Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 7.31E Relating to the Minimum Trade Size Modifier for Additional Order Types and Expanding the Minimum Trade Size Modifier for Existing Order Types, 45099-45103 [2017-20626]

Download as PDF Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices Electronic Comments 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 22 and Rule 19b–4(f)(6) thereunder.23 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. A proposed rule change filed under Rule 19b–4(f)(6) 24 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),25 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. 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) 26 of the Act to determine whether the proposed rule change should be approved or disapproved. asabaliauskas on DSKBBXCHB2PROD with NOTICES 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: • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEAMER–2017–18 on the subject line. Paper Comments • 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–2017–18. 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 Web site (http://www.sec.gov/ rules/sro.shtml). 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 Web site 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEAMER–2017–18, and should be submitted on or before October 18, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Eduardo A. Aleman, Assistant Secretary. 22 15 [FR Doc. 2017–20624 Filed 9–26–17; 8:45 am] 23 17 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81672; File No. SR– NYSEAMER–2017–17] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 7.31E Relating to the Minimum Trade Size Modifier for Additional Order Types and Expanding the Minimum Trade Size Modifier for Existing Order Types September 21, 2017. 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 September 11, 2017, NYSE American LLC (‘‘Exchange’’ or ‘‘NYSE American’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7.31E relating to the Minimum Trade Size modifier. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, 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. BILLING CODE 8011–01–P U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 24 17 CFR 240.19b–4(f)(6). 25 17 CFR 240.19b–4(f)(6)(iii). 26 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:59 Sep 26, 2017 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 27 17 Jkt 241001 PO 00000 CFR 200.30–3(a)(12). Frm 00114 Fmt 4703 Sfmt 4703 45099 E:\FR\FM\27SEN1.SGM 27SEN1 45100 Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change asabaliauskas on DSKBBXCHB2PROD with NOTICES 1. Purpose The Exchange proposes to amend Rule 7.31E relating to the Minimum Trade Size (‘‘MTS’’) modifier. Specifically, the Exchange proposes to make the MTS modifier available for Non-Displayed Primary Pegged Orders 4 and Discretionary Pegged Orders. In addition, the Exchange proposes to provide additional optionality for ETP Holders using the MTS modifier with Midpoint Liquidity (‘‘MPL’’) Orders, Non-Displayed Primary Pegged Orders, and Discretionary Pegged Orders. As proposed, ETP Holders could choose how such orders would trade on arrival to trade either with (i) orders that in the aggregate meet the MTS (current functionality), or (ii) individual orders that each meet the MTS (proposed functionality). The MTS modifier is currently available for Limit IOC Orders,5 MPL Orders,6 and Tracking Orders.7 As such, the MTS modifier is currently available only for orders that are not displayed 4 The Exchange proposes a non-substantive amendment to rename ‘‘Primary Pegged Orders’’ as ‘‘Non-Displayed Primary Pegged Orders’’ in Rule 7.31E(h)(2). The Exchange believes that this proposed amendment provides transparency regarding whether Primary Pegged Orders on the Exchange are displayed. 5 See Rule 7.31E(b)(2)(A) (‘‘A Limit IOC Order to buy (sell) may be designated with a minimum trade size (‘‘MTS’’), which will trade against sell (buy) orders in the Exchange Book that in the aggregate, meets its MTS. On entry, a Limit IOC Order with an MTS must have a minimum of one round lot and will be rejected on arrival if the MTS is larger than the size of the Limit IOC Order. A Limit IOC Order with an MTS that cannot be immediately traded at its minimum size will be cancelled in its entirety.’’) 6 See Rule 7.31E(d)(3)(D) (‘‘An MPL Order may be designated with an MTS of a minimum of one round lot and will be rejected on arrival if the MTS is larger than the size of the MPL Order. On arrival, an MPL Order to buy (sell) with an MTS will trade with sell (buy) orders in the Exchange Book that in the aggregate, meets its MTS. If the sell (buy) orders do not meet the MTS, the MPL Order to buy (sell) will not trade on arrival and will be ranked in the Exchange Book. Once resting, an MPL Order to buy (sell) with an MTS will trade with an order to sell (buy) that meets the MTS and is priced at or below (above) the midpoint of the PBBO. If an order does not meet an MPL Order’s MTS, the order will not trade with and may trade through such MPL Order. If an MPL Order with an MTS is traded in part or reduced in size and the remaining quantity of the order is less than the MTS, the MPL Order will be cancelled.’’) 7 See Rule 7.31E(d)(4)(C) (‘‘A Tracking Order may be designated with an MTS of one round lot or more. If an incoming order cannot meet the MTS, a Tracking Order with a later working time will trade ahead of the Tracking Order designated with an MTS with an earlier working time. If a Tracking Order with an MTS is traded in part or reduced in size and the remaining quantity is less than the MTS, the Tracking Order will be cancelled.’’) VerDate Sep<11>2014 18:59 Sep 26, 2017 Jkt 241001 and do not route. On arrival, both Limit IOC Orders and MPL Orders with an MTS modifier will trade against contraside orders in the Exchange Book that in the aggregate, meet the MTS.8 Once resting, MPL Orders and Tracking Orders with an MTS modifier function similarly: If a contra-side order does not meet the MTS, the incoming order will not trade with and may trade through the resting order with the MTS modifier. In addition, both MPL Orders and Tracking Orders with an MTS modifier will be cancelled if such orders are traded in part or reduced in size and the remaining quantity is less than the MTS. The Exchange proposes to amend its rules to make MTS modifier functionality available for additional non-displayed orders that do not route, i.e., Non-Displayed Primary Pegged Orders and Discretionary Pegged Orders. The Exchange also proposes to add an option that an order with an MTS modifier would trade on entry only with individual orders that each meet the MTS. These proposed changes are based on the rules of Nasdaq Stock Market LLC (‘‘Nasdaq’’) and Investors Exchange LLC (‘‘IEX’’), which both offer minimum trade size functionality for orders that are not displayed and that do not route, including pegging orders and for IEX, its Discretionary Peg Order.9 Both exchanges also offer the option for orders with a minimum trade size to trade on entry only with individual orders that each meet the MTS of the incoming order.10 To effect this proposed rule change, the Exchange proposes to move all references to MTS modifiers in Rule 7.31E to proposed Rule 7.31E(i)(3), as a new additional order instruction and modifier to be referred to as the ‘‘Minimum Trade Size (‘MTS’) Modifier.’’ As proposed, Rule 7.31E(i)(3) 8 Tracking Orders, including Tracking Orders with an MTS modifier, are passive orders that do not trade on arrival. 9 See Nasdaq Rule 4703(e) (Nasdaq’s ‘‘Minimum Quantity Order’’ may not be displayed and will be rejected if it includes an instruction to route) and IEX Rule 11.190(b)(11)(A) (IEX’s ‘‘Minimum Quantity Order’’ or ‘‘MQTY’’ is a non-displayed, non-routable order that may be a pegged order, which includes IEX’s ‘‘Primary Peg Order’’ and ‘‘Discretionary Peg Order’’). 10 See Nasdaq Rule 4703(e) (Nasdaq’s ‘‘Minimum Quantity’’ order attribute allows for a Nasdaq participant to specify one of two alternatives to how a Minimum Quantity Order would be processed at the time of entry, one of which is that ‘‘the minimum quantity condition must be satisfied by execution against one or more orders, each of which must have a size that satisfies the minimum quantity condition’’) and IEX Rule 11.190(b)(11)(G)(iii)(B) (On arrival, IEX’s ‘‘Minimum Execution Size with All-or-None Remaining’’ qualifier for IEX’s MQTY executes against each willing resting order in priority, provided that each individual execution size meets its effective minimum quantity.) PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 would provide that a Limit IOC Order, MPL Order, Tracking Order, NonDisplayed Primary Pegged Order, or Discretionary Pegged Order may be designated with an MTS Modifier. Because this proposed rule text would specify which orders would be eligible for the MTS Modifier, the Exchange proposes to delete existing rule text specifying which orders are and are not eligible for an MTS.11 Proposed Rule 7.31E(i)(3)(A) would provide that an MTS must be a minimum of a round lot and that an order with an MTS Modifier would be rejected if the MTS is less than a round lot or if the MTS is larger than the size of the order. This proposed rule text is based on the next-to-last sentence of Rule 7.31E(b)(2)(A) and the first sentence of 7.31E(d)(3)(D), and in part on the first sentence of Rule 7.31E(d)(4)(C), with non-substantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier.12 Proposed Rule 7.31E(i)(3)(B) would provide that an ETP Holder must specify one of the following instructions with respect to how an order with an MTS Modifier would trade at the time of entry. This proposed text is new and reflects the Exchange’s proposal to add an alternative to how an order with an MTS Modifier would trade on entry. Proposed Rule 7.31E(i)(3)(B)(i) would describe the existing functionality as one of the instructions that would be available to ETP Holders. The proposed rule would provide that an order to buy (sell) with an MTS Modifier would trade with sell (buy) orders in the Exchange Book that in the aggregate meet such order’s MTS. This proposed rule text is based on the third sentence of Rule 7.31E(b)(2)(A) and the second sentence of Rule 7.31E(d)(3)(D) with nonsubstantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier. Proposed Rule 7.31E(i)(3)(B)(ii) would describe the new instruction that on entry, an order to buy (sell) with an MTS Modifier could trade with individual sell (buy) order(s) in the Exchange Book that each meets such order’s MTS. Because the Exchange is not proposing to change how an MTS Modifier would function for Limit IOC Orders, the Exchange further proposes 11 The Exchange proposes to delete references to MTS in Rules 7.31E(b)(2)(A), 7.31E(b)(2)(B), 7.31E(d)(3)(D), 7.31E(d)(4)(C), 7.31E(e)(3)(B), and 7.46E(f)(1)(A). 12 Nasdaq also requires that its Minimum Quantity Order also have a size of at least a round lot. See Nasdaq Rule 4703(e). E:\FR\FM\27SEN1.SGM 27SEN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices to provide that this instruction would not be available for Limit IOC Orders. As discussed above, the addition of this instruction for how orders with an MTS Modifier would trade on entry is based on the rules of Nasdaq and IEX.13 Proposed Rule 7.31E(i)(3)(C) would provide that an order with an MTS Modifier that is designated Day and cannot be satisfied on arrival would not trade and would be ranked in the Exchange Book. This proposed rule text is based on the third sentence of Rule 7.31E(d)(3)(D) with non-substantive differences to reference orders designated Day so that this proposed rule text would also be applicable to Non-Displayed Primary Pegged Orders and Discretionary Pegged Orders, which are also designated Day. Proposed Rule 7.31E(i)(3)(D) would provide that an order with an MTS Modifier that is designated IOC and cannot be immediately satisfied would be cancelled in its entirety. This proposed rule text is based on the last sentence of Rule 7.31E(b)(2)(A), with non-substantive differences to specify that this functionality would be applicable to any orders designated IOC that have an MTS Modifier, i.e., Limit IOC Orders and MPL–IOC Orders. Proposed Rule 7.31E(i)(3)(E) would provide that a resting order to buy (sell) with an MTS Modifier would trade with individual sell (buy) order(s) that each meets the MTS. This proposed rule text is based on the fourth sentence of Rule 7.31E(d)(3)(D) with a non-substantive difference to use the same terminology as proposed Rule 7.31E(i)(3)(B)(ii) because a resting order with an MTS Modifier only trades if contra-side individual orders each meets such order’s MTS. The Exchange proposes non-substantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier. Proposed Rules 7.31E(i)(3)(E)(i)–(iii) would set forth additional requirements for how a resting order with an MTS Modifier would trade. Proposed Rule 7.31E(i)(3)(E)(i) would provide that if a sell (buy) order does not meet the MTS of the resting order to buy (sell) with an MTS Modifier, that sell (buy) order would not trade with and may trade through such order with an MTS Modifier. This proposed rule text is based on the fifth sentence of Rule 7.31E(d)(3)(D) and the second sentence of Rule 7.31E(d)(4)(C) with nonsubstantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier. 