Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt New Equity Trading Rules To trade Securities Pursuant to Unlisted Trading Privileges, Including Orders and Modifiers, Order Ranking and Display, and Order Execution and Routing on Pillar, the Exchange's New Trading Technology Platform, 52757-52762 [2017-24577]
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Federal Register / Vol. 82, No. 218 / Tuesday, November 14, 2017 / Notices
excess of the limits in section 12(d)(1)
of the Act.
APPLICANTS: Meeder Funds Trust (the
‘‘Trust’’), a Massachusetts business trust
registered under the Act as an open-end
investment company with multiple
series; Meeder Asset Management, Inc.,
an Ohio corporation registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Adviser,’’), and Adviser Dealer
Services, Inc. (the ‘‘Distributor’’), an
Ohio corporation registered as a brokerdealer under the Securities Exchange
Act of 1934 (‘‘Exchange Act’’).
FILING DATES: The application was filed
on May 16, 2017 and amended on
September 15, 2017.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 4, 2017 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: Michael Wible, Thompson
Hine LLP, 41 South High Street, Suite
1700, Columbus, Ohio 43215.
FOR FURTHER INFORMATION CONTACT:
James D. McGinnis, Senior Counsel, at
(202) 551–3025, or Parisa Haghshenas,
Branch Chief, at (202) 551–6723
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order to
permit (a) registered open-end
management investment companies (the
‘‘Investing Funds’’) that are not part of
the same ‘‘group of investment
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companies,’’ as defined in section
12(d)(1)(G)(ii) of the Act, as the Trust, to
acquire shares in series of the Trust (the
‘‘Funds’’) 1 in excess of the limits in
section 12(d)(1)(A) of the Act 2 and (b)
the Funds, any principal underwriter for
a Fund, and any broker or dealer
registered under the Exchange Act (a
‘‘Broker’’) to sell shares of the Funds to
the Investing Funds in excess of the
limits of section 12(d)(1)(B) of the Act.
Applicants also request an order under
sections 6(c) and 17(b) of the Act to
exempt applicants from section 17(a) to
the extent necessary to permit a Fund to
sell its shares to, and redeem its shares
from, an Investing Fund.
2. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the Application. Such terms
and conditions are designed to, among
other things, help prevent any potential
(i) undue influence over a Fund through
control or in connection with certain
services, transactions, and
underwritings; (ii) excessive layering of
fees; and (iii) overly complex fund
structures, which are the concerns
underlying the limits in sections
12(d)(1)(A) and (B) of the Act.
3. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
1 Applicants request that the relief apply to: (1)
Each registered, open-end management investment
company or series thereof that currently or
subsequently is part of the same ‘group of
investment companies,’ within the meaning of
Section 12(d)(1)(G)(ii) of the Act, as the Trust and
is advised by the Adviser (included in the term
‘Funds’); (2) each Investing Fund that enters into a
Participation Agreement (as defined in the
Application) with a Fund to purchase shares of the
Fund; and (3) any principal underwriter to a Fund
or Broker selling shares of a Fund.
2 Certain of the Funds created in the future may
be registered under the Act as open-end
management investment companies and may have
received exemptive relief to permit their shares to
be listed and traded on a national securities
exchange at negotiated prices.
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52757
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–24628 Filed 11–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82028; File No. SR–NYSE–
2017–36]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Adopt New
Equity Trading Rules To trade
Securities Pursuant to Unlisted
Trading Privileges, Including Orders
and Modifiers, Order Ranking and
Display, and Order Execution and
Routing on Pillar, the Exchange’s New
Trading Technology Platform
November 7, 2017.
I. Introduction
On July 28, 2017, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt new equity trading
rules to allow the Exchange to trade
securities pursuant to unlisted trading
privileges (‘‘UTP Securities’’) 3 on Pillar,
the Exchange’s new trading technology
platform. The proposed rule change was
published for comment in the Federal
Register on August 9, 2017.4 On
September 18, 2017, the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether the proposed rule change
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 NYSE Rules define ‘‘UTP Security’’ as a security
that is listed on a national securities exchange other
than the Exchange and that trades on the Exchange
pursuant to unlisted trading privileges. See NYSE
Rule 1.1(ii).
4 See Securities Exchange Act Release No. 81310
(Aug. 3, 2017), 82 FR 37257 (Aug. 9, 2017)
(‘‘Notice’’).
2 17
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Federal Register / Vol. 82, No. 218 / Tuesday, November 14, 2017 / Notices
should be disapproved.5 The
Commission received no comments on
the proposed rule change. This order
institutes proceedings under Section
19(b)(2)(B) of the Exchange Act 6 to
determine whether to approve or
disapprove the proposed rule change.
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II. Description of the Proposed Rule
Change
The Exchange proposes to adopt
equities trading rules to implement
Pillar, a new trading technology
platform, in order to introduce trading
of UTP Securities on the Exchange.
Under the proposal, the Pillar platform
rules, as set forth in NYSE Rules 1P–
13P, would govern trading in UTP
Securities on the Exchange.7 The
Exchange proposes rule changes relating
to clearly erroneous executions; the
limit up-limit down plan; short sales;
halts; orders and modifiers; order
ranking, display, execution, and routing;
odd and mixed lots; the tick size pilot
plan. The Exchange also proposes to
specify the current Exchange rules that
would not be operative under Pillar.
Pursuant to the proposal, UTP
Securities would trade under the
Exchange’s current parity allocation
model.8 Designated market makers
(‘‘DMMs’’) would not be assigned UTP
Securities on Pillar.9 Supplemental
Liquidity Providers 10 would be eligible
to be assigned UTP Securities, and
member organizations operating floor
broker operations that are physically
located on the floor would also be
eligible to trade UTP Securities,11 but
UTP Securities would not be available
for floor-based point-of-sale trading.
Finally, the Exchange would not
conduct auctions in UTP Securities.12
The Exchange represents that it will
continue to trade NYSE-listed securities
on its current trading platform.13
5 See Securities Exchange Act Release No. 81641
(Sept. 18, 2017), 82 FR 44483 (Sept. 22, 2017)
(‘‘Extension’’).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 76803
(Dec. 30, 2015), 81 FR 536 (Jan. 6, 2016) (SR–NYSE–
2015–67) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change) (adopting a
framework of rule numbering based on NYSE Arca
rules in advance of the NYSE adopting Pillar).
8 The Pillar platform on NYSE Arca and NYSE
American uses a price-time allocation model. See
NYSE Arca Rule 7.37–E(a) and NYSE American
Rule 7.37E(a).
9 See Notice, supra note 3, 82 FR at 37258.
10 See Proposed NYSE Rule 107B.
11 According to the Exchange, member
organizations trading UTP Securities would be
required to comply with Section 11(a)(1) of the Act,
15 U.S.C. 78k(a)(1), and with any exceptions that
are currently applicable to trading on the Exchange.
See Notice, supra note 3, 82 FR at 37258 n.12.
12 See Notice, supra note 3, 82 FR at 37258.
13 The Exchange states that it plans to transition
trading in NYSE-listed securities to Pillar at a later
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The Exchange represents that the
proposal to trade UTP Securities on
Pillar is based in part on the equity
trading rules of NYSE Arca, Inc. (‘‘NYSE
Arca’’) and NYSE American LLC
(‘‘NYSE American’’), with the following
substantive differences. First, as noted
earlier, the Exchange would use a parity
allocation model with a setter priority
allocation for the participant that sets
the best bid or offer on the Exchange
(‘‘BBO’’).14 Second, the Exchange would
not offer a Retail Liquidity Program or
the associated order types—Retail
Orders and Retail Price Improvement
Orders. Third, as noted above, the
Exchange would not conduct auctions.
Fourth, the Exchange would offer only
two trading sessions—an Early Trading
Session and a Core Trading Session.
Finally, the Exchange’s order types and
modifiers would differ from the order
types and modifiers offered by NYSE
Arca and NYSE American.
The Exchange represents that it will
announce the implementation of trading
UTP Securities on Pillar by a Trader
Update. The Exchange anticipates that
the implementation will occur in the
first quarter of 2018. If the Exchange
begins trading UTP Securities on Pillar,
certain current NYSE trading rules
would not be applicable. The Exchange
proposes to mark the affected Exchange
rules with a preamble to state that the
rules are not applicable to trading UTP
Securities on Pillar.
The Notice contains a detailed
description of the proposal. The
following section briefly summarizes
the proposal.
A. NYSE Rule 7P—Equities Trading
The Exchange proposes several new
rules and changes to existing rules in
NYSE Rule 7P. Currently, Section 1 of
NYSE Rule 7P sets forth general
provisions relating to equities trading on
Pillar, such as hours of business and
clearance and settlement. The Exchange
proposes to add NYSE Rules 7.10
(clearly erroneous executions); 7.11
(limit up-limit down); and 7.16 (short
sales) to Section 1 of NYSE Rule 7P and
amend NYSE Rule 7.18 (halts).
