Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31E Relating to Mid-Point Liquidity Orders and the MTS Modifier and Rule 7.36E To Add a Definition of “Aggressing Order”, 1442-1445 [2018-00306]
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Federal Register / Vol. 83, No. 8 / Thursday, January 11, 2018 / Notices
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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 No.
SR–CboeBZX–2017–023 and should be
submitted on or before February 1, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00303 Filed 1–10–18; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82447; File No. SR–
NYSEAMER–2017–40]
srobinson on DSK9F5VC42PROD with NOTICES
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.31E
Relating to Mid-Point Liquidity Orders
and the MTS Modifier and Rule 7.36E
To Add a Definition of ‘‘Aggressing
Order’’
January 5, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.31E relating to Mid-Point
Liquidity Orders and the MTS Modifier
and Rule 7.36E to add a definition of
‘‘Aggressing Order.’’ The proposed rule
change is available on the Exchange’s
website 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
27 17
notice is hereby given that on December
22, 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, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to amend
Rule 7.31E (Orders and Modifiers)
relating to Mid-Point Liquidity (‘‘MPL’’)
Orders and the MTS Modifier and Rule
7.36E (Order Ranking and Display) to
add a definition of ‘‘Aggressing Order.’’
For MPL Orders, the Exchange proposes
to amend the price at which a
marketable MPL Order would trade
when there are resting orders priced
better than the midpoint. The Exchange
also proposes to amend how resting
orders with an MTS Modifier would
trade in specified circumstances.
Background
As provided for in current Rule
7.31E(d)(3)(C), on arrival, an MPL Order
to buy (sell) that is eligible to trade will
trade with resting orders to sell (buy)
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with a working price at or below (above)
the midpoint of the PBBO (i.e., priced
better than the midpoint of the PBBO).
The rule further provides that resting
MPL Orders to buy (sell) will trade at
the midpoint of the PBBO against all
incoming orders to sell (buy) priced at
or below (above) the midpoint of the
PBBO (i.e., priced better than the
midpoint of the PBBO).
Current Rule 7.31E(i)(3) describes the
MTS Modifier, including how a resting
order with an MTS Modifier will trade.
Current Rule 7.31E(i)(3)(E)(i) provides
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 will not trade with and may trade
through such order with an MTS
Modifier. Current Rule 7.31E(i)(3)(E)(ii)
provides 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 will
trade ahead of the resting sell (buy)
order. Finally, current Rule
7.31E(i)(3)(E)(iii) provides that a resting
order to buy (sell) with an MTS
Modifier will 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. Similarly, Rule 7.46E(f)(5)(I)
(Tick Size Pilot Plan) provides that for
Pilot Securities in Test Group Three, a
resting order to buy (sell) with an MTS
Modifier will 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.
Proposed Definition of ‘‘Aggressing
Order’’
The Exchange proposes to amend
Rule 7.36E to add a definition that
would be used for purposes of Rule 7E.
Proposed Rule 7.36E(a)(5) would define
the term ‘‘Aggressing Order’’ to mean a
buy (sell) order that is or becomes
marketable against sell (buy) interest on
the Exchange Book.4 This term would
therefore refer to orders that are
marketable against other orders on the
Exchange Book, such as incoming
orders and orders that have returned
unexecuted after routing.
This term would also be applicable to
resting orders that become marketable
due to one or more events. For the most
part, resting orders will have already
traded with contra-side orders against
4 The term ‘‘marketable’’ is defined in Rule
1.1E(u) to mean for a Limit Order, an order than can
be immediately executed or routed.
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which they are marketable. However,
there are circumstances when a resting
order may become marketable, such as
orders that become eligible to trade
when a PBBO unlocks or uncrosses (e.g.,
MPL and Pegged Orders) or orders that
have a trading restriction at specified
prices (e.g., as discussed in greater
detail below, orders with an MTS
Modifier). To maximize the potential for
orders to trade, the Exchange
continually evaluates whether resting
orders may become marketable. Events
that could trigger a resting order to
become marketable include updates to
the working price of such order, updates
to the PBBO or NBBO, changes to other
orders on the Exchange Book, or
processing of inbound messages (e.g., an
update to Price Bands under the
Regulation NMS Plan to Address
Extraordinary Market Volatility). To
address such circumstances, the
Exchange proposes to include in
proposed Rule 7.36E(a)(5) that a resting
order may become an Aggressing Order
if its working price changes, if the PBBO
or NBBO is updated, because of changes
to other orders on the Exchange Book,
or when processing inbound messages.