13 See 14 PBBO is defined in Rule 1.1E(dd) as the Best Protected Bid and the Best Protected Offer. supra note 10. VerDate Sep<11>2014 18:59 Sep 26, 2017 Proposed Rule 7.31E(i)(3)(E)(ii) would provide that if a resting sell (buy) order did not meet the MTS of a same-priced resting order to buy (sell) with an MTS Modifier, a subsequently arriving sell (buy) order that meets the MTS would trade ahead of the resting sell (buy) order. This proposed rule text is based on the second sentence of Rule 7.31E(d)(4)(C) with non-substantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier. Proposed Rule 7.31E(i)(3)(E)(iii) would provide that a resting order to buy (sell) with an MTS Modifier would not be eligible to trade if sell (buy) order(s) ranked Priority 2—Display Orders are displayed on the Exchange Book at a price lower (higher) than the working price of such MTS Order. This proposed rule is new and is designed to ensure that a non-displayed order with an MTS Modifier that is resting on the Exchange Book would not trade at a price that crosses the price of a displayed contra-side order. For example, if the PBBO 14 is $10.10 × $10.14 and there is a resting MPL Order to buy with an MTS Modifier for 100 shares that has a working price of $10.12 (‘‘Order A’’), a later-arriving Limit Order to sell ranked Priority 2— Display Orders for 50 shares priced at $10.11 (‘‘Order B’’) would not be eligible to trade with Order A because it does not meet Order A’s MTS. However, because it is odd-lot sized, Order B would not change the PBBO and therefore the working price of Order A would not change, but Order B would be displayed on the Exchange’s proprietary data feeds at $10.11. In such case, to eliminate the potential for the Exchange to have an execution of Order A at a higher price than Order B, Order A would not be eligible to trade until such time that Order B no longer internally crosses Order A’s working price. Order A and Order B would no longer be internally crossed if, for example, Order B is cancelled or executed or if the PBBO moves such that the working price of Order A no longer internally crosses the display price of Order B. As a related matter, the Exchange also proposes to amend Rule 7.46E (Tick Size Pilot Plan) to establish how the Exchange would process orders with an MTS Modifier for Pilot Securities in Test Group Three. Proposed Rule 7.46E(f)(5)(I) would provide that for such securities, a resting order to buy (sell) with an MTS Modifier would not Jkt 241001 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 45101 be eligible to trade if sell (buy) order(s) ranked Priority 2—Display Orders are displayed on the Exchange Book at a price equal to or lower (higher) than the working price of such MTS Order. The Exchange proposes this difference for Pilot Securities in Test Group Three of the Tick Size Pilot Plan to ensure that a non-displayed order does not trade ahead of a same-price contra-side displayed order. For example, if the PBBO is $10.10 × $10.20 and there is a resting MPL Order to buy with an MTS Modifier for 100 shares that has a working price of $10.15 (‘‘Order A’’), a later-arriving Limit Order to sell ranked Priority 2— Display Orders for 50 shares priced at $10.15 (‘‘Order B’’) would not be eligible to trade with Order A because it does not meet Order A’s MTS, would not change the PBBO, and, pursuant to proposed Rule 7.31E(i)(3)(E)(ii), would rest on the Exchange Book internally locking the price of Order A. To avoid a violation of the Tick Size Pilot Plan for Pilot Securities in Test Group Three, Order A would not be eligible to trade if Order B is displayed at Order A’s working price until such time that the displayed order no longer internally locks Order A’s working price. Order A and Order B would no longer be internally locked if, for example, Order B is cancelled or executed or if the PBBO moves such that the working price of Order A no longer internally locks the display price of Order B. Proposed Rule 7.31E(i)(3)(F) would provide that a resting order with an MTS Modifier would be cancelled if it is traded in part or reduced in size and the remaining quantity is less than such order’s MTS. This proposed rule text is based on the last sentence of Rule 7.31E(d)(3)(D) and the last sentence of Rule 7.31E(d)(4)(C) with nonsubstantive differences to use common terminology when applying this requirement to all of the order types eligible for an MTS Modifier. Because of the technology changes associated with this proposed rule change, the Exchange will announce the implementation date of this proposed rule change by Trader Update. The Exchange anticipates that the implementation date will be in the fourth quarter of 2017. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),15 in general, and furthers the 15 15 E:\FR\FM\27SEN1.SGM U.S.C. 78f(b). 27SEN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES 45102 Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices objectives of Section 6(b)(5),16 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. The Exchange believes that the proposal to expand the availability of the Exchange’s existing MTS Modifier to additional non-displayed, non-routable orders, e.g., Non-Displayed Primary Pegged Orders and Discretionary Pegged Orders, would 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, because the proposed rule change is based on similar minimum trade size functionality on Nasdaq and IEX, which exchanges similarly make minimum trade size functionality available to nondisplayed, non-routable orders, including pegging orders, and for IEX, its Discretionary Peg Order.17 The Exchange believes that the proposal would 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 because it would provide ETP Holders with the option for orders with a minimum trade size to trade on entry only with individual orders that each meets the MTS of the incoming order, thereby providing ETP Holders with more control in how such orders could execute. As such, the proposed rule change is based on similar options available for users of minimum trade size functionality on Nasdaq and IEX.18 The Exchange further believes that this proposed option would remove impediments to, and perfect the mechanism of, a free and open market and a national market system because it would allow ETP Holders to provide an instruction that an order with an MTS Modifier would not trade with orders that are smaller in size that the MTS for such order, thereby providing ETP Holders with more control over when an order with an MTS Modifier may be executed. The Exchange believes that the proposal regarding when a resting order with an MTS would be eligible to trade 16 15 U.S.C. 78f(b)(5). supra note 9. 