Section 3 of NYSE Rule 7P sets forth
the rules for trading on Pillar. The
Exchange proposes to add to this section
new NYSE Rules 7.31 (orders and
modifiers); 7.34 (trading sessions); 7.36
(order ranking and display); 7.37 (order
execution and routing); and 7.38 (odd
and mixed lots). Finally, the Exchange
proposes to add new NYSE Rule 7.46 to
date, and will file separate proposed rule changes
to implement that transition. See Notice, supra note
3, 82 FR at 37258 n.9.
14 See NYSE Rule 1.1(h) (defining ‘‘BBO’’ as the
best bid or offer on the Exchange).
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Section 5 of NYSE Rule 7P to establish
rules to implement the Tick Size Pilot
Plan.
1. General Provisions
The Exchange proposes to establish
rules relating to clearly erroneous
executions, the limit up-limit down
plan, short sales, and trading halts with
respect to UTP Securities.
Proposed NYSE Rule 7.10 would set
forth the Exchange’s rules governing
clearly erroneous executions.15 The
proposed rule would set forth how a
member organization could request a
review of an order that was submitted
erroneously, the timing of Exchange
review, thresholds for determining
clearly erroneous execution, review
procedures, and other rules governing
clearly erroneous executions.
The Exchange represents that the
proposed rule is based on NYSE Arca
Rule 7.10–E and NYSE American Rule
7.10E, except that the proposed rule
would omit references to: (1) The Late
Trading Session,16 since the Exchange
would not offer a late trading session;
(2) Cross Orders,17 since the Exchange
would not offer cross orders; and (3)
executions in the Trading Halt Auction,
since the Exchange would not conduct
auctions for UTP Securities.18
Proposed NYSE Rule 7.11 would
establish rules governing how the
Exchange would comply with the
Regulation NMS Plan to Address
Extraordinary Market Volatility (‘‘LULD
Plan’’). The LULD Plan addresses
extraordinary market volatility and is
intended to prevent trades in NMS
securities from occurring outside of
specified price bands, and the proposed
rule would implement the LULD Plan
on the Exchange’s Pillar platform. The
Exchange represents that the proposed
rule is based on NYSE American 7.11E
with the following differences: (1) There
would be no option for member
organizations to enter an instruction to
cancel Limit Orders that cannot be
traded or routed at prices within the
price bands; (2) there would be no
provisions and references relating to Q
Orders, Limit IOC Cross Orders, or
orders with specific routing instructions
because the Exchange will not offer
these order types; 19 (3) there would be
no provision on reopenings since the
15 See
Proposed NYSE Rule 7.10.
Proposed NYSE Rule 7.34 and see infra the
related discussion below.
17 See Proposed NYSE Rule 7.31 and see infra the
related discussion below.
18 The Exchange proposes that current NYSE Rule
128 (Clearly Erroneous Executions For NYSE
Equities) would not be applicable for trading in
UTP Securities on Pillar.
19 See Proposed NYSE Rule 7.31 and the related
discussion below.
16 See
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Exchange will not conduct auctions;
and (4) the proposed rules would not
include references to Day ISO orders, an
order type that NYSE American does
not offer.
Proposed NYSE Rule 7.16 would set
forth the Exchange’s short sale rule,
which would govern short sales and
compliance with Regulation SHO. The
Exchange represents that the proposed
rule is based on NYSE Arca Rule 7.16–
E and NYSE American Rule 7.16E with
two substantive differences. First,
because the proposed rule would not
apply to the Exchange’s listed securities,
the Exchange would not evaluate the
triggering of the short sale price
restrictions pursuant to Rule 201 of
Regulation SHO for covered securities
in which the Exchange is not the listing
market.20 Second, the Exchange is not
proposing a rule that relates to Tracking
Orders, Cross Orders, or the Proactive if
Locked/Crossed Modifier because the
Exchange would not offer these order
types for UTP Securities.21
Current NYSE Rule 7.18 governs
trading halts in an UTP Security. The
Exchange proposes to add proposed
Rule 7.18(b), which would set forth how
the Exchange would process new and
existing orders in an UTP Security
during an UTP Regulatory Halt.22 The
Exchange represents that the proposed
rule is based on NYSE Arca Rule 7.18–
E(b) and subparagraphs (1)–(6), as well
as NYSE American Rule 7.18E(b) and
subparagraphs (1)–(6), except that the
Exchange would not refer to ‘‘Primary
Only’’ order types because the Exchange
would not offer this order type. The
Exchange also proposes to add NYSE
Rule 7.18(d)(1)(A), which would allow
the Exchange to continue to trade an
UTP Exchange Traded Product for the
remainder of the Early Trading Session
in certain situations.23 The Exchange
represents that the proposed rule is
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20 As
a result, the Exchange would not include
rules based on NYSE Arca Rules 7.16–E(f)(3), 7.16–
E(f)(4)(A), or 7.16–E(f)(4)(B) or NYSE American
Rules 7.16E(f)(3), 7.16E(f)(4)(A), or 7.16E(f)(4)(B).
21 Current NYSE Rule 440B (Short Sales) would
not be applicable to trading UTP Securities on
Pillar.
22 See Proposed NYSE Rule 7.18(b). UTP
Regulatory Halt is defined in current NYSE Rule
1.1(kk) to mean a trade suspension, halt, or pause
called by the UTP Listing Market in an UTP
Security that requires all market centers to halt
trading in that security. NYSE Rule 1.1(jj) defines
the term ‘‘UTP Listing Market’’ as the primary
listing market for an UTP Security.
23 See Proposed NYSE Rule 7.18(d)(1)(A).
Specifically, this rule would apply if an UTP
Exchange Traded Product begins trading on the
Exchange in the Early Trading Session and a
temporary interruption occurs in a major market
vendor’s calculation or wide dissemination of either
the Intraday Indicative Value or the value of the
underlying index to the UTP Exchange Traded
Product, as applicable.
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based on NYSE Arca Rule 7.18–
E(d)(1)(A) and NYSE American Rule
7.18E(d)(1)(A), with no substantive
differences.24
2. Trading Rules for Pillar
The Exchange proposes trading rules
for Pillar, including a description of
order types and modifiers, trading
sessions, how orders are displayed and
ranked, how orders are executed and
routed, and how odd lots and mixed lots
are ranked and executed.
Proposed NYSE Rule 7.31 would set
forth the primary order types, as well as
time-in-force modifiers, auction-only
orders, orders with conditional or
undisplayed price and/or size, orders
with instructions not to route, pegged
orders, and other order instructions and
modifiers that would be available on
Pillar. The Exchange represents that the
proposed orders and modifiers are a
subset of those offered on NYSE Arca
and NYSE American, with several
substantive differences.
The proposed NYSE rule differs from
the NYSE Arca and NYSE American
rules as follows: (1) NYSE would not
offer auctions in UTP Securities
(Auction-Only Orders would be routed
to the primary listing markets); (2) Limit
Orders entered before the Core Trading
Session would be designated for both
the Early and Core Trading Sessions; (3)
the Exchange would not offer the option
to designate certain orders with a NonDisplay Remove Modifier; (4)
Intermarket Sweep Orders would not be
available to floor brokers; (5) Pegged
Orders would be available only to floor
brokers; 25 and (6) the Exchange would
not offer certain order types.26 The
proposed rule also sets forth how Self
Trade Prevention Modifiers would
24 The Exchange proposes two non-substantive
changes: (1) Amend NYSE Rule 7.18(a) to update
a cross-reference and (2) amend NYSE Rule
7.18(d)(1)(B) to replace the phrase ‘‘Normal Trading
Hours’’ with the phrase ‘‘Core Trading Session.’’
See Proposed NYSE Rule 7.34(a)(2) (defining Core
Trading Session).
25 Currently, NYSE only offers pegged orders for
floor brokers. See NYSE Rule 13(f)(1) (stating that
pegging interest ‘‘must be an e-Quote or d-Quote’’).
See NYSE Rule 70 for more information on e-Quote
and d-Quote.
26 The Exchange would not offer Tracking Orders,
Cross Orders, Q Orders, orders that include specific
routing instructions (which includes Primary Only
Orders), Inside Limit Orders, Limit IOC Cross
Orders, Market Pegged Orders, Discretionary Pegged
Orders, or the Proactive if Locked/Crossed Modifier.
However, the Exchange would offer the order type
Non-Displayed Primary Pegged Order, which NYSE
Arca does not offer. The Exchange would also offer
order types and modifiers not offered by NYSE
American (Primary Pegged Orders, ALO Orders,
Day ISO Orders, IOC ISO Orders, and MPL Orders
with an ALO Modifier).
