Notice2024-12789
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Rule 928NYP
Primary source
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Published
June 12, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 114 (Wednesday, June 12, 2024)</title>
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[Federal Register Volume 89, Number 114 (Wednesday, June 12, 2024)]
[Notices]
[Pages 49923-49926]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-12789]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100283; File No. SR-NYSEAMER-2024-36]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Rule
928NYP
June 6, 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 May 31, 2024, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``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 amend Rule 928NYP (Pre-Trade and Activity-
Based Risk Controls) pertaining to pre-trade risk controls to make
additional pre-trade risk controls available to Entering Firms. 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.
[[Page 49924]]
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 928NYP (Pre-Trade and Activity-
Based Risk Controls) pertaining to pre-trade risk controls to make
additional pre-trade risk controls available to entering Firms.\4\
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\4\ The term ``Entering Firm'' refers to an ATP Holder
(including those acting as Market Makers). See Rule 928NYP(a)(1).
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Background and Proposal
In 2023, in connection with the Exchange's migration to Pillar and
to better assist ATP Holders in managing their risk, the Exchange
adopted Rule 928NYP, which included pre-trade risk controls, among
other activity-based controls, wherein an Entering Firm had the option
of establishing limits or restrictions on certain of its trading
behavior on the Exchange and authorizing the Exchange to take action if
those limits or restrictions were exceeded.\5\
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\5\ See Securities Exchange Act Release No. 97869 (July 10,
2023), 88 FR 45730 (July 17, 2023) (Notice of Filing and Immediate
Effectiveness of Proposed Rules, including proposed Rule 928NYP)
(SR-NYSEAMER-2023-34).
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The Exchange has recently received several requests from market
participants to create an additional risk control to restrict the
overall rate of orders. The Exchange notes that several of the Cboe
affiliated options exchanges currently offer risk controls identical to
the one proposed here.\6\ As such, market participants are already
familiar with these risk checks, such that the ones proposed by the
Exchange in this filing are not novel. The Exchange notes that this
rule change is modeled on the proposal recently submitted by the
Exchange's affiliate equities exchanges, including NYSE American LLC
(``NYSE American'').\7\
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\6\ See e.g., Cboe BZX Rule 11.13, Interpretations and Policies
.01 paragraph (f) and Cboe EDGX Rule 11.10, Interpretations and
Policies .01 paragraph (f).
\7\ See, e.g., SR-NYSEAMER-2024-35 (modifying NYSE American Rule
7.19E). The Exchange notes that several equities exchanges already
offer this pre-trade risk control. See, e.g., Cboe BZX Rule 11.13,
Interpretations and Policies .01 paragraph (f); Cboe BYX Rule 11.13,
Interpretations and Policies .01 paragraph (f); Cboe EDGX Rule
11.10, Interpretations and Policies .01 paragraph (f); MEMX Rule
11.10, Interpretations and Policies .01 paragraph (f); and MIAX
Pearl Equities Rule 2618(a)(1)(H).
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In light of these requests, the Exchange proposes to amend Rule
928NYP(a)(2)(A) to add a new subparagraph (vi), which would provide
that the Single Order Risk Controls available to Entering Firms would
include ``controls to restrict the overall rate of orders.''
As with the Exchange's existing risk controls, use of the pre-trade
risk control proposed herein would be optional. The Exchange proposes
no other changes to Rule 928NYP or its Commentary.
Continuing Obligations of ATP Holders Under Rule 15c3-5
The proposed Pre-Trade Risk Controls described here are meant to
supplement, and not replace, the ATP Holders' own internal systems,
monitoring, and procedures related to risk management. The Exchange
does not guarantee that these controls will be sufficiently
comprehensive to meet all of an ATP Holder's needs, the controls are
not designed to be the sole means of risk management, and using these
controls will not necessarily meet an ATP Holder's obligations required
by Exchange or federal rules (including, without limitation, the Rule
15c3-5 under the Act \8\ (``Rule 15c3-5'')). Use of the Exchange's Pre-
Trade Risk Controls will not automatically constitute compliance with
Exchange or federal rules and responsibility for compliance with all
Exchange and SEC rules remains with the ATP Holder.\9\
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\8\ See 17 CFR 240.15c3-5.