18 See supra note 10. 17 See VerDate Sep<11>2014 18:59 Sep 26, 2017 Jkt 241001 would 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, because the proposed rule change would ensure that a non-displayed order does not trade at a price that crosses the price of interest that is displayed on the Exchange, or for Tick Size Pilot Securities in Group Three, so that a non-displayed order would not trade at the same price as contra-side displayed interest in violation of the Tick Size Pilot Plan. This proposed rule change would therefore promote just and equitable principles of trade by ensuring that displayed interest does not get traded through by a nondisplayed order. Finally, the Exchange believes that the proposed amendment to rename the ‘‘Primary Pegged Order’’ as the ‘‘NonDisplayed Primary Pegged Order’’ would 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 because it would promote transparency in Exchange rules regarding whether Primary Pegged Orders on the Exchange are displayed. 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 rule change is designed to address competition by making available on the Exchange functionality that is already available on Nasdaq and IEX. The Exchange therefore believes that the proposed rule change would promote competition by providing market participants with an additional venue to which to route non-displayed, nonroutable orders with an MTS Modifier. 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 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 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 19 and Rule 19b– 4(f)(6) thereunder.20 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 21 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 22 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 asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange stated that implementing the MTS modifier functionality as soon as possible would provide ETP Holders with greater control over when an order with an MTS modifier may be executed. The Exchange also stated that waiver of the 30-day operative delay would allow it to implement the proposed rule change when the technology supporting the change becomes available, which the Exchange anticipates to be less than 30 days after the date of this filing. The Commission notes that the proposed functionality is already available on other national securities exchanges. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.23 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 19 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. 21 17 CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6)(iii). 23 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 20 17 E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 82, No. 186 / Wednesday, September 27, 2017 / Notices 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–20626 Filed 9–26–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81671; File No. SR– BatsBZX–2017–54] • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEAMER–2017–17 on the subject line. Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the iShares Inflation Hedged Corporate Bond ETF, a Series of the iShares U.S. ETF Trust, Under Rule 14.11(i), Managed Fund Shares Paper Comments asabaliauskas on DSKBBXCHB2PROD with NOTICES Electronic Comments September 21, 2017. • 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–2017–17. 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 Web site (http://www.sec.gov/ rules/sro.shtml). 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 Web site 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. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEAMER–2017–17 and should be submitted on or before October 18, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 7, 2017, Bats BZX Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. VerDate Sep<11>2014 18:59 Sep 26, 2017 Jkt 241001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to list and trade shares of the iShares Inflation Hedged Corporate Bond ETF (the ‘‘Fund’’), a series of the iShares U.S. ETF Trust (the ‘‘Trust’’), under Rule 14.11(i) (‘‘Managed Fund Shares’’). The shares of the Fund are referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at the Exchange’s Web site at www.bats.com, 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 Exchange 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 these 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 45103 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 list and trade the Shares under Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange.3 The Fund will be an actively managed exchange-traded fund that seeks to mitigate the inflation risk of a portfolio composed of U.S. dollardenominated investment-grade corporate bonds either through holding such bonds or through holding exchange-traded funds that hold such bonds, as further described below. The Exchange submits this proposal in order to allow the Fund to hold Inflation Hedging Instruments, as defined below, in a manner that may not comply with Rule 14.11(i)(4)(C)(iv)(a),4 Rule 14.11(i)(4)(C)(iv)(b),5 and/or Rule 3 The Commission originally approved BZX Rule 14.11(i) in Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR–BATS–2011–018) and subsequently approved generic listing standards for Managed Fund Shares under Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 2016), 81 FR 49698 (July 28, 2016) (SR–BATS–2015–100). 4 Rule 14.11(i)(4)(C)(iv)(a) provides that ‘‘there shall be no limitation to the percentage of the portfolio invested in such holdings; provided, however, that in the aggregate, at least 90% of the weight of such holdings invested in futures, exchange-traded options, and listed swaps shall, on both an initial and continuing basis, consist of futures, options, and swaps for which the Exchange may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other members or affiliates of the ISG or for which the principal market is a market with which the Exchange has a comprehensive surveillance sharing agreement, calculated using the aggregate gross notional value of such holdings.’’ The Exchange is proposing that the Fund be exempt from this requirement only as it relates to the Fund’s holdings in certain credit default swaps and Inflation Swaps, as further described below. 5 Rule 14.11(i)(4)(C)(iv)(b) provides that ‘‘the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).’’ The Exchange is proposing that the Fund be exempt only from the requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). The Exchange is proposing that the Fund be exempt from this requirement only Continued E:\FR\FM\27SEN1.SGM 27SEN1