The order that becomes the
Aggressing Order is the liquidity-taking
order. Generally, if resting orders on
both sides are determined to be an
Aggressing Order, e.g., a locked PBBO
becomes unlocked and as a result, MPL
Orders are repriced, the later-arriving
order will be the liquidity-taking order.5
However, if the evaluation results in
only one side becoming an Aggressing
Order, e.g., an order with an MTS
Modifier becomes eligible to trade and
the contra-side order(s) have no working
price changes, the order with the MTS
Modifier would become the liquiditytaking Aggressing Order. As described
below, the Exchange proposes to use the
term ‘‘Aggressing Order’’ in the rule text
relating to the MTS Modifier. Because
an Aggressing Order becomes a liquidity
taker, such term could be applicable to
other circumstances. For example, an
order with a Non-Display Remove
Modifier [sic] that trades as a liquidity
taker would also be considered an
Aggressing Order. However, at this time,
the Exchange does not propose to
amend its rules to use the term
‘‘Aggressing Order’’ because the rule
already specifies which order is the
liquidity taker.
Proposed Amendments Relating to MPL
Orders
The Exchange proposes to amend the
first sentence of current Rule
7.31E(d)(3)(C) to make this text
5 See,
e.g., Rule 7.31–E(d)(3)(B).
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applicable to any marketable MPL
Order, and not just an arriving MPL
Order. To effect this change, the
Exchange proposes to use the term
‘‘Aggressing Order’’ and replace the
phrase ‘‘[o]n arrival, an MPL Order to
buy (sell) that is eligible to trade’’ with
the phrase, ‘‘[a]n Aggressing MPL Order
to buy (sell).’’
The Exchange also proposes to amend
the first sentence of current Rule
7.31E(d)(3)(C) to describe at what price
an Aggressing MPL Order would trade
with contra-side resting orders that are
priced better than the midpoint. The
rule currently provides that an arriving
MPL Order to buy (sell) would trade
with resting orders to sell (buy) with a
working price at or below (above) the
midpoint of the PBBO. The Exchange
proposes to specify that when an
Aggressing MPL Order trades with
resting orders priced better than the
midpoint, it will trade at the working
price of the resting orders, which is
current functionality. For example, if
the PBB is 10.10 and the midpoint is
10.13, and there are non-displayed sell
orders of 100 shares with working prices
of 10.11 and 10.12, an Aggressing MPL
Order to buy with a limit of 10.13 for
200 shares would trade with such nondisplayed sell orders at 10.11 and 10.12,
respectively. The Exchange believes that
this proposed amendment would
promote transparency in Exchange rules
regarding at what price an Aggressing
MPL Order would trade.
By using the term ‘‘Aggressing
Order,’’ this rule would be applicable to
a resting MPL Order that becomes
marketable, such as after a PBBO
unlocks or uncrosses. In the above
example, if the MPL Order to buy is
ineligible to trade because of a crossed
PBBO, and while the PBBO is crossed,
the Exchange receives the two nondisplayed sell orders, when the PBBO
uncrosses and the new midpoint is
10.13, the resting MPL Order would
become an Aggressing Order and would
trade with the non-displayed sell orders
at 10.11 and 10.12, respectively.
The Exchange also proposes to amend
the second sentence of Rule
7.31E(d)(3)(C) to replace the term
‘‘incoming orders’’ with the term
‘‘Aggressing Orders.’’ This proposed
rule change would provide greater
specificity that any contra-side order
that is an Aggressing Order, as defined
in proposed Rule 7.36E(a)(5), would
trade with a resting MPL Order at the
midpoint of the PBBO.
Proposed Amendments Relating to the
MTS Modifier
The Exchange proposes to amend
Rules 7.31E(i)(3)(C) and (E) to specify
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1443
circumstances when a resting order with
an MTS Modifier would not be eligible
to trade.
Current Rule 7.31E(i)(3)(C) provides
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.