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52759
function consistent with the Exchange’s
proposed allocation model.27
Proposed NYSE Rule 7.34 would
specify that the Exchange would operate
Early and Core Trading Sessions. The
Exchange represents that the proposed
rule is based on NYSE Arca Rule 7.34–
E and NYSE American Rule 7.34E,
except for the following substantive
differences: (1) The Exchange would
offer two trading sessions—an Early
Trading Session and a Core Trading
Session—instead of three trading
sessions; 28 (2) the Early Trading Session
would start at 7:00 a.m. Eastern Time
(rather than 4:00 a.m. Eastern Time on
NYSE Arca); (3) the Exchange would
deem an order entered before or during
the Early or Core Trading Session as
designated for both trading sessions; 29
(4) the Exchange would not reference
current NYSE Rule 7.44 because the
Exchange would not offer a retail
liquidity program; (5) in the Early
Trading Session, Market Orders would
be treated like Auction-Only Orders and
would be routed to the primary listing
market on arrival, instead of being
rejected; and (6) the Exchange would
not include provisions involving
auctions and would not refer to order
types that it does not offer (e.g., Cross
Orders).
Proposed NYSE Rule 7.36 would set
forth how orders are ranked and
displayed, and the priority of orders. As
noted earlier, the Exchange would use a
parity allocation model for the trading
of UTP securities. The Exchange
represents that proposed subsections
NYSE Rule 7.36(a)–(g) are based on
NYSE Arca Rule 7.36–E(a)–(g) and
NYSE American Rule 7.36(a)–(g) with
several substantive differences. The
Exchange would add the term
‘‘Participant’’ based on the term
‘‘individual participant’’ in current
NYSE Rule 72(c)(ii), and a new term
‘‘Aggressing Order.’’ 30 Proposed NYSE
Rule 7.36(b)(2) would not include the
27 The Exchange proposes additional rules
addressing how the self-trade prevention modifiers
STP Cancel Newest and STP Cancel Oldest orders
would interact with resting orders in a priority
category that allocates orders based on parity. The
Exchange proposes that current NYSE Rules 13
(Orders and Modifiers) and 70 (Execution of Floor
Broker Interest) would not be applicable for trading
in UTP Securities on Pillar.
28 NYSE Arca and NYSE American also offer a
Late Trading Session. See NYSE Arca Rule 7.34–
E(a)(3) and NYSE American Rule 7.34E(a)(3). NYSE
would not offer a Late Trading Session.
29 Proposed NYSE Rule 7.34(b) would also
provide that an order would be deemed designated
with a day time-in-force modifier if that order did
not have a time-in-force designation.
30 See Proposed NYSE Rule 7.36(a)(6). An
Aggressing Order is a buy (sell) order that is or
becomes marketable against sell (buy) interest on
the Exchange Book.
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reference to NYSE Arca Rule 7.7–E—
which prohibits ETP Holders from
transmitting through the facilities of the
Exchange information regarding a bid,
offer, indication of an order, or the ETP
Holder’s identity unless the originating
ETP Holder grants permission or
affirmatively elects to disclose its
identity—because all non-marketable
displayed Limit Orders would be
displayed on an anonymous basis.
Proposed NYSE Rule 7.36(c) would not
include a reference to price-time
priority since the Exchange would
operate under its existing parity
allocation model, and there would be
three priority categories for orders
instead of four categories on NYSE Arca
and NYSE American.31
Proposed NYSE Rule 7.36(h) sets forth
the rules for Setter Priority. The
Exchange represents that the proposed
rule is based in part on current NYSE
Rule 72, with several substantive
differences: (1) In addition to
establishing the BBO,32 an order would
have to either establish a new national
best bid or offer (‘‘NBBO’’) 33 or join an
Away Market NBBO to be eligible for
Setter Priority; (2) unlike current NYSE
Rule 72(a)(ii), Setter Priority would not
be available for a resting order solely
because that order is the only interest at
a given price when that price becomes
the BBO; (3) Setter Priority would not be
available for reserve quantities that
replenish the display quantity of a
Reserve Order; 34 and (4) orders that are
routed and return unexecuted would be
eligible for Setter Priority consistent
with proposed NYSE Rules 7.16(f)(5)(H),
31 See Proposed NYSE Rule 7.36(e). The proposed
priority categories are Priority 1—Market Orders,
Priority 2—Display Orders, and Priority 3—NonDisplayed Orders. The category Tracking Orders,
which appears as a Priority 4 category in NYSE
Arca 7.36–E and NYSE American 7.36E, is not
included in the Exchange’s proposed rule.
32 See NYSE Rule 1.1(h).
33 See NYSE Rule 1.1(dd) (defining NBBO as the
national best bid or offer) and Rule 600(b)(42) of
Regulation NMS (‘‘National best bid and national
best offer means, with respect to quotations for an
NMS security, the best bid and best offer for such
security that are calculated and disseminated on a
current and continuing basis by a plan processor
pursuant to an effective national market system
plan; provided, that in the event two or more
market centers transmit to the plan processor
pursuant to such plan identical bids or offers for an
NMS security, the best bid or best offer (as the case
may be) shall be determined by ranking all such
identical bids or offers (as the case may be) first by
size (giving the highest ranking to the bid or offer
associated with the largest size), and then by time
(giving the highest ranking to the bid or offer
received first in time)’’). 17 CFR 242.600(b)(42).
34 See Proposed NYSE Rule 7.36(h)(4)(B). The
Exchange proposes that resting orders that are the
only interest at the price when that price becomes
the BBO, and the replenished portion of a Reserve
Order, would not be eligible for Setter Priority on
Pillar in order to encourage displayed orders that
are aggressively priced.
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7.36(f)(1)(A) and (B), and 7.38(b)(2),
which govern the working time assigned
to the return quantity of an order.35 In
addition, the Exchange proposes that an
order would be evaluated for Setter
Priority when the order becomes eligible
to trade for the first time upon the
transition to a new trading session; 36
that an order would retain Setter
Priority when transitioning from one
trading session to another; 37 and that an
order would lose Setter Priority if it is
assigned a new display price.38
Proposed NYSE Rule 7.37 would
govern how orders would execute and
route. Proposed NYSE Rule 7.37(a)
would govern order execution. Proposed
NYSE Rule 7.37(b) would govern order
allocation, as described further below.
And proposed NYSE Rule 7.37(c)–(g)
would govern routing, the data feeds the
Exchange would use, the prohibition on
quotations that lock or cross the
protected best bid or offer, and
exceptions to the Commission’s Order
Protection Rule.
The Exchange represents that
proposed Rule 7.37 is based on NYSE
Arca Rule 7.37–E(a)–(f) and NYSE
American Rule 7.37E(a)–(f), with the
following substantive differences. The
proposed rule would not include
references to Inside Limit Orders and
orders with specific routing instructions
since the Exchange will not offer these
order types. Proposed NYSE Rule 7.37
would not include rule text from NYSE
Arca Rules 7.37–E(b)(3) or (d)(1) 39
because, like NYSE American, the
Exchange would neither use data feeds
from broker-dealers nor route to away
markets that do not display protected
quotations. Also, in proposed NYSE
Rule 7.37(a), the Exchange would use
the proposed new term ‘‘Aggressing
Order’’ instead of ‘‘incoming marketable
order’’ when referring to orders that
would be matched for execution.40
Proposed NYSE Rule 7.37(b) would
establish how Aggressing Orders are
allocated against contra-side orders. The
Exchange represents that the proposed
rule is based in part on current NYSE
Rule 72(c) with the following
substantive differences: (1) The
Exchange would maintain separate
35 The Exchange proposes that NYSE Rules 72(a),
(b), and (c)(xii) would not be applicable to trading
UTP Securities on Pillar.
36 See Proposed NYSE Rule 7.36(h)(1)(B).
37 See Proposed NYSE Rule 7.36(h)(2)(E).
38 See Proposed NYSE Rule 7.36(h)(3)(B).
39 NYSE Arca Rule 7.37–E(b)(3) provides ETP
Holders the option to bypass away markets that are
not displaying protected quotations. NYSE Arca
Rule 7.37–E(d)(1) states that NYSE Arca receives
data feeds directly from broker-dealers for the
purpose of routing interest to away markets that are
not displaying protected quotations.