Agencies

[Federal Register Volume 82, Number 186 (Wednesday, September 27, 2017)]
[Notices]
[Pages 45099-45103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20626]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81672; File No. SR-NYSEAMER-2017-17]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending 
Rule 7.31E Relating to the Minimum Trade Size Modifier for Additional 
Order Types and Expanding the Minimum Trade Size Modifier for Existing 
Order Types

September 21, 2017.
    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 September 11, 2017, NYSE American LLC (``Exchange'' or ``NYSE 
American'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7.31E relating to the Minimum 
Trade
    Size modifier.
    The proposed rule change is available on the Exchange's Web site at 
www.nyse.com, 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.

[[Page 45100]]

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 relating to the Minimum 
Trade Size (``MTS'') modifier. Specifically, the Exchange proposes to 
make the MTS modifier available for Non-Displayed Primary Pegged Orders 
\4\ and Discretionary Pegged Orders. In addition, the Exchange proposes 
to provide additional optionality for ETP Holders using the MTS 
modifier with Midpoint Liquidity (``MPL'') Orders, Non-Displayed 
Primary Pegged Orders, and Discretionary Pegged Orders. As proposed, 
ETP Holders could choose how such orders would trade on arrival to 
trade either with (i) orders that in the aggregate meet the MTS 
(current functionality), or (ii) individual orders that each meet the 
MTS (proposed functionality).
---------------------------------------------------------------------------

    \4\ The Exchange proposes a non-substantive amendment to rename 
``Primary Pegged Orders'' as ``Non-Displayed Primary Pegged Orders'' 
in Rule 7.31E(h)(2). The Exchange believes that this proposed 
amendment provides transparency regarding whether Primary Pegged 
Orders on the Exchange are displayed.
---------------------------------------------------------------------------

    The MTS modifier is currently available for Limit IOC Orders,\5\ 
MPL Orders,\6\ and Tracking Orders.\7\ As such, the MTS modifier is 
currently available only for orders that are not displayed and do not 
route. On arrival, both Limit IOC Orders and MPL Orders with an MTS 
modifier will trade against contra-side orders in the Exchange Book 
that in the aggregate, meet the MTS.\8\ Once resting, MPL Orders and 
Tracking Orders with an MTS modifier function similarly: If a contra-
side order does not meet the MTS, the incoming order will not trade 
with and may trade through the resting order with the MTS modifier. In 
addition, both MPL Orders and Tracking Orders with an MTS modifier will 
be cancelled if such orders are traded in part or reduced in size and 
the remaining quantity is less than the MTS.
---------------------------------------------------------------------------

    \5\ See Rule 7.31E(b)(2)(A) (``A Limit IOC Order to buy (sell) 
may be designated with a minimum trade size (``MTS''), which will 
trade against sell (buy) orders in the Exchange Book that in the 
aggregate, meets its MTS. On entry, a Limit IOC Order with an MTS 
must have a minimum of one round lot and will be rejected on arrival 
if the MTS is larger than the size of the Limit IOC Order. A Limit 
IOC Order with an MTS that cannot be immediately traded at its 
minimum size will be cancelled in its entirety.'')
    \6\ See Rule 7.31E(d)(3)(D) (``An MPL Order may be designated 
with an MTS of a minimum of one round lot and will be rejected on 
arrival if the MTS is larger than the size of the MPL Order. On 
arrival, an MPL Order to buy (sell) with an MTS will trade with sell 
(buy) orders in the Exchange Book that in the aggregate, meets its 
MTS. If the sell (buy) orders do not meet the MTS, the MPL Order to 
buy (sell) will not trade on arrival and will be ranked in the 
Exchange Book. Once resting, an MPL Order to buy (sell) with an MTS 
will trade with an order to sell (buy) that meets the MTS and is 
priced at or below (above) the midpoint of the PBBO. If an order 
does not meet an MPL Order's MTS, the order will not trade with and 
may trade through such MPL Order. If an MPL Order with an MTS is 
traded in part or reduced in size and the remaining quantity of the 
order is less than the MTS, the MPL Order will be cancelled.'')
    \7\ See Rule 7.31E(d)(4)(C) (``A Tracking Order may be 
designated with an MTS of one round lot or more. If an incoming 
order cannot meet the MTS, a Tracking Order with a later working 
time will trade ahead of the Tracking Order designated with an MTS 
with an earlier working time. If a Tracking Order with an MTS is 
traded in part or reduced in size and the remaining quantity is less 
than the MTS, the Tracking Order will be cancelled.'')
    \8\ Tracking Orders, including Tracking Orders with an MTS 
modifier, are passive orders that do not trade on arrival.
---------------------------------------------------------------------------