The Exchange proposes to describe new
functionality relating to when an order
with an MTS Modifier that is designated
Day would not be eligible to trade. In
short, if a later-arriving contra-side
order can meet the MTS of a resting
order with an MTS Modifier, the two
orders would trade unless the execution
would be inconsistent with either intramarket price priority or would result in
a non-displayed order trading ahead of
a same-side, same-priced displayed
order.6 Therefore, as proposed, the
Exchange would not permit an order
with an MTS Modifier that crosses other
displayed or non-displayed orders on
the Exchange Book to trade at prices
that are worse than the price of such
contra-side orders. As further proposed,
the Exchange would not permit a resting
order with an MTS Modifier to trade at
a price equal to a displayed contra-side
order.7
To reflect these changes, the second
sentence of Rule 7.31E(i)(3)(C) would
provide that when a buy (sell) order
with an MTS Modifier that is designated
Day is ranked in the Exchange Book, it
would not be eligible to trade:
(i) At a price equal to or above (below)
any sell (buy) orders that are displayed
and that have a working price equal to
or below (above) the working price of
such order with an MTS Modifier, or
(ii) at a price above (below) any sell
(buy) orders that are not displayed and
that have a working price below (above)
the working price of such order with an
MTS Modifier.
For example,
• if the PBBO is 10.10 x 10.16, on the
Exchange Book there is a sell order
(‘‘Order A’’) ranked Priority 3—NonDisplay Orders for 50 shares at 10.12
and a sell order (‘‘Order B’’) ranked
Priority 2—Display Orders for 25 shares
at 10.11, and the Exchange receives a
buy MPL Order (‘‘Order C’’) with an
MTS Modifier for 100 shares with a
10.16 limit, because the MTS cannot be
met, Order C will not trade and will be
ranked in the Exchange Book at the
midpoint of 10.13. At this point, the
Exchange would have a non-displayed
buy order crossing both non-displayed
6 Rule 7.36E(c) provides that the Exchange ranks
all non-marketable orders on the Exchange Book
according to price—time priority.
7 A displayed odd-lot order that is not included
in the calculation of the PBBO could be at the same
price as an MPL Order.
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and displayed sell orders on the
Exchange Book. If the Exchange then
receives a non-displayed sell order
(‘‘Order D’’) for 100 shares at 10.11,
even though Order D would be
marketable against Order C, it would not
trade because a trade at 10.13 would be
above the price of resting sell orders.8
Order D would be added to the
Exchange Book at 10.11.
• If next, the Exchange receives a buy
order (‘‘Order E’’) to buy 25 shares at
10.11, it would trade with Order B. As
discussed above, this execution would
trigger the Exchange to evaluate whether
Order C becomes marketable against
contra-side orders.9 In this scenario,
because Order B has now executed,
Order C is no longer restricted from
trading at 10.11. Because Order C’s
restriction has been lifted and Order D
does not have a working price change,
Order C would become an Aggressing
Order and trade as the liquidity taker
with Order D at 10.11.
Because proposed Rule
7.31E(i)(3)(C)(i) would be applicable to
all securities that trade on the exchange,
including Pilot Securities in the Tick
Pilot Plan, the Exchange proposes to
delete Rule 7.46E(f)(5)(I) as duplicative
of the proposed new rule text.
The Exchange also proposes to amend
Rules 7.31E(i)(3)(E)(i), (ii), and (iii)
relating to the behavior of resting orders
with an MTS Modifier.10 The Exchange
proposes a non-substantive change to
Rule 7.31E(i)(3)(E) to change the term
‘‘order(s)’’ to ‘‘orders,’’ which the
Exchange believes is a more technically
accurate way to describe that a resting
order with an MTS Modifier will be
evaluated against individual orders.
First, the Exchange proposes to
amend Rule 7.31E(i)(3)(E)(i) to use the
term ‘‘Aggressing Order.’’ Use of this
proposed new definition would not
change the functionality associated with
this rule. Accordingly, as proposed, the
rule would provide that if an Aggressing
Order to sell (buy) does not meet the
MTS of the resting order to buy (sell)
with an MTS Modifier, that Aggressing
Order will not trade with and may trade
through such order with an MTS
Modifier (proposed new text in italics).
The Exchange believes that use of the
term ‘‘Aggressing Order’’ in the context
of this rule would promote transparency
8 Pursuant to Rule 7.31E(d)(3)(C), an Aggressing
Order will trade with a resting MPL Order at the
midpoint of the PBBO.