40 See supra note 37.
PO 00000
Frm 00051
Fmt 4703
Sfmt 4703
allocation wheels at each price for
displayed and non-displayed orders on
each side of the market; 41 (2) allocations
to a Floor Broker Participant would be
allocation to orders represented by that
Floor Broker on parity; (3) the proposed
rule would not reference DMM
allocations as there would be no DMMs
assigned to UTP Securities; (4) the
Exchange would offer Mid-Point
Liquidity Orders (‘‘MPL’’) with a
Minimum Trading Size (‘‘MTS’’), and
the orders would be allocated based on
MTS size and time; 42 (5) if resting
orders on one side of the market are
repriced and become marketable against
contra-side orders on the Exchange
book, the Exchange would rank the repriced orders as described in proposed
NYSE Rule 7.36(c) and trade them as
Aggressing Orders consistent with their
ranking; and (6) proposed NYSE Rule
7.37(b)(9) would provide that if resting
orders on both sides of the market are
repriced and become marketable against
one another, the Exchange would rank
the orders based on proposed NYSE
Rule 7.36(c) and determine which
orders are the Aggressing Orders based
on their ranking.43
Proposed NYSE Rule 7.38 sets forth
how odd-lot and mixed-lot orders
would be ranked and executed. The
Exchange represents that the proposed
rule is based on NYSE Arca Rule 7.38–
E and NYSE American 7.38E, except
that, if the display price of an odd-lot
order to buy (sell) is greater than (less
than) its working price, the order would
be ranked and allocated based on its
display price.44
3. Tick Size Pilot Plan
Proposed NYSE Rule 7.46 sets forth
the rules for the Tick Size Pilot Plan.
The Exchange represents that the
proposed rule is based on NYSE
American Rule 7.46E, except that: (1)
The Exchange would not include text
relating to Market Pegged Orders or
Limit IOC Cross Orders (as the Exchange
would not offer these orders); (2)
41 Current NYSE Rule 72(c)(viii) sets forth a single
allocation wheel for each security. According to the
Exchange, the proposed NYSE Rule for Pillar would
permit a member organization to establish a
position at each price point, instead of simply
adding the order to a single allocation wheel with
multiple price points.
42 See Proposed NYSE Rule 7.37(b)(1)(E)).
43 The Exchange proposes that NYSE Rules 15A,
19, 72(c), 1000, 1001, 1002, and 1004 would not
apply to trading UTP Securities on Pillar. As NYSE
Rule 72(d) would also not apply to trading UTP
Securities on the Pillar trading platform, the
Exchange proposes that NYSE Rule 72 in its
entirety would not apply to trading UTP Securities
on Pillar.
44 The Exchange proposes that current NYSE Rule
61 (Recognized Quotations) would not be
applicable to trading UTP Securities on Pillar.
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Federal Register / Vol. 82, No. 218 / Tuesday, November 14, 2017 / Notices
proposed NYSE Rules 7.46(f)(5)(A) and
(B) would govern ranking and allocation
for Pilot Securities in Test Group Three
instead of Rules 7.36(e) and 7.37(b)(1),
respectively; 45 and (3) proposed NYSE
Rules 7.46(f)(5)(F)(i)(a) and (b) are based
on NYSE Arca Rules 7.46–E(f)(5)(F)(i)(a)
and (b) because NYSE American does
not offer Day ISO orders. Proposed
NYSE Rules 7.46(f)(5)(F)(ii) and (iii)
include ALO orders, which, like Day
ISO orders, are not offered by NYSE
American.46
B. Amendments to NYSE Rules 103B
and 107B
The Exchange proposes to amend
NYSE Rule 103B(I) (Security Allocation
and Reallocation) to state that UTP
Securities will not be allocated to a
DMM Unit. Also, the Exchange proposes
to amend NYSE Rule 107B
(Supplemental Liquidity Providers) to
change ‘‘NYSE-listed securities’’ to
‘‘NYSE-traded securities.’’ According to
the Exchange, the change reflects that
UTP Securities would be eligible for
assignment to Supplemental Liquidity
Providers.
C. Retail Liquidity Program Not
Available on Pillar
The Exchange does not plan to offer
a retail liquidity program for UTP
Securities on Pillar. For this reason, the
Exchange proposes that NYSE Rule
107C would not apply to trading UTP
Securities on Pillar. Also, proposed
rules based on NYSE Arca rules that
cross reference NYSE Arca Rule 7.44–E
would not include that rule reference.
ethrower on DSK3G9T082PROD with NOTICES
D. Current NYSE Rules Not Applicable
to Pillar
Under the Exchange’s proposal,
several current NYSE rules would not
apply to trading in UTP Securities as
they are superseded by the proposed
rules. Several additional rules, which do
not have counterparts in the proposed
Pillar rules, would not apply to trading
in UTP Securities as they are related to
auctions and floor-based point-of-sale
trading. Further information about
current NYSE rules that would not
apply to UTP trading on the Pillar
platform can be found in the Notice.47
III. Proceedings To Determine Whether
To Approve or Disapprove the Proposal
The Commission is instituting
proceedings pursuant to Section 19(b)(2)
45 The
Exchange did not provide a reason for this
rule change.
46 The Exchange proposes that current NYSE Rule
67 (Tick Size Pilot Plan) would not be applicable
for trading in UTP Securities on Pillar.
47 See Notice, supra note 3, 82 FR at 37270, for
a list of NYSE rules that are not applicable to Pillar.
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16:27 Nov 13, 2017
Jkt 244001
of the Act 48 to determine whether the
Exchange’s proposed rule change
should be approved or disapproved. The
Commission believes it is appropriate to
institute proceedings at this time in
view of the legal and policy issues
raised by the proposal, as discussed
below. Institution of proceedings does
not indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described in greater detail below, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act, the Commission is providing notice
of the grounds for disapproval under
consideration. In particular, the
Commission is instituting proceedings
to allow for additional analysis of the
proposed rule change’s consistency with
Sections 6(b)(5) and 6(b)(8) of the Act.49
Section 6(b)(5) requires, among other
things, that the rules of a national
securities exchange be designed ‘‘to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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.’’ 50 In addition, Section
6(b)(5) of the Act prohibits the rules of
an exchange from being ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers.’’ 51 Section 6(b)(8) of the Act,
requires that the rules of a national
securities exchange ‘‘not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of [the Act].’’ 52
As discussed above, NYSE proposes
to commence UTP trading of Tape B and
C securities and to do so on its new
Pillar trading platform. There would be
no DMM assigned to UTP Securities;
there would be no Floor-based point of
sale for UTP Securities; the Exchange
would not conduct auctions in UTP
Securities; and the Exchange would
allocate executions in UTP Securities
using a modified version of its parity
allocation system, granting one place on
the allocation wheel to each Floor
Broker Participant and one place on the
allocation wheel to orders collectively
represented in the Exchange Book.
Additionally, Floor Brokers would be
able to use certain order types, such as
48 15
49 15
U.S.C. 78s(b)(2).
U.S.C. 78f(b)(5) and (b)(8).
50 Id.
51 Id.
52 15
PO 00000
U.S.C. 78f(b)(8).
Frm 00052
Fmt 4703
Sfmt 4703
52761
Pegging Orders, that would not be
available to other market participants.53
The Commission seeks commenters’
views on whether the Exchange’s
proposal is consistent with Section
6(b)(5) and Section 6(b)(8) of the Act. In
particular, the Commission seeks
commenters’ view on the following
questions.
• Unlike the Exchange’s existing
trading model for its listed securities,
there would be no DMM assigned to
UTP Securities, no Floor-based point of
sale for UTP Securities, no Crossing
Orders, and no auction in UTP
Securities. Given these differences from
the market structure in which Floor
Brokers currently operate, what are
commenters’ views on the role that
Floor Brokers would play in trading
UTP Securities on the Exchange?
• What benefits or costs, if any,
would the activities of Floor Brokers
create for trading of UTP Securities on
the Exchange? What benefits or costs, if
any, would accrue to the customers of
the Floor Brokers? Would these benefits
or costs vary depending on the type of
Floor Broker customer or the means the
customer used to submit an order
through a Floor Broker? What benefits
or costs, if any, would accrue to
participants on the Exchange that are
not customers of a Floor Broker?
• Would providing Floor Brokers
with parity allocation in UTP Securities,
or providing them with exclusive use of
certain order instructions, unfairly
discriminate against market participants
who do not submit orders through a
Floor Broker? Would providing parity to
Floor Brokers, or providing them with
exclusive use of certain order
instructions, impose a burden on
competition that is not necessary or
appropriate?
IV. Solicitation of Comments
The Commission requests that
interested persons provide written
submissions of their views, data and
arguments with respect to the concerns
identified above, as well as any others
they may have with the proposal. In
particular, the Commission invites the
written views of interested persons
concerning whether the proposal is
inconsistent with Section 6(b)(5),
Section 6(b)(8), or any other provision of
the Act, or the rules and regulation
53 After Market Orders trade based on time and
the order with Setter Priority, if eligible, receives an
allocation, Proposed NYSE Rule 7.37(b) allocates
orders based on parity by Participant. Proposed
NYSE Rule 7.36(a)(5) defines Participant as a Floor
broker trading license (a ‘‘Floor Broker Participant’’)
or orders collectively represented in the Exchange
Book that have not been entered by a Floor broker
(‘‘Book Participant’’).