    The Exchange proposes to amend its rules to make MTS modifier 
functionality available for additional non-displayed orders that do not 
route, i.e., Non-Displayed Primary Pegged Orders and Discretionary 
Pegged Orders. The Exchange also proposes to add an option that an 
order with an MTS modifier would trade on entry only with individual 
orders that each meet the MTS. These proposed changes are based on the 
rules of Nasdaq Stock Market LLC (``Nasdaq'') and Investors Exchange 
LLC (``IEX''), which both offer minimum trade size functionality for 
orders that are not displayed and that do not route, including pegging 
orders and for IEX, its Discretionary Peg Order.\9\ Both exchanges also 
offer the option for orders with a minimum trade size to trade on entry 
only with individual orders that each meet the MTS of the incoming 
order.\10\
---------------------------------------------------------------------------

    \9\ See Nasdaq Rule 4703(e) (Nasdaq's ``Minimum Quantity Order'' 
may not be displayed and will be rejected if it includes an 
instruction to route) and IEX Rule 11.190(b)(11)(A) (IEX's ``Minimum 
Quantity Order'' or ``MQTY'' is a non-displayed, non-routable order 
that may be a pegged order, which includes IEX's ``Primary Peg 
Order'' and ``Discretionary Peg Order'').
    \10\ See Nasdaq Rule 4703(e) (Nasdaq's ``Minimum Quantity'' 
order attribute allows for a Nasdaq participant to specify one of 
two alternatives to how a Minimum Quantity Order would be processed 
at the time of entry, one of which is that ``the minimum quantity 
condition must be satisfied by execution against one or more orders, 
each of which must have a size that satisfies the minimum quantity 
condition'') and IEX Rule 11.190(b)(11)(G)(iii)(B) (On arrival, 
IEX's ``Minimum Execution Size with All-or-None Remaining'' 
qualifier for IEX's MQTY executes against each willing resting order 
in priority, provided that each individual execution size meets its 
effective minimum quantity.)
---------------------------------------------------------------------------

    To effect this proposed rule change, the Exchange proposes to move 
all references to MTS modifiers in Rule 7.31E to proposed Rule 
7.31E(i)(3), as a new additional order instruction and modifier to be 
referred to as the ``Minimum Trade Size (`MTS') Modifier.'' As 
proposed, Rule 7.31E(i)(3) would provide that a Limit IOC Order, MPL 
Order, Tracking Order, Non-Displayed Primary Pegged Order, or 
Discretionary Pegged Order may be designated with an MTS Modifier. 
Because this proposed rule text would specify which orders would be 
eligible for the MTS Modifier, the Exchange proposes to delete existing 
rule text specifying which orders are and are not eligible for an 
MTS.\11\
---------------------------------------------------------------------------

    \11\ The Exchange proposes to delete references to MTS in Rules 
7.31E(b)(2)(A), 7.31E(b)(2)(B), 7.31E(d)(3)(D), 7.31E(d)(4)(C), 
7.31E(e)(3)(B), and 7.46E(f)(1)(A).
---------------------------------------------------------------------------

    Proposed Rule 7.31E(i)(3)(A) would provide that an MTS must be a 
minimum of a round lot and that an order with an MTS Modifier would be 
rejected if the MTS is less than a round lot or if the MTS is larger 
than the size of the order. This proposed rule text is based on the 
next-to-last sentence of Rule 7.31E(b)(2)(A) and the first sentence of 
7.31E(d)(3)(D), and in part on the first sentence of Rule 
7.31E(d)(4)(C), with non-substantive differences to use common 
terminology when applying this requirement to all of the order types 
eligible for an MTS Modifier.\12\
---------------------------------------------------------------------------

    \12\ Nasdaq also requires that its Minimum Quantity Order also 
have a size of at least a round lot. See Nasdaq Rule 4703(e).
---------------------------------------------------------------------------

    Proposed Rule 7.31E(i)(3)(B) would provide that an ETP Holder must 
specify one of the following instructions with respect to how an order 
with an MTS Modifier would trade at the time of entry. This proposed 
text is new and reflects the Exchange's proposal to add an alternative 
to how an order with an MTS Modifier would trade on entry. Proposed 
Rule 7.31E(i)(3)(B)(i) would describe the existing functionality as one 
of the instructions that would be available to ETP Holders. The 
proposed rule would provide that an order to buy (sell) with an MTS 
Modifier would trade with sell (buy) orders in the Exchange Book that 
in the aggregate meet such order's MTS. This proposed rule text is 
based on the third sentence of Rule 7.31E(b)(2)(A) and the second 
sentence of Rule 7.31E(d)(3)(D) with non-substantive differences to use 
common terminology when applying this requirement to all of the order 
types eligible for an MTS Modifier.
    Proposed Rule 7.31E(i)(3)(B)(ii) would describe the new instruction 
that on entry, an order to buy (sell) with an MTS Modifier could trade 
with individual sell (buy) order(s) in the Exchange Book that each 
meets such order's MTS. Because the Exchange is not proposing to change 
how an MTS Modifier would function for Limit IOC Orders, the Exchange 
further proposes