9 See discussion infra regarding the second
sentence to proposed Rule 7.36E(a)(5).
10 A resting order with an MTS Modifier that
becomes an Aggressing Order would trade
consistent with Rule 7.31E(i)(3)(E) and therefore
would trade with individual orders that each meet
the MTS.
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of which order is trading with the
resting order with an MTS Modifier.
Second, the Exchange proposes to
amend Rule 7.31E(i)(3)(E)(ii) to provide
that if a resting sell (buy) non-displayed
order did not meet the MTS of a samepriced resting order to buy (sell) with an
MTS Modifier, a subsequently arriving
sell (buy) order that meets the MTS
would trade ahead of such resting nondisplayed sell (buy) order at that price
(proposed new text in italics), e.g., at the
internal locking price. The Exchange
proposes to amend this rule to provide
that the subsequently arriving order
could trade ahead of a resting nondisplayed order at that price. As
described above, the proposed
amendment to Rule 7.31E(i)(3)(C)(i)
would address circumstances when an
order with an MTS Modifier is locked
by a displayed order. In such case, the
subsequently arriving order would not
trade with the order with an MTS
Modifier.
Finally, the Exchange proposes to
delete current Rule 7.31E(i)(3)(iii) as
superseded by proposed Rule
7.31E(i)(3)(C)(i) and (ii) and the
amendments to Rule 7.31E(i)(3)(E)(i)
and (ii).
Because of the technology changes
associated with these 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 first
quarter of 2018.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),11 in general, and furthers the
objectives of Section 6(b)(5),12 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
proposed definition of ‘‘Aggressing
Order’’ in Rule 7.36E would remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, protect investors and the public
interest because it would provide for a
11 15
12 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00118
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definition in Exchange rules that
describes orders that are or become
marketable. The Exchange believes that
the proposed definition would promote
transparency in Exchange rules by
providing detail regarding
circumstances when a resting order may
become marketable, and thus would be
an Aggressing Order. The Exchange
further believes that use of such
definition would promote clarity in
Exchange rules, particularly in the
context of the amendments to MPL
Orders and orders with an MTS
Modifier.
The Exchange believes that the
proposed amendments to Rule
7.31E(d)(3)(C) to use the term
‘‘Aggressing Order’’ and to describe the
prices at which an Aggressing MPL
Order would trade would remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, protect investors and the public
interest because it would promote
clarity and transparency in Exchange
rules regarding the behavior of
marketable MPL Orders. In particular,
the rule would provide greater
specificity regarding how a resting MPL
Order that becomes an Aggressing Order
would trade.
Finally, the Exchange believes that
the proposed amendments relating to
when a resting order with an MTS
Modifier 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, protect investors
and the public interest, because the
proposed rule change would ensure that
there would not be an execution of a
resting order with an MTS Modifier that
either would be inconsistent with intramarket price priority or would result in
a non-displayed order trading ahead of
a same-side, same-priced displayed
order. 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.
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 not designed to address
any competitive issues, but rather to add
further clarity to Exchange rules by
defining the term ‘‘Aggressing Order’’
and using that term in connection with
MPL Orders. In addition, the rule is
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designed to ensure that resting orders
with an MTS Modifier would not trade
through displayed orders or violate
intra-market priority.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 13 and Rule
19b–4(f)(6) thereunder.14 Because the
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) 15 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),16 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) 17 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
13 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii).
17 15 U.S.C. 78s(b)(2)(B).
00:05 Jan 11, 2018
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–
NYSEAMER–2017–40 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–2017–40. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–NYSEAMER–2017–40 and
should be submitted on or before
February 1, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00306 Filed 1–10–18; 8:45 am]
14 17
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change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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COMMISSION
[Release No. 34–82445; File No. SR–Phlx–
2017–99]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Order Granting Accelerated
Approval of a Proposed Rule Change
To Amend Rule 1059 To Make
Permanent a Program That Allows
Cabinet Trade Transactions To Take
Place at a Price Below $1 Per Option
Contract
January 5, 2018.
I. Introduction
On November 29, 2017, Nasdaq PHLX
LLC (the ‘‘Exchange’’ or ‘‘Phlx’’) 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 amending the Exchange’s rules
to make permanent a program that
allows transactions to take place in open
outcry trading at prices of at least $0 but
less than $1 per option contract (‘‘subdollar cabinet trades’’). The proposed
rule change was published for comment
in the Federal Register on December 14,
2017.3 The Commission received no
comment letters on the proposed rule
change. This order approves the
proposed rule change on an accelerated
basis.