E:\FR\FM\14NON1.SGM
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Federal Register / Vol. 82, No. 218 / Tuesday, November 14, 2017 / Notices
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.54
Interested persons are invited to
submit written data, views and
arguments regarding whether the
proposal should be disapproved by
December 5, 2017. Any person who
wishes to file a rebuttal to any other
person’s submission must file that
rebuttal by December 19, 2017.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2017–36 on the subject line.
ethrower on DSK3G9T082PROD with NOTICES
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
Numbers SR–NYSE–2017–36. The 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposal that are
filed with the Commission, and all
written communications relating to the
proposal 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
54 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
VerDate Sep<11>2014
16:27 Nov 13, 2017
Jkt 244001
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2017–36 and should
be submitted on or before December 5,
2017. Rebuttal comments should be
submitted by December 19, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–24577 Filed 11–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82026; File No. SR–
NYSEArca–2017–110]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change, as
Modified by Amendment No. 1, To List
and Trade Shares of the GraniteShares
Platinum Trust Under NYSE Arca Rule
8.201–E
November 7, 2017.
On September 12, 2017, NYSE Arca,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares of the
GraniteShares Platinum Trust under
NYSE Arca Rule 8.201–E. The proposed
rule change was published for comment
in the Federal Register on September
27, 2017.3 On October 24, 2017, the
Exchange filed Amendment No. 1 to the
proposed rule change.4 The Commission
has received no comments on the
proposed rule change.
Section 19(b)(2) of the Act 5 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
55 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81675
(Sept. 21, 2017) 82 FR 45080.
4 Amendment No. 1, which amended and
replaced the proposed rule change in its entirety,
is available on the Commission’s Web site at:
https://www.sec.gov/comments/sr-nysearca-2017110/nysearca2017110-2653767-161379.pdf.
5 15 U.S.C. 78s(b)(2).
1 15
PO 00000
Frm 00053
Fmt 4703
Sfmt 4703
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is November 11,
2017. The Commission is extending this
45-day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change, as modified by Amendment
No. 1. Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,6
designates December 26, 2017, as the
date by which the Commission should
either approve or disapprove, or
institute proceedings to determine
whether to disapprove, the proposed
rule change (File No. SR–NYSEArca–
2017–110), as modified by Amendment
No. 1.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–24575 Filed 11–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82034]
Order Scheduling Filing of Statements
on Review
November 8, 2017.
In the Matter of the Chicago Stock
Exchange, Inc.
For an Order Granting the Approval of
Proposed Rule Change to Adopt the
CHX Liquidity Enhancing Access
Delay on a Pilot Basis (File No. SR–
CHX–2017–04)
On February 10, 2017, the Chicago
Stock Exchange, Inc. (‘‘CHX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
6 Id.
7 17
1 15
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
E:\FR\FM\14NON1.SGM
14NON1
]]>Agencies
[Federal Register Volume 82, Number 218 (Tuesday, November 14, 2017)]
[Notices]
[Pages 52757-52762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24577]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82028; File No. SR-NYSE-2017-36]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Adopt New Equity Trading Rules To trade
Securities Pursuant to Unlisted Trading Privileges, Including Orders
and Modifiers, Order Ranking and Display, and Order Execution and
Routing on Pillar, the Exchange's New Trading Technology Platform
November 7, 2017.
I. Introduction
On July 28, 2017, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt new equity trading rules to allow the
Exchange to trade securities pursuant to unlisted trading privileges
(``UTP Securities'') \3\ on Pillar, the Exchange's new trading
technology platform. The proposed rule change was published for comment
in the Federal Register on August 9, 2017.\4\ On September 18, 2017,
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether the proposed rule change
[[Page 52758]]
should be disapproved.\5\ The Commission received no comments on the
proposed rule change. This order institutes proceedings under Section
19(b)(2)(B) of the Exchange Act \6\ to determine whether to approve or
disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ NYSE Rules define ``UTP Security'' as a security that is
listed on a national securities exchange other than the Exchange and
that trades on the Exchange pursuant to unlisted trading privileges.
See NYSE Rule 1.1(ii).
\4\ See Securities Exchange Act Release No. 81310 (Aug. 3,
2017), 82 FR 37257 (Aug. 9, 2017) (``Notice'').
\5\ See Securities Exchange Act Release No. 81641 (Sept. 18,
2017), 82 FR 44483 (Sept. 22, 2017) (``Extension'').
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to adopt equities trading rules to implement
Pillar, a new trading technology platform, in order to introduce
trading of UTP Securities on the Exchange. Under the proposal, the
Pillar platform rules, as set forth in NYSE Rules 1P-13P, would govern
trading in UTP Securities on the Exchange.\7\ The Exchange proposes
rule changes relating to clearly erroneous executions; the limit up-
limit down plan; short sales; halts; orders and modifiers; order
ranking, display, execution, and routing; odd and mixed lots; the tick
size pilot plan. The Exchange also proposes to specify the current
Exchange rules that would not be operative under Pillar.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 76803 (Dec. 30,
2015), 81 FR 536 (Jan. 6, 2016) (SR-NYSE-2015-67) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change) (adopting a
framework of rule numbering based on NYSE Arca rules in advance of
the NYSE adopting Pillar).
---------------------------------------------------------------------------
Pursuant to the proposal, UTP Securities would trade under the
Exchange's current parity allocation model.\8\ Designated market makers
(``DMMs'') would not be assigned UTP Securities on Pillar.\9\
Supplemental Liquidity Providers \10\ would be eligible to be assigned
UTP Securities, and member organizations operating floor broker
operations that are physically located on the floor would also be
eligible to trade UTP Securities,\11\ but UTP Securities would not be
available for floor-based point-of-sale trading. Finally, the Exchange
would not conduct auctions in UTP Securities.\12\ The Exchange
represents that it will continue to trade NYSE-listed securities on its
current trading platform.\13\
---------------------------------------------------------------------------
\8\ The Pillar platform on NYSE Arca and NYSE American uses a
price-time allocation model. See NYSE Arca Rule 7.37-E(a) and NYSE
American Rule 7.37E(a).
\9\ See Notice, supra note 3, 82 FR at 37258.
\10\ See Proposed NYSE Rule 107B.
\11\ According to the Exchange, member organizations trading UTP
Securities would be required to comply with Section 11(a)(1) of the
Act, 15 U.S.C. 78k(a)(1), and with any exceptions that are currently
applicable to trading on the Exchange. See Notice, supra note 3, 82
FR at 37258 n.12.
\12\ See Notice, supra note 3, 82 FR at 37258.
\13\ The Exchange states that it plans to transition trading in
NYSE-listed securities to Pillar at a later date, and will file
separate proposed rule changes to implement that transition. See
Notice, supra note 3, 82 FR at 37258 n.9.
---------------------------------------------------------------------------
The Exchange represents that the proposal to trade UTP Securities
on Pillar is based in part on the equity trading rules of NYSE Arca,
Inc. (``NYSE Arca'') and NYSE American LLC (``NYSE American''), with
the following substantive differences. First, as noted earlier, the
Exchange would use a parity allocation model with a setter priority
allocation for the participant that sets the best bid or offer on the
Exchange (``BBO'').\14\ Second, the Exchange would not offer a Retail
Liquidity Program or the associated order types--Retail Orders and
Retail Price Improvement Orders. Third, as noted above, the Exchange
would not conduct auctions. Fourth, the Exchange would offer only two
trading sessions--an Early Trading Session and a Core Trading Session.
Finally, the Exchange's order types and modifiers would differ from the
order types and modifiers offered by NYSE Arca and NYSE American.
---------------------------------------------------------------------------
\14\ See NYSE Rule 1.1(h) (defining ``BBO'' as the best bid or
offer on the Exchange).
---------------------------------------------------------------------------
The Exchange represents that it will announce the implementation of
trading UTP Securities on Pillar by a Trader Update. The Exchange
anticipates that the implementation will occur in the first quarter of
2018. If the Exchange begins trading UTP Securities on Pillar, certain
current NYSE trading rules would not be applicable. The Exchange
proposes to mark the affected Exchange rules with a preamble to state
that the rules are not applicable to trading UTP Securities on Pillar.
The Notice contains a detailed description of the proposal. The
following section briefly summarizes the proposal.