[[Page 45101]]

to provide that this instruction would not be available for Limit IOC 
Orders. As discussed above, the addition of this instruction for how 
orders with an MTS Modifier would trade on entry is based on the rules 
of Nasdaq and IEX.\13\
---------------------------------------------------------------------------

    \13\ See supra note 10.
---------------------------------------------------------------------------

    Proposed Rule 7.31E(i)(3)(C) would provide that an order with an 
MTS Modifier that is designated Day and cannot be satisfied on arrival 
would not trade and would be ranked in the Exchange Book. This proposed 
rule text is based on the third sentence of Rule 7.31E(d)(3)(D) with 
non-substantive differences to reference orders designated Day so that 
this proposed rule text would also be applicable to Non-Displayed 
Primary Pegged Orders and Discretionary Pegged Orders, which are also 
designated Day.
    Proposed Rule 7.31E(i)(3)(D) would provide that an order with an 
MTS Modifier that is designated IOC and cannot be immediately satisfied 
would be cancelled in its entirety. This proposed rule text is based on 
the last sentence of Rule 7.31E(b)(2)(A), with non-substantive 
differences to specify that this functionality would be applicable to 
any orders designated IOC that have an MTS Modifier, i.e., Limit IOC 
Orders and MPL-IOC Orders.
    Proposed Rule 7.31E(i)(3)(E) would provide that a resting order to 
buy (sell) with an MTS Modifier would trade with individual sell (buy) 
order(s) that each meets the MTS. This proposed rule text is based on 
the fourth sentence of Rule 7.31E(d)(3)(D) with a non-substantive 
difference to use the same terminology as proposed Rule 
7.31E(i)(3)(B)(ii) because a resting order with an MTS Modifier only 
trades if contra-side individual orders each meets such order's MTS. 
The Exchange proposes non-substantive differences to use common 
terminology when applying this requirement to all of the order types 
eligible for an MTS Modifier.
    Proposed Rules 7.31E(i)(3)(E)(i)-(iii) would set forth additional 
requirements for how a resting order with an MTS Modifier would trade. 
Proposed Rule 7.31E(i)(3)(E)(i) would provide that if a sell (buy) 
order does not meet the MTS of the resting order to buy (sell) with an 
MTS Modifier, that sell (buy) order would not trade with and may trade 
through such order with an MTS Modifier. This proposed rule text is 
based on the fifth sentence of Rule 7.31E(d)(3)(D) and the second 
sentence of Rule 7.31E(d)(4)(C) with non-substantive differences to use 
common terminology when applying this requirement to all of the order 
types eligible for an MTS Modifier.
    Proposed Rule 7.31E(i)(3)(E)(ii) would provide that if a resting 
sell (buy) order did not meet the MTS of a same-priced resting order to 
buy (sell) with an MTS Modifier, a subsequently arriving sell (buy) 
order that meets the MTS would trade ahead of the resting sell (buy) 
order. This proposed rule text is based on the second sentence of Rule 
7.31E(d)(4)(C) with non-substantive differences to use common 
terminology when applying this requirement to all of the order types 
eligible for an MTS Modifier.
    Proposed Rule 7.31E(i)(3)(E)(iii) would provide that a resting 
order to buy (sell) with an MTS Modifier would not be eligible to trade 
if sell (buy) order(s) ranked Priority 2--Display Orders are displayed 
on the Exchange Book at a price lower (higher) than the working price 
of such MTS Order. This proposed rule is new and is designed to ensure 
that a non-displayed order with an MTS Modifier that is resting on the 
Exchange Book would not trade at a price that crosses the price of a 
displayed contra-side order.
    For example, if the PBBO \14\ is $10.10 x $10.14 and there is a 
resting MPL Order to buy with an MTS Modifier for 100 shares that has a 
working price of $10.12 (``Order A''), a later-arriving Limit Order to 
sell ranked Priority 2--Display Orders for 50 shares priced at $10.11 
(``Order B'') would not be eligible to trade with Order A because it 
does not meet Order A's MTS. However, because it is odd-lot sized, 
Order B would not change the PBBO and therefore the working price of 
Order A would not change, but Order B would be displayed on the 
Exchange's proprietary data feeds at $10.11. In such case, to eliminate 
the potential for the Exchange to have an execution of Order A at a 
higher price than Order B, Order A would not be eligible to trade until 
such time that Order B no longer internally crosses Order A's working 
price. Order A and Order B would no longer be internally crossed if, 
for example, Order B is cancelled or executed or if the PBBO moves such 
that the working price of Order A no longer internally crosses the 
display price of Order B.
---------------------------------------------------------------------------

    \14\ PBBO is defined in Rule 1.1E(dd) as the Best Protected Bid 
and the Best Protected Offer.
---------------------------------------------------------------------------