II. Description of the Proposed Rule
Change
Prior to 2010, Phlx Rule 1059
(Accommodation Transactions) allowed
cabinet trade transactions at a price of
$1 per option contract to occur in open
outcry trading for certain options
classes.4 In 2010, the Exchange
amended Phlx Rule 1059 on a pilot
basis to allow sub-dollar cabinet trades
to take place at prices of at least $0 but
less than $1 per option contract.5 The
Exchange now proposes to amend Phlx
Rule 1059 to make permanent its subdollar cabinet trade pilot program,
which currently is scheduled to expire
on January 5, 2018.6
The Exchange permits sub-dollar
cabinet trade transactions to be traded
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82245
(Dec. 8, 2017), 82 FR 58825 (Dec. 14, 2017) (SR–
Phlx–2017–99) (‘‘Notice’’).
4 See Phlx Rule 1059.
5 See Securities Exchange Act Release No. 63626
(Dec. 30, 2010), 76 FR 812 (Jan. 6, 2011) (SR–Phlx–
2010–185).
6 See Commentary .02 to Phlx Rule 1059. See also
Securities Exchange Act Release No. 79782 (January
12, 2017), 82 FR 6667 (January 19, 2017) (SR–Phlx–
2017–01).
2 17
E:\FR\FM\11JAN1.SGM
11JAN1
]]>Agencies
[Federal Register Volume 83, Number 8 (Thursday, January 11, 2018)]
[Notices]
[Pages 1442-1445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00306]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82447; File No. SR-NYSEAMER-2017-40]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 7.31E Relating to Mid-Point Liquidity Orders and the MTS Modifier
and Rule 7.36E To Add a Definition of ``Aggressing Order''
January 5, 2018.
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 December 22, 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, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.31E relating to Mid-Point
Liquidity Orders and the MTS Modifier and Rule 7.36E to add a
definition of ``Aggressing Order.'' The proposed rule change is
available on the Exchange's website 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.
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 (Orders and Modifiers)
relating to Mid-Point Liquidity (``MPL'') Orders and the MTS Modifier
and Rule 7.36E (Order Ranking and Display) to add a definition of
``Aggressing Order.'' For MPL Orders, the Exchange proposes to amend
the price at which a marketable MPL Order would trade when there are
resting orders priced better than the midpoint. The Exchange also
proposes to amend how resting orders with an MTS Modifier would trade
in specified circumstances.
Background
As provided for in current Rule 7.31E(d)(3)(C), on arrival, an MPL
Order to buy (sell) that is eligible to trade will trade with resting
orders to sell (buy) with a working price at or below (above) the
midpoint of the PBBO (i.e., priced better than the midpoint of the
PBBO). The rule further provides that resting MPL Orders to buy (sell)
will trade at the midpoint of the PBBO against all incoming orders to
sell (buy) priced at or below (above) the midpoint of the PBBO (i.e.,
priced better than the midpoint of the PBBO).
Current Rule 7.31E(i)(3) describes the MTS Modifier, including how
a resting order with an MTS Modifier will trade. Current Rule
7.31E(i)(3)(E)(i) provides 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 will not trade with and may trade through such order with
an MTS Modifier. Current Rule 7.31E(i)(3)(E)(ii) provides 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 will trade ahead of the resting sell
(buy) order. Finally, current Rule 7.31E(i)(3)(E)(iii) provides that a
resting order to buy (sell) with an MTS Modifier will 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. Similarly, Rule 7.46E(f)(5)(I) (Tick
Size Pilot Plan) provides that for Pilot Securities in Test Group
Three, a resting order to buy (sell) with an MTS Modifier will 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.
Proposed Definition of ``Aggressing Order''
The Exchange proposes to amend Rule 7.36E to add a definition that
would be used for purposes of Rule 7E. Proposed Rule 7.36E(a)(5) would
define the term ``Aggressing Order'' to mean a buy (sell) order that is
or becomes marketable against sell (buy) interest on the Exchange
Book.\4\ This term would therefore refer to orders that are marketable
against other orders on the Exchange Book, such as incoming orders and
orders that have returned unexecuted after routing.