\9\ See also Commentary .01 to Rule 928NYP, which provides that
the Pre-Trade Risk Controls set forth in Rule 928NYP ``are meant to
supplement, and not replace, the ATP Holder's own internal systems,
monitoring, and procedures related to risk management and are not
designed for compliance with Rule 15c3-5 under the Exchange Act.
Responsibility for compliance with all Exchange and SEC rules
remains with the ATP Holder.'').
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Timing and Implementation
The Exchange anticipates implementing the proposed change in the
second quarter of 2024 and, in any event, will implement the proposed
rule change no later than the end of September 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,\10\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\11\ 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 regulating,
clearing, settling, processing information with respect to, and
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,
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the proposed rule change
will remove impediments to and perfect the mechanism of a free and open
market and a national market system because the proposed optional
additional Pre-Trade Risk Control would provide Entering Firms with
enhanced abilities to manage their risk with respect to orders on the
Exchange. The proposed additional Pre-Trade Risk Control is not novel;
they are based on existing risk settings already in place on Cboe
affiliated options exchanges, and market participants are already
familiar with the types of protections that the proposed risk control
affords.\12\ Moreover, the proposed pre-trade risk control is optional
and, as such, Entering Firms are free to utilize this risk feature or
not at their discretion. As such, the Exchange believes that the
proposed additional Pre-Trade Risk Control would provide a means to
address potentially market-impacting events, helping to ensure the
proper functioning of the market.
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\12\ See supra note 6. This pre-trade risk control is also
offered on several equities exchanges. See supra note 7.
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In addition, the Exchange believes that the proposed rule change
will protect investors and the public interest because the proposed
additional Pre-Trade Risk Control is a form of impact mitigation that
will aid Entering Firms in minimizing their risk exposure and reduce
the potential for disruptive, market-wide events. The Exchange
understands that ATP Holders implement a number of different risk-based
controls, including those required by Rule 15c3-5. The controls
proposed here will serve as an additional tool for
[[Page 49925]]
Entering Firms to assist them in identifying any risk exposure. The
Exchange believes the proposed additional Pre-Trade Risk Controls will
assist Entering Firms in managing their financial exposure which, in
turn, could enhance the integrity of trading on the securities markets
and help to assure the stability of the financial system.
Finally, the Exchange believes that the proposed rule change does
not unfairly discriminate among the Exchange's ATP Holders because use
of the proposed additional Pre-Trade Risk Control is optional and is
not a prerequisite for participation on the Exchange.
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 fact, the Exchange
believes that the proposal will have a positive effect on competition
because, by providing Entering Firms additional means to monitor and
control risk, the proposed rule will increase confidence in the proper
functioning of the markets. The Exchange believes the proposed
additional Pre-Trade Risk Control will assist Entering Firms in
managing their financial exposure which, in turn, could enhance the
integrity of trading on the securities markets and help to assure the
stability of the financial system. As a result, the level of
competition should increase as public confidence in the markets is
solidified.
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 \13\ and Rule 19b-4(f)(6) thereunder.\14\
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 \15\ and Rule 19b-4(f)(6)
thereunder.\16\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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 under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission
may 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
the proposed rule change may become effective and operative upon filing
with the Commission. The Exchange states that the proposed rule change
is tied to a technological release that the Exchange plans to implement
by the end of June 2024, that such release may be ready before the 30-
day operative delay has elapsed, and the Exchange seeks to implement
the proposed rule change without delay. The Exchange explains that the
proposed rule change will assist Entering Firms in minimizing their
risk exposure, which could enhance the integrity of trading on the
securities markets and help to assure the stability of the financial
system, and that the proposed rule change is not novel as it is based
on existing risk settings already in place on other exchanges. For
these reasons, and because the proposed rule change does not raise any
new or novel regulatory issues, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change
operative upon filing.\19\
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the 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 to
determine whether the proposed rule change should be approved or
disapproved.
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#ea989f868fc7898587878f849e99aa998f89c48d859c"><span class="__cf_email__" data-cfemail="3745425b521a54585a5a525943447744525419505841">[email protected]</span></a>. Please include
file number SR-NYSEAMER-2024-36 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-2024-36. 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-2024-36 and should
be submitted on or before July 3, 2024.
[[Page 49926]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12789 Filed 6-11-24; 8:45 am]
BILLING CODE 8011-01-P
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