    As a related matter, the Exchange also proposes to amend Rule 7.46E 
(Tick Size Pilot Plan) to establish how the Exchange would process 
orders with an MTS Modifier for Pilot Securities in Test Group Three. 
Proposed Rule 7.46E(f)(5)(I) would provide that for such securities, a 
resting order to buy (sell) with an MTS Modifier would not be eligible 
to trade if sell (buy) order(s) ranked Priority 2--Display Orders are 
displayed on the Exchange Book at a price equal to or lower (higher) 
than the working price of such MTS Order. The Exchange proposes this 
difference for Pilot Securities in Test Group Three of the Tick Size 
Pilot Plan to ensure that a non-displayed order does not trade ahead of 
a same-price contra-side displayed order.
    For example, if the PBBO is $10.10 x $10.20 and there is a resting 
MPL Order to buy with an MTS Modifier for 100 shares that has a working 
price of $10.15 (``Order A''), a later-arriving Limit Order to sell 
ranked Priority 2--Display Orders for 50 shares priced at $10.15 
(``Order B'') would not be eligible to trade with Order A because it 
does not meet Order A's MTS, would not change the PBBO, and, pursuant 
to proposed Rule 7.31E(i)(3)(E)(ii), would rest on the Exchange Book 
internally locking the price of Order A. To avoid a violation of the 
Tick Size Pilot Plan for Pilot Securities in Test Group Three, Order A 
would not be eligible to trade if Order B is displayed at Order A's 
working price until such time that the displayed order no longer 
internally locks Order A's working price. Order A and Order B would no 
longer be internally locked if, for example, Order B is cancelled or 
executed or if the PBBO moves such that the working price of Order A no 
longer internally locks the display price of Order B.
    Proposed Rule 7.31E(i)(3)(F) would provide that a resting order 
with an MTS Modifier would be cancelled if it is traded in part or 
reduced in size and the remaining quantity is less than such order's 
MTS. This proposed rule text is based on the last sentence of Rule 
7.31E(d)(3)(D) and the last sentence of Rule 7.31E(d)(4)(C) with non-
substantive differences to use common terminology when applying this 
requirement to all of the order types eligible for an MTS Modifier.
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date of this 
proposed rule change by Trader Update. The Exchange anticipates that 
the implementation date will be in the fourth quarter of 2017.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\15\ in general, and 
furthers the

[[Page 45102]]

objectives of Section 6(b)(5),\16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposal to expand the availability 
of the Exchange's existing MTS Modifier to additional non-displayed, 
non-routable orders, e.g., Non-Displayed Primary Pegged Orders and 
Discretionary Pegged Orders, would 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, because 
the proposed rule change is based on similar minimum trade size 
functionality on Nasdaq and IEX, which exchanges similarly make minimum 
trade size functionality available to non-displayed, non-routable 
orders, including pegging orders, and for IEX, its Discretionary Peg 
Order.\17\
---------------------------------------------------------------------------

    \17\ See supra note 9.
---------------------------------------------------------------------------

    The Exchange believes that the proposal would 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 because it would provide ETP Holders with the option for 
orders with a minimum trade size to trade on entry only with individual 
orders that each meets the MTS of the incoming order, thereby providing 
ETP Holders with more control in how such orders could execute. As 
such, the proposed rule change is based on similar options available 
for users of minimum trade size functionality on Nasdaq and IEX.\18\ 
The Exchange further believes that this proposed option would remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system because it would allow ETP Holders to 
provide an instruction that an order with an MTS Modifier would not 
trade with orders that are smaller in size that the MTS for such order, 
thereby providing ETP Holders with more control over when an order with 
an MTS Modifier may be executed.
---------------------------------------------------------------------------

    \18\ See supra note 10.
---------------------------------------------------------------------------

    The Exchange believes that the proposal regarding when a resting 
order with an MTS would be eligible to trade would 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, because the proposed rule change would ensure that a non-
displayed order does not trade at a price that crosses the price of 
interest that is displayed on the Exchange, or for Tick Size Pilot 
Securities in Group Three, so that a non-displayed order would not 
trade at the same price as contra-side displayed interest in violation 
of the Tick Size Pilot Plan. This proposed rule change would therefore 
promote just and equitable principles of trade by ensuring that 
displayed interest does not get traded through by a non-displayed 
order.
    Finally, the Exchange believes that the proposed amendment to 
rename the ``Primary Pegged Order'' as the ``Non-Displayed Primary 
Pegged Order'' would 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 because it would 
promote transparency in Exchange rules regarding whether Primary Pegged 
Orders on the Exchange are displayed.

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 rule change is designed to address competition by making 
available on the Exchange functionality that is already available on 
Nasdaq and IEX. The Exchange therefore believes that the proposed rule 
change would promote competition by providing market participants with 
an additional venue to which to route non-displayed, non-routable 
orders with an MTS Modifier.

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 \19\ and Rule 19b-
4(f)(6) thereunder.\20\
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \21\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \22\ 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 asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
stated that implementing the MTS modifier functionality as soon as 
possible would provide ETP Holders with greater control over when an 
order with an MTS modifier may be executed. The Exchange also stated 
that waiver of the 30-day operative delay would allow it to implement 
the proposed rule change when the technology supporting the change 
becomes available, which the Exchange anticipates to be less than 30 
days after the date of this filing. The Commission notes that the 
proposed functionality is already available on other national 
securities exchanges. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposal operative upon filing.\23\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 45103]]

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAMER-2017-17 on the subject line.

Paper Comments

     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-2017-17. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site 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. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEAMER-2017-17 and should 
be submitted on or before October 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20626 Filed 9-26-17; 8:45 am]
 BILLING CODE 8011-01-P