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\4\ The term ``marketable'' is defined in Rule 1.1E(u) to mean
for a Limit Order, an order than can be immediately executed or
routed.
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This term would also be applicable to resting orders that become
marketable due to one or more events. For the most part, resting orders
will have already traded with contra-side orders against
[[Page 1443]]
which they are marketable. However, there are circumstances when a
resting order may become marketable, such as orders that become
eligible to trade when a PBBO unlocks or uncrosses (e.g., MPL and
Pegged Orders) or orders that have a trading restriction at specified
prices (e.g., as discussed in greater detail below, orders with an MTS
Modifier). To maximize the potential for orders to trade, the Exchange
continually evaluates whether resting orders may become marketable.
Events that could trigger a resting order to become marketable include
updates to the working price of such order, updates to the PBBO or
NBBO, changes to other orders on the Exchange Book, or processing of
inbound messages (e.g., an update to Price Bands under the Regulation
NMS Plan to Address Extraordinary Market Volatility). To address such
circumstances, the Exchange proposes to include in proposed Rule
7.36E(a)(5) that a resting order may become an Aggressing Order if its
working price changes, if the PBBO or NBBO is updated, because of
changes to other orders on the Exchange Book, or when processing
inbound messages.
The order that becomes the Aggressing Order is the liquidity-taking
order. Generally, if resting orders on both sides are determined to be
an Aggressing Order, e.g., a locked PBBO becomes unlocked and as a
result, MPL Orders are repriced, the later-arriving order will be the
liquidity-taking order.\5\ However, if the evaluation results in only
one side becoming an Aggressing Order, e.g., an order with an MTS
Modifier becomes eligible to trade and the contra-side order(s) have no
working price changes, the order with the MTS Modifier would become the
liquidity-taking Aggressing Order. As described below, the Exchange
proposes to use the term ``Aggressing Order'' in the rule text relating
to the MTS Modifier. Because an Aggressing Order becomes a liquidity
taker, such term could be applicable to other circumstances. For
example, an order with a Non-Display Remove Modifier [sic] that trades
as a liquidity taker would also be considered an Aggressing Order.
However, at this time, the Exchange does not propose to amend its rules
to use the term ``Aggressing Order'' because the rule already specifies
which order is the liquidity taker.
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\5\ See, e.g., Rule 7.31-E(d)(3)(B).
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Proposed Amendments Relating to MPL Orders
The Exchange proposes to amend the first sentence of current Rule
7.31E(d)(3)(C) to make this text applicable to any marketable MPL
Order, and not just an arriving MPL Order. To effect this change, the
Exchange proposes to use the term ``Aggressing Order'' and replace the
phrase ``[o]n arrival, an MPL Order to buy (sell) that is eligible to
trade'' with the phrase, ``[a]n Aggressing MPL Order to buy (sell).''
The Exchange also proposes to amend the first sentence of current
Rule 7.31E(d)(3)(C) to describe at what price an Aggressing MPL Order
would trade with contra-side resting orders that are priced better than
the midpoint. The rule currently provides that an arriving MPL Order to
buy (sell) would trade with resting orders to sell (buy) with a working
price at or below (above) the midpoint of the PBBO. The Exchange
proposes to specify that when an Aggressing MPL Order trades with
resting orders priced better than the midpoint, it will trade at the
working price of the resting orders, which is current functionality.
For example, if the PBB is 10.10 and the midpoint is 10.13, and there
are non-displayed sell orders of 100 shares with working prices of
10.11 and 10.12, an Aggressing MPL Order to buy with a limit of 10.13
for 200 shares would trade with such non-displayed sell orders at 10.11
and 10.12, respectively. The Exchange believes that this proposed
amendment would promote transparency in Exchange rules regarding at
what price an Aggressing MPL Order would trade.
By using the term ``Aggressing Order,'' this rule would be
applicable to a resting MPL Order that becomes marketable, such as
after a PBBO unlocks or uncrosses. In the above example, if the MPL
Order to buy is ineligible to trade because of a crossed PBBO, and
while the PBBO is crossed, the Exchange receives the two non-displayed
sell orders, when the PBBO uncrosses and the new midpoint is 10.13, the
resting MPL Order would become an Aggressing Order and would trade with
the non-displayed sell orders at 10.11 and 10.12, respectively.
