Notice2024-06454
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Rule 7.31E
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Published
March 27, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 60 (Wednesday, March 27, 2024)</title>
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[Federal Register Volume 89, Number 60 (Wednesday, March 27, 2024)]
[Notices]
[Pages 21302-21304]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06454]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99827; File No. SR-NYSEAMER-2024-21]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Rule
7.31E
March 21, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 1, 2024, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described
[[Page 21303]]
in Items I, II, and III below, which Items have been prepared by the
Exchange. 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\ 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 regarding Discretionary
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.31E(h)(3) to modify the
operation of the Discretionary Pegged Order.
The Discretionary Pegged Order is a non-displayed order to buy
(sell) that is pegged to the same side of the PBBO and assigned a
working price equal to the lower (higher) of the midpoint of the PBBO
(the ``Midpoint Price'') or the limit price of the order.\3\ A
Discretionary Pegged Order will exercise the least amount of discretion
necessary from its working price to its discretionary price (defined as
the lower (higher) of the Midpoint Price or the limit price of the
order) to trade with contra-side interest. Rule 7.31E(h)(3)(A) provides
that a Discretionary Pegged Order must be designated Day.\4\ Rule
7.31E(h)(3)(B) provides that when exercising discretion, Discretionary
Pegged Orders maintain their time priority at their working price as
Priority 3--Non-Display Orders and are prioritized behind Priority 3--
Non-Display Orders with a working price equal to the discretionary
price of a Discretionary Pegged Order at the time of execution. If
multiple Discretionary Pegged Orders are exercising price discretion
during the same book processing action, they maintain their relative
time priority at the discretionary price.
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\3\ See Rule 7.31E(h)(3). As defined in NYSE American Rule 1.1,
``PBBO'' means the Best Protected Bid and the Best Protected Offer.
\4\ The Exchange also proposes a non-substantive change to Rule
7.31E(h)(3)(A) to delete an extraneous comma.
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Rule 7.31E(h)(3)(C) currently provides that a Discretionary Pegged
Order will not exercise discretion if the PBBO is determined to be
unstable via a ``quote instability calculation'' that assesses the
probability of a change to the PBB or PBO. Specifically, as set forth
in current Rule 7.31E(h)(3)(D), the Exchange uses the quote instability
calculation along with real-time relative quoting activity of protected
quotations to assess the probability of an imminent change to the PBBO
(the ``quote instability factor''). When the quoting activity meets
predefined criteria described in Rule 7.31E(h)(3)(D)(i)(A) through (C)
and the quote instability factor calculated is greater than the
Exchange's quote instability threshold (defined in Rule
7.31E(h)(3)(D)(i)(D)(2)), the Exchange treats the quote as unstable.
The quote stability calculation utilizes quote stability coefficients
and quote stability variables, as defined in Rules
7.31E(h)(3)(D)(i)(D)(1)(a) and (b). In July 2022, the Exchange modified
the quote stability calculation to incorporate updated quote stability
coefficients that would allow the quote stability calculation to
identify changes to the PBBO more accurately.\5\
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\5\ See Securities Exchange Act Release No. 95153 (June 24,
2022), 87 FR 39139 (June 30, 2022) (SR-NYSEAMER-2022-15) (Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment No. 2, To Amend
Rule 7.31E(h)(3) Relating to Discretionary Pegged Orders); see also
<a href="https://www.nyse.com/trader-update/history#110000436857">https://www.nyse.com/trader-update/history#110000436857</a> (Trader
Update announcing implementation of updated quote stability
calculation).
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The Exchange proposes to amend Rule 7.31E(h)(3) to modify the
operation of Discretionary Pegged Orders based on the Exchange's
assessment of the order type's impact on system performance, including
the system resources required to perform the quote stability
calculation. Specifically, the Exchange proposes to modify Rule
7.31E(h)(3) to provide that the Discretionary Pegged Order would not be
restricted from exercising discretion during periods of quote
instability, thereby eliminating the need to perform the quote
stability calculation.
As proposed, the Discretionary Pegged Order would operate as
defined in Rule 7.31E(h)(3) and as specified in current Rules
7.31E(h)(3)(A) and (B), without any changes except that the order would
continue to exercise the least amount of price discretion necessary
from its working price to its discretionary price to trade with contra-
side orders on the Exchange Book without regard to potential quote
instability. The Exchange thus proposes to delete the clause beginning
with ``except'' in the last sentence of current Rule 7.31E(h)(3). In
addition, because the Exchange proposes to permit Discretionary Pegged
Orders to exercise discretion without considering potential quote
instability, the Exchange would no longer perform the quote instability
calculation to assess the probability of an imminent change to the PBBO
or identify periods of quote instability. To effect this change, the
Exchange proposes to delete current Rules 7.31E(h)(3)(C) and (D),
including the subparagraphs thereunder. The Exchange also proposes to
renumber current Rule 7.31E(h)(3)(E) as Rule 7.31E(h)(3)(C) to reflect
those deletions.
Although the Discretionary Pegged Order, as modified, would no
longer provide price protection during periods of quote instability,
the Exchange believes that it would still provide ETP Holders with the
flexibility and benefits of an order type that can exercise discretion
to trade with contra-side interest. The Exchange notes that the
Discretionary Pegged Order, as modified, would operate identically to
the Discretionary Pegged Order offered by its affiliated exchange, NYSE
Arca, Inc. (``NYSE Arca''), and similarly to order types currently
offered by other equities exchanges.\6\
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\6\ See NYSE Arca Rule 7.31-E(h)(3) (defining Discretionary
Pegged Order); see also, e.g., Cboe EDGA Exchange, Inc. Rule 11.8(e)
(defining the MidPoint Discretionary Order as a limit order to buy
or sell that is pegged to the NBBO with discretion to execute at
prices up or down to and including the midpoint of the NBBO); Cboe
EDGX Exchange, Inc. Rule 11.8(g) (same).
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Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation of the
proposed change by Trader Update. Subject to effectiveness of this rule
filing, the Exchange will implement the proposed rule change no later
than in the third quarter of 2024.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\7\ in general, and furthers the objectives of
[[Page 21304]]
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 to modify the
operation of the Discretionary Pegged Order, further to the Exchange's
assessment of the order type's impact on system performance, would
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system, as well as protect investors and
the public interest, by continuing to provide ETP Holders with the
benefits of an order type that can exercise discretion to trade with
contra-side interest, without performing a quote instability
calculation that would restrict such order from exercising discretion
during periods of quote instability. The Exchange also believes that
the proposed modification of the Discretionary Pegged Order would
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system by modifying the Discretionary
Pegged Order to function similarly to discretionary orders currently
offered by other equities exchanges.\9\
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\9\ See note 7, 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. The Exchange believes that
the proposed change would promote competition by permitting the
Exchange to offer ETP Holders an order type that can exercise
discretion to trade with contra-side interest and would not be
restricted from doing so by a quote stability calculation. The Exchange
also believes that the proposed modifications to the operation of the
Discretionary Pegged Order could promote competition because the order
type would function similarly to order types currently offered by other
equities exchanges.\10\
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\10\ 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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
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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.
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 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#2755524b420a44484a4a424953546754424409404851"><span class="__cf_email__" data-cfemail="7200071e175f111d1f1f171c0601320117115c151d04">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-21 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-NYSEAMER-2024-21. 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
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
10:00 a.m. and 3:00 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-2024-21, and
should be submitted on or before April 17, 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. 2024-06454 Filed 3-26-24; 8:45 am]
BILLING CODE 8011-01-P
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