopening auctions at the limit price of the
order but may not participate in the Closing Auction.
Rule 7.31(h)(2)(A) currently provides that a Primary Pegged Order
must include a minimum of one round lot displayed. Rule 7.31(h)(2)(A)
further provides that the working price of a Primary Pegged Order
equals the display price, the display quantity is ranked Priority 2--
Display Orders, and the reserve interest is ranked Priority 3--Non-
Display Orders.
Rule 7.31(h)(2)(B) provides that a Primary Pegged Order will be
rejected if the PBBO is locked or crossed. If the PBBO is locked or
crossed when the display quantity of a Primary Pegged Reserve Order is
replenished, the entire order will be cancelled. If after arrival, the
PBBO becomes locked or crossed, the Primary Pegged Order will wait for
a PBBO that is not locked or crossed before the display and working
price are adjusted and remains eligible to trade at its current working
price.
Proposed Rule Change
The Exchange proposes to modify Rule 7.31(d)(4) relating to D
Orders and Rule 7.31(h)(2)(A) relating to Primary Pegged Orders to
allow such orders to be entered in any size. Specifically, the Exchange
proposes to eliminate rule text in Rules 7.31(d)(4) and 7.31(h)(2)(A)
currently providing that a D Order or Primary Pegged Order must include
a minimum of one round lot displayed. The Exchange believes that
requiring D Orders and Primary Pegged Orders to be entered in round
lots is unnecessary and that providing the option to enter D Orders and
Primary Pegged Orders in odd lots could increase liquidity and enhance
opportunities for order execution on the Exchange. The Exchange notes
that permitting odd-lot order quantities is not novel on the Exchange
or other cash equity exchanges and believes that this proposed change
would align the Exchange's handling of D Orders and Primary Pegged
Orders with the treatment of similar order types on other cash equity
exchanges.\5\
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\5\ See, e.g., Nasdaq Stock Market LLC (``Nasdaq'') Rule
4703(g), Cboe BZX Exchange, Inc. (``BZX'') Rule 11.9(c)(10), and
Cboe BYX Exchange, Inc. (``BYX'') Rule 11.9(c)(10) (each describing
Discretionary Orders, which, like D Orders, have a non-displayed
discretionary price range within which the entering party is willing
to trade); Members Exchange Rule 11.8(c)(2) (describing the Primary
Peg Order type similar to the Primary Pegged Order and providing
that a Primary Peg Order may be entered as an odd lot, round lot, or
mixed lot). The Exchange notes that the rules of Nasdaq, BZX, and
BYX appear to permit orders, including order types similar to D
Orders and Primary Pegged Orders, to be entered in any size. See
Nasdaq Rule 4703(b) (providing that an order may be entered in any
whole share size, except as otherwise provided); BZX Rule 11.2
(providing that orders are eligible for odd-lot, round-lot, and
mixed-lot executions unless otherwise indicated); BYX Rule 11.2
(same).
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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 first quarter of 2024.
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 change would promote just
and equitable principles of trade, remove impediments to, and perfect
the mechanism of, a free and open market and a national market system,
and protect investors and the public interest because it would permit
the option to enter D Orders and Primary Pegged Orders in odd-lot
sizes, which could encourage order flow to the Exchange and promote
opportunities for order execution on the Exchange, to the benefit of
all market participants. The Exchange notes that the proposed change
would not otherwise impact the operation of D Orders or Primary Pegged
Orders as provided under current Exchange rules. The Exchange also
believes that the proposed change would align Exchange rules with the
treatment of similar order types on other cash equity exchanges,
thereby removing impediments to, and perfecting the mechanism of, a
free and open market and a national market system.\8\
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\8\ See note 4, 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. As noted above, the Exchange
believes the proposed rule change would allow the Exchange to accept D
Orders and Primary Pegged Orders of any size and
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align the Exchange's handling of such orders with other cash equity
exchanges' handling of similar order types,\9\ thereby promoting
competition among exchanges by offering options available on other cash
equity exchanges. The Exchange also believes that, to the extent the
proposed change would increase 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\ 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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A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ 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 to allow it to
accept D Orders and Primary Pegged Orders of any size as soon as the
technology associated with the proposed change is available. The
Exchange states that the proposal raises no novel issues and that
waiver of the operative delay would allow the Exchange to more
expeditiously offer increased flexibility to member organizations and
promote additional trading opportunities for all market participants.
The Commission finds that, because the proposal does not change the
operation of D Orders or Primary Pegged Orders, other than to expand
their use to odd-lot orders, waiver of the operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposal operative upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\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. If the Commission
takes such action, the Commission shall institute proceedings under
section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 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#c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7"><span class="__cf_email__" data-cfemail="0775726b622a64686a6a626973744774626429606871">[email protected]</span></a>. Please include
file number SR-NYSE-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-NYSE-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-NYSE-2024-11 and should be
submitted on or before March 29, 2024.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04925 Filed 3-7-24; 8:45 am]
BILLING CODE 8011-01-P
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