A. NYSE Rule 7P--Equities Trading
The Exchange proposes several new rules and changes to existing
rules in NYSE Rule 7P. Currently, Section 1 of NYSE Rule 7P sets forth
general provisions relating to equities trading on Pillar, such as
hours of business and clearance and settlement. The Exchange proposes
to add NYSE Rules 7.10 (clearly erroneous executions); 7.11 (limit up-
limit down); and 7.16 (short sales) to Section 1 of NYSE Rule 7P and
amend NYSE Rule 7.18 (halts).
Section 3 of NYSE Rule 7P sets forth the rules for trading on
Pillar. The Exchange proposes to add to this section new NYSE Rules
7.31 (orders and modifiers); 7.34 (trading sessions); 7.36 (order
ranking and display); 7.37 (order execution and routing); and 7.38 (odd
and mixed lots). Finally, the Exchange proposes to add new NYSE Rule
7.46 to Section 5 of NYSE Rule 7P to establish rules to implement the
Tick Size Pilot Plan.
1. General Provisions
The Exchange proposes to establish rules relating to clearly
erroneous executions, the limit up-limit down plan, short sales, and
trading halts with respect to UTP Securities.
Proposed NYSE Rule 7.10 would set forth the Exchange's rules
governing clearly erroneous executions.\15\ The proposed rule would set
forth how a member organization could request a review of an order that
was submitted erroneously, the timing of Exchange review, thresholds
for determining clearly erroneous execution, review procedures, and
other rules governing clearly erroneous executions.
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\15\ See Proposed NYSE Rule 7.10.
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The Exchange represents that the proposed rule is based on NYSE
Arca Rule 7.10-E and NYSE American Rule 7.10E, except that the proposed
rule would omit references to: (1) The Late Trading Session,\16\ since
the Exchange would not offer a late trading session; (2) Cross
Orders,\17\ since the Exchange would not offer cross orders; and (3)
executions in the Trading Halt Auction, since the Exchange would not
conduct auctions for UTP Securities.\18\
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\16\ See Proposed NYSE Rule 7.34 and see infra the related
discussion below.
\17\ See Proposed NYSE Rule 7.31 and see infra the related
discussion below.
\18\ The Exchange proposes that current NYSE Rule 128 (Clearly
Erroneous Executions For NYSE Equities) would not be applicable for
trading in UTP Securities on Pillar.
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Proposed NYSE Rule 7.11 would establish rules governing how the
Exchange would comply with the Regulation NMS Plan to Address
Extraordinary Market Volatility (``LULD Plan''). The LULD Plan
addresses extraordinary market volatility and is intended to prevent
trades in NMS securities from occurring outside of specified price
bands, and the proposed rule would implement the LULD Plan on the
Exchange's Pillar platform. The Exchange represents that the proposed
rule is based on NYSE American 7.11E with the following differences:
(1) There would be no option for member organizations to enter an
instruction to cancel Limit Orders that cannot be traded or routed at
prices within the price bands; (2) there would be no provisions and
references relating to Q Orders, Limit IOC Cross Orders, or orders with
specific routing instructions because the Exchange will not offer these
order types; \19\ (3) there would be no provision on reopenings since
the
[[Page 52759]]
Exchange will not conduct auctions; and (4) the proposed rules would
not include references to Day ISO orders, an order type that NYSE
American does not offer.
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\19\ See Proposed NYSE Rule 7.31 and the related discussion
below.
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Proposed NYSE Rule 7.16 would set forth the Exchange's short sale
rule, which would govern short sales and compliance with Regulation
SHO. The Exchange represents that the proposed rule is based on NYSE
Arca Rule 7.16-E and NYSE American Rule 7.16E with two substantive
differences. First, because the proposed rule would not apply to the
Exchange's listed securities, the Exchange would not evaluate the
triggering of the short sale price restrictions pursuant to Rule 201 of
Regulation SHO for covered securities in which the Exchange is not the
listing market.\20\ Second, the Exchange is not proposing a rule that
relates to Tracking Orders, Cross Orders, or the Proactive if Locked/
Crossed Modifier because the Exchange would not offer these order types
for UTP Securities.\21\
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\20\ As a result, the Exchange would not include rules based on
NYSE Arca Rules 7.16-E(f)(3), 7.16-E(f)(4)(A), or 7.16-E(f)(4)(B) or
NYSE American Rules 7.16E(f)(3), 7.16E(f)(4)(A), or 7.16E(f)(4)(B).
\21\ Current NYSE Rule 440B (Short Sales) would not be
applicable to trading UTP Securities on Pillar.
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Current NYSE Rule 7.18 governs trading halts in an UTP Security.
The Exchange proposes to add proposed Rule 7.18(b), which would set
forth how the Exchange would process new and existing orders in an UTP
Security during an UTP Regulatory Halt.\22\ The Exchange represents
that the proposed rule is based on NYSE Arca Rule 7.18-E(b) and
subparagraphs (1)-(6), as well as NYSE American Rule 7.18E(b) and
subparagraphs (1)-(6), except that the Exchange would not refer to
``Primary Only'' order types because the Exchange would not offer this
order type. The Exchange also proposes to add NYSE Rule 7.18(d)(1)(A),
which would allow the Exchange to continue to trade an UTP Exchange
Traded Product for the remainder of the Early Trading Session in
certain situations.\23\ The Exchange represents that the proposed rule
is based on NYSE Arca Rule 7.18-E(d)(1)(A) and NYSE American Rule
7.18E(d)(1)(A), with no substantive differences.\24\
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\22\ See Proposed NYSE Rule 7.18(b). UTP Regulatory Halt is
defined in current NYSE Rule 1.1(kk) to mean a trade suspension,
halt, or pause called by the UTP Listing Market in an UTP Security
that requires all market centers to halt trading in that security.
NYSE Rule 1.1(jj) defines the term ``UTP Listing Market'' as the
primary listing market for an UTP Security.
\23\ See Proposed NYSE Rule 7.18(d)(1)(A). Specifically, this
rule would apply if an UTP Exchange Traded Product begins trading on
the Exchange in the Early Trading Session and a temporary
interruption occurs in a major market vendor's calculation or wide
dissemination of either the Intraday Indicative Value or the value
of the underlying index to the UTP Exchange Traded Product, as
applicable.
\24\ The Exchange proposes two non-substantive changes: (1)
Amend NYSE Rule 7.18(a) to update a cross-reference and (2) amend
NYSE Rule 7.18(d)(1)(B) to replace the phrase ``Normal Trading
Hours'' with the phrase ``Core Trading Session.'' See Proposed NYSE
Rule 7.34(a)(2) (defining Core Trading Session).
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2. Trading Rules for Pillar
The Exchange proposes trading rules for Pillar, including a
description of order types and modifiers, trading sessions, how orders
are displayed and ranked, how orders are executed and routed, and how
odd lots and mixed lots are ranked and executed.
Proposed NYSE Rule 7.31 would set forth the primary order types, as
well as time-in-force modifiers, auction-only orders, orders with
conditional or undisplayed price and/or size, orders with instructions
not to route, pegged orders, and other order instructions and modifiers
that would be available on Pillar. The Exchange represents that the
proposed orders and modifiers are a subset of those offered on NYSE
Arca and NYSE American, with several substantive differences.
The proposed NYSE rule differs from the NYSE Arca and NYSE American
rules as follows: (1) NYSE would not offer auctions in UTP Securities
(Auction-Only Orders would be routed to the primary listing markets);
(2) Limit Orders entered before the Core Trading Session would be
designated for both the Early and Core Trading Sessions; (3) the
Exchange would not offer the option to designate certain orders with a
Non-Display Remove Modifier; (4) Intermarket Sweep Orders would not be
available to floor brokers; (5) Pegged Orders would be available only
to floor brokers; \25\ and (6) the Exchange would not offer certain
order types.\26\ The proposed rule also sets forth how Self Trade
Prevention Modifiers would function consistent with the Exchange's
proposed allocation model.\27\
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\25\ Currently, NYSE only offers pegged orders for floor
brokers. See NYSE Rule 13(f)(1) (stating that pegging interest
``must be an e-Quote or d-Quote''). See NYSE Rule 70 for more
information on e-Quote and d-Quote.
\26\ The Exchange would not offer Tracking Orders, Cross Orders,
Q Orders, orders that include specific routing instructions (which
includes Primary Only Orders), Inside Limit Orders, Limit IOC Cross
Orders, Market Pegged Orders, Discretionary Pegged Orders, or the
Proactive if Locked/Crossed Modifier. However, the Exchange would
offer the order type Non-Displayed Primary Pegged Order, which NYSE
Arca does not offer. The Exchange would also offer order types and
modifiers not offered by NYSE American (Primary Pegged Orders, ALO
Orders, Day ISO Orders, IOC ISO Orders, and MPL Orders with an ALO
Modifier).
\27\ The Exchange proposes additional rules addressing how the
self-trade prevention modifiers STP Cancel Newest and STP Cancel
Oldest orders would interact with resting orders in a priority
category that allocates orders based on parity. The Exchange
proposes that current NYSE Rules 13 (Orders and Modifiers) and 70
(Execution of Floor Broker Interest) would not be applicable for
trading in UTP Securities on Pillar.
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Proposed NYSE Rule 7.34 would specify that the Exchange would
operate Early and Core Trading Sessions. The Exchange represents that
the proposed rule is based on NYSE Arca Rule 7.34-E and NYSE American
Rule 7.34E, except for the following substantive differences: (1) The
Exchange would offer two trading sessions--an Early Trading Session and
a Core Trading Session--instead of three trading sessions; \28\ (2) the
Early Trading Session would start at 7:00 a.m. Eastern Time (rather
than 4:00 a.m. Eastern Time on NYSE Arca); (3) the Exchange would deem
an order entered before or during the Early or Core Trading Session as
designated for both trading sessions; \29\ (4) the Exchange would not
reference current NYSE Rule 7.44 because the Exchange would not offer a
retail liquidity program; (5) in the Early Trading Session, Market
Orders would be treated like Auction-Only Orders and would be routed to
the primary listing market on arrival, instead of being rejected; and
(6) the Exchange would not include provisions involving auctions and
would not refer to order types that it does not offer (e.g., Cross
Orders).
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\28\ NYSE Arca and NYSE American also offer a Late Trading
Session. See NYSE Arca Rule 7.34-E(a)(3) and NYSE American Rule
7.34E(a)(3). NYSE would not offer a Late Trading Session.
\29\ Proposed NYSE Rule 7.34(b) would also provide that an order
would be deemed designated with a day time-in-force modifier if that
order did not have a time-in-force designation.
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Proposed NYSE Rule 7.36 would set forth how orders are ranked and
displayed, and the priority of orders. As noted earlier, the Exchange
would use a parity allocation model for the trading of UTP securities.
The Exchange represents that proposed subsections NYSE Rule 7.36(a)-(g)
are based on NYSE Arca Rule 7.36-E(a)-(g) and NYSE American Rule
7.36(a)-(g) with several substantive differences. The Exchange would
add the term ``Participant'' based on the term ``individual
participant'' in current NYSE Rule 72(c)(ii), and a new term
``Aggressing Order.'' \30\ Proposed NYSE Rule 7.36(b)(2) would not
include the
[[Page 52760]]
reference to NYSE Arca Rule 7.7-E--which prohibits ETP Holders from
transmitting through the facilities of the Exchange information
regarding a bid, offer, indication of an order, or the ETP Holder's
identity unless the originating ETP Holder grants permission or
affirmatively elects to disclose its identity--because all non-
marketable displayed Limit Orders would be displayed on an anonymous
basis. Proposed NYSE Rule 7.36(c) would not include a reference to
price-time priority since the Exchange would operate under its existing
parity allocation model, and there would be three priority categories
for orders instead of four categories on NYSE Arca and NYSE
American.\31\
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\30\ See Proposed NYSE Rule 7.36(a)(6). An Aggressing Order is a
buy (sell) order that is or becomes marketable against sell (buy)
interest on the Exchange Book.
\31\ See Proposed NYSE Rule 7.36(e). The proposed priority
categories are Priority 1--Market Orders, Priority 2--Display
Orders, and Priority 3--Non-Displayed Orders. The category Tracking
Orders, which appears as a Priority 4 category in NYSE Arca 7.36-E
and NYSE American 7.36E, is not included in the Exchange's proposed
rule.
---------------------------------------------------------------------------
Proposed NYSE Rule 7.36(h) sets forth the rules for Setter
Priority. The Exchange represents that the proposed rule is based in
part on current NYSE Rule 72, with several substantive differences: (1)
In addition to establishing the BBO,\32\ an order would have to either
establish a new national best bid or offer (``NBBO'') \33\ or join an
Away Market NBBO to be eligible for Setter Priority; (2) unlike current
NYSE Rule 72(a)(ii), Setter Priority would not be available for a
resting order solely because that order is the only interest at a given
price when that price becomes the BBO; (3) Setter Priority would not be
available for reserve quantities that replenish the display quantity of
a Reserve Order; \34\ and (4) orders that are routed and return
unexecuted would be eligible for Setter Priority consistent with
proposed NYSE Rules 7.16(f)(5)(H), 7.36(f)(1)(A) and (B), and
7.38(b)(2), which govern the working time assigned to the return
quantity of an order.\35\ In addition, the Exchange proposes that an
order would be evaluated for Setter Priority when the order becomes
eligible to trade for the first time upon the transition to a new
trading session; \36\ that an order would retain Setter Priority when
transitioning from one trading session to another; \37\ and that an
order would lose Setter Priority if it is assigned a new display
price.\38\
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\32\ See NYSE Rule 1.1(h).
\33\ See NYSE Rule 1.1(dd) (defining NBBO as the national best
bid or offer) and Rule 600(b)(42) of Regulation NMS (``National best
bid and national best offer means, with respect to quotations for an
NMS security, the best bid and best offer for such security that are
calculated and disseminated on a current and continuing basis by a
plan processor pursuant to an effective national market system plan;
provided, that in the event two or more market centers transmit to
the plan processor pursuant to such plan identical bids or offers
for an NMS security, the best bid or best offer (as the case may be)
shall be determined by ranking all such identical bids or offers (as
the case may be) first by size (giving the highest ranking to the
bid or offer associated with the largest size), and then by time
(giving the highest ranking to the bid or offer received first in
time)''). 17 CFR 242.600(b)(42).
\34\ See Proposed NYSE Rule 7.36(h)(4)(B). The Exchange proposes
that resting orders that are the only interest at the price when
that price becomes the BBO, and the replenished portion of a Reserve
Order, would not be eligible for Setter Priority on Pillar in order
to encourage displayed orders that are aggressively priced.
\35\ The Exchange proposes that NYSE Rules 72(a), (b), and
(c)(xii) would not be applicable to trading UTP Securities on
Pillar.
\36\ See Proposed NYSE Rule 7.36(h)(1)(B).
\37\ See Proposed NYSE Rule 7.36(h)(2)(E).
\38\ See Proposed NYSE Rule 7.36(h)(3)(B).
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Proposed NYSE Rule 7.37 would govern how orders would execute and
route. Proposed NYSE Rule 7.37(a) would govern order execution.
Proposed NYSE Rule 7.37(b) would govern order allocation, as described
further below. And proposed NYSE Rule 7.37(c)-(g) would govern routing,
the data feeds the Exchange would use, the prohibition on quotations
that lock or cross the protected best bid or offer, and exceptions to
the Commission's Order Protection Rule.
The Exchange represents that proposed Rule 7.37 is based on NYSE
Arca Rule 7.37-E(a)-(f) and NYSE American Rule 7.37E(a)-(f), with the
following substantive differences. The proposed rule would not include
references to Inside Limit Orders and orders with specific routing
instructions since the Exchange will not offer these order types.
Proposed NYSE Rule 7.37 would not include rule text from NYSE Arca
Rules 7.37-E(b)(3) or (d)(1) \39\ because, like NYSE American, the
Exchange would neither use data feeds from broker-dealers nor route to
away markets that do not display protected quotations. Also, in
proposed NYSE Rule 7.37(a), the Exchange would use the proposed new
term ``Aggressing Order'' instead of ``incoming marketable order'' when
referring to orders that would be matched for execution.\40\
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\39\ NYSE Arca Rule 7.37-E(b)(3) provides ETP Holders the option
to bypass away markets that are not displaying protected quotations.
NYSE Arca Rule 7.37-E(d)(1) states that NYSE Arca receives data
feeds directly from broker-dealers for the purpose of routing
interest to away markets that are not displaying protected
quotations.
\40\ See supra note 37.
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Proposed NYSE Rule 7.37(b) would establish how Aggressing Orders
are allocated against contra-side orders. The Exchange represents that
the proposed rule is based in part on current NYSE Rule 72(c) with the
following substantive differences: (1) The Exchange would maintain
separate allocation wheels at each price for displayed and non-
displayed orders on each side of the market; \41\ (2) allocations to a
Floor Broker Participant would be allocation to orders represented by
that Floor Broker on parity; (3) the proposed rule would not reference
DMM allocations as there would be no DMMs assigned to UTP Securities;
(4) the Exchange would offer Mid-Point Liquidity Orders (``MPL'') with
a Minimum Trading Size (``MTS''), and the orders would be allocated
based on MTS size and time; \42\ (5) if resting orders on one side of
the market are repriced and become marketable against contra-side
orders on the Exchange book, the Exchange would rank the re-priced
orders as described in proposed NYSE Rule 7.36(c) and trade them as
Aggressing Orders consistent with their ranking; and (6) proposed NYSE
Rule 7.37(b)(9) would provide that if resting orders on both sides of
the market are repriced and become marketable against one another, the
Exchange would rank the orders based on proposed NYSE Rule 7.36(c) and
determine which orders are the Aggressing Orders based on their
ranking.\43\
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\41\ Current NYSE Rule 72(c)(viii) sets forth a single
allocation wheel for each security. According to the Exchange, the
proposed NYSE Rule for Pillar would permit a member organization to
establish a position at each price point, instead of simply adding
the order to a single allocation wheel with multiple price points.
\42\ See Proposed NYSE Rule 7.37(b)(1)(E)).
\43\ The Exchange proposes that NYSE Rules 15A, 19, 72(c), 1000,
1001, 1002, and 1004 would not apply to trading UTP Securities on
Pillar. As NYSE Rule 72(d) would also not apply to trading UTP
Securities on the Pillar trading platform, the Exchange proposes
that NYSE Rule 72 in its entirety would not apply to trading UTP
Securities on Pillar.
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Proposed NYSE Rule 7.38 sets forth how odd-lot and mixed-lot orders
would be ranked and executed. The Exchange represents that the proposed
rule is based on NYSE Arca Rule 7.38-E and NYSE American 7.38E, except
that, if the display price of an odd-lot order to buy (sell) is greater
than (less than) its working price, the order would be ranked and
allocated based on its display price.\44\
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\44\ The Exchange proposes that current NYSE Rule 61 (Recognized
Quotations) would not be applicable to trading UTP Securities on
Pillar.
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3. Tick Size Pilot Plan
Proposed NYSE Rule 7.46 sets forth the rules for the Tick Size
Pilot Plan. The Exchange represents that the proposed rule is based on
NYSE American Rule 7.46E, except that: (1) The Exchange would not
include text relating to Market Pegged Orders or Limit IOC Cross Orders
(as the Exchange would not offer these orders); (2)
[[Page 52761]]
proposed NYSE Rules 7.46(f)(5)(A) and (B) would govern ranking and
allocation for Pilot Securities in Test Group Three instead of Rules
7.36(e) and 7.37(b)(1), respectively; \45\ and (3) proposed NYSE Rules
7.46(f)(5)(F)(i)(a) and (b) are based on NYSE Arca Rules 7.46-
E(f)(5)(F)(i)(a) and (b) because NYSE American does not offer Day ISO
orders. Proposed NYSE Rules 7.46(f)(5)(F)(ii) and (iii) include ALO
orders, which, like Day ISO orders, are not offered by NYSE
American.\46\
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\45\ The Exchange did not provide a reason for this rule change.
\46\ The Exchange proposes that current NYSE Rule 67 (Tick Size
Pilot Plan) would not be applicable for trading in UTP Securities on
Pillar.
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B. Amendments to NYSE Rules 103B and 107B
The Exchange proposes to amend NYSE Rule 103B(I) (Security
Allocation and Reallocation) to state that UTP Securities will not be
allocated to a DMM Unit. Also, the Exchange proposes to amend NYSE Rule
107B (Supplemental Liquidity Providers) to change ``NYSE-listed
securities'' to ``NYSE-traded securities.'' According to the Exchange,
the change reflects that UTP Securities would be eligible for
assignment to Supplemental Liquidity Providers.
C. Retail Liquidity Program Not Available on Pillar
The Exchange does not plan to offer a retail liquidity program for
UTP Securities on Pillar. For this reason, the Exchange proposes that
NYSE Rule 107C would not apply to trading UTP Securities on Pillar.
Also, proposed rules based on NYSE Arca rules that cross reference NYSE
Arca Rule 7.44-E would not include that rule reference.
D. Current NYSE Rules Not Applicable to Pillar
Under the Exchange's proposal, several current NYSE rules would not
apply to trading in UTP Securities as they are superseded by the
proposed rules. Several additional rules, which do not have
counterparts in the proposed Pillar rules, would not apply to trading
in UTP Securities as they are related to auctions and floor-based
point-of-sale trading. Further information about current NYSE rules
that would not apply to UTP trading on the Pillar platform can be found
in the Notice.\47\
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\47\ See Notice, supra note 3, 82 FR at 37270, for a list of
NYSE rules that are not applicable to Pillar.
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III. Proceedings To Determine Whether To Approve or Disapprove the
Proposal
The Commission is instituting proceedings pursuant to Section
19(b)(2) of the Act \48\ to determine whether the Exchange's proposed
rule change should be approved or disapproved. The Commission believes
it is appropriate to institute proceedings at this time in view of the
legal and policy issues raised by the proposal, as discussed below.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described in greater detail below, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration. In
particular, the Commission is instituting proceedings to allow for
additional analysis of the proposed rule change's consistency with
Sections 6(b)(5) and 6(b)(8) of the Act.\49\ Section 6(b)(5) requires,
among other things, that the rules of a national securities exchange be
designed ``to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, 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.'' \50\ In addition, Section 6(b)(5) of the Act
prohibits the rules of an exchange from being ``designed to permit
unfair discrimination between customers, issuers, brokers, or
dealers.'' \51\ Section 6(b)(8) of the Act, requires that the rules of
a national securities exchange ``not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of [the
Act].'' \52\
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\49\ 15 U.S.C. 78f(b)(5) and (b)(8).
\50\ Id.
\51\ Id.
\52\ 15 U.S.C. 78f(b)(8).
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As discussed above, NYSE proposes to commence UTP trading of Tape B
and C securities and to do so on its new Pillar trading platform. There
would be no DMM assigned to UTP Securities; there would be no Floor-
based point of sale for UTP Securities; the Exchange would not conduct
auctions in UTP Securities; and the Exchange would allocate executions
in UTP Securities using a modified version of its parity allocation
system, granting one place on the allocation wheel to each Floor Broker
Participant and one place on the allocation wheel to orders
collectively represented in the Exchange Book. Additionally, Floor
Brokers would be able to use certain order types, such as Pegging
Orders, that would not be available to other market participants.\53\
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\53\ After Market Orders trade based on time and the order with
Setter Priority, if eligible, receives an allocation, Proposed NYSE
Rule 7.37(b) allocates orders based on parity by Participant.
Proposed NYSE Rule 7.36(a)(5) defines Participant as a Floor broker
trading license (a ``Floor Broker Participant'') or orders
collectively represented in the Exchange Book that have not been
entered by a Floor broker (``Book Participant'').
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The Commission seeks commenters' views on whether the Exchange's
proposal is consistent with Section 6(b)(5) and Section 6(b)(8) of the
Act. In particular, the Commission seeks commenters' view on the
following questions.
Unlike the Exchange's existing trading model for its
listed securities, there would be no DMM assigned to UTP Securities, no
Floor-based point of sale for UTP Securities, no Crossing Orders, and
no auction in UTP Securities. Given these differences from the market
structure in which Floor Brokers currently operate, what are
commenters' views on the role that Floor Brokers would play in trading
UTP Securities on the Exchange?
What benefits or costs, if any, would the activities of
Floor Brokers create for trading of UTP Securities on the Exchange?
What benefits or costs, if any, would accrue to the customers of the
Floor Brokers? Would these benefits or costs vary depending on the type
of Floor Broker customer or the means the customer used to submit an
order through a Floor Broker? What benefits or costs, if any, would
accrue to participants on the Exchange that are not customers of a
Floor Broker?
Would providing Floor Brokers with parity allocation in
UTP Securities, or providing them with exclusive use of certain order
instructions, unfairly discriminate against market participants who do
not submit orders through a Floor Broker? Would providing parity to
Floor Brokers, or providing them with exclusive use of certain order
instructions, impose a burden on competition that is not necessary or
appropriate?
IV. Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data and arguments with respect to the
concerns identified above, as well as any others they may have with the
proposal. In particular, the Commission invites the written views of
interested persons concerning whether the proposal is inconsistent with
Section 6(b)(5), Section 6(b)(8), or any other provision of the Act, or
the rules and regulation
[[Page 52762]]
thereunder. Although there do not appear to be any issues relevant to
approval or disapproval which would be facilitated by an oral
presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\54\
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\54\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views and
arguments regarding whether the proposal should be disapproved by
December 5, 2017. Any person who wishes to file a rebuttal to any other
person's submission must file that rebuttal by December 19, 2017.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2017-36 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 Numbers SR-NYSE-2017-36. The 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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposal that are filed with the
Commission, and all written communications relating to the proposal
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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2017-36 and should be submitted on
or before December 5, 2017. Rebuttal comments should be submitted by
December 19, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
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\55\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24577 Filed 11-13-17; 8:45 am]
BILLING CODE 8011-01-P