The Exchange also proposes to amend the second sentence of Rule
7.31E(d)(3)(C) to replace the term ``incoming orders'' with the term
``Aggressing Orders.'' This proposed rule change would provide greater
specificity that any contra-side order that is an Aggressing Order, as
defined in proposed Rule 7.36E(a)(5), would trade with a resting MPL
Order at the midpoint of the PBBO.
Proposed Amendments Relating to the MTS Modifier
The Exchange proposes to amend Rules 7.31E(i)(3)(C) and (E) to
specify circumstances when a resting order with an MTS Modifier would
not be eligible to trade.
Current Rule 7.31E(i)(3)(C) provides 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. The Exchange
proposes to describe new functionality relating to when an order with
an MTS Modifier that is designated Day would not be eligible to trade.
In short, if a later-arriving contra-side order can meet the MTS of a
resting order with an MTS Modifier, the two orders would trade unless
the execution would be inconsistent with either intra-market price
priority or would result in a non-displayed order trading ahead of a
same-side, same-priced displayed order.\6\ Therefore, as proposed, the
Exchange would not permit an order with an MTS Modifier that crosses
other displayed or non-displayed orders on the Exchange Book to trade
at prices that are worse than the price of such contra-side orders. As
further proposed, the Exchange would not permit a resting order with an
MTS Modifier to trade at a price equal to a displayed contra-side
order.\7\
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\6\ Rule 7.36E(c) provides that the Exchange ranks all non-
marketable orders on the Exchange Book according to price--time
priority.
\7\ A displayed odd-lot order that is not included in the
calculation of the PBBO could be at the same price as an MPL Order.
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To reflect these changes, the second sentence of Rule
7.31E(i)(3)(C) would provide that when a buy (sell) order with an MTS
Modifier that is designated Day is ranked in the Exchange Book, it
would not be eligible to trade:
(i) At a price equal to or above (below) any sell (buy) orders that
are displayed and that have a working price equal to or below (above)
the working price of such order with an MTS Modifier, or
(ii) at a price above (below) any sell (buy) orders that are not
displayed and that have a working price below (above) the working price
of such order with an MTS Modifier.
For example,
if the PBBO is 10.10 x 10.16, on the Exchange Book there
is a sell order (``Order A'') ranked Priority 3--Non-Display Orders for
50 shares at 10.12 and a sell order (``Order B'') ranked Priority 2--
Display Orders for 25 shares at 10.11, and the Exchange receives a buy
MPL Order (``Order C'') with an MTS Modifier for 100 shares with a
10.16 limit, because the MTS cannot be met, Order C will not trade and
will be ranked in the Exchange Book at the midpoint of 10.13. At this
point, the Exchange would have a non-displayed buy order crossing both
non-displayed
[[Page 1444]]
and displayed sell orders on the Exchange Book. If the Exchange then
receives a non-displayed sell order (``Order D'') for 100 shares at
10.11, even though Order D would be marketable against Order C, it
would not trade because a trade at 10.13 would be above the price of
resting sell orders.\8\ Order D would be added to the Exchange Book at
10.11.
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\8\ Pursuant to Rule 7.31E(d)(3)(C), an Aggressing Order will
trade with a resting MPL Order at the midpoint of the PBBO.
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If next, the Exchange receives a buy order (``Order E'')
to buy 25 shares at 10.11, it would trade with Order B. As discussed
above, this execution would trigger the Exchange to evaluate whether
Order C becomes marketable against contra-side orders.\9\ In this
scenario, because Order B has now executed, Order C is no longer
restricted from trading at 10.11. Because Order C's restriction has
been lifted and Order D does not have a working price change, Order C
would become an Aggressing Order and trade as the liquidity taker with
Order D at 10.11.
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\9\ See discussion infra regarding the second sentence to
proposed Rule 7.36E(a)(5).
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Because proposed Rule 7.31E(i)(3)(C)(i) would be applicable to all
securities that trade on the exchange, including Pilot Securities in
the Tick Pilot Plan, the Exchange proposes to delete Rule
7.46E(f)(5)(I) as duplicative of the proposed new rule text.
The Exchange also proposes to amend Rules 7.31E(i)(3)(E)(i), (ii),
and (iii) relating to the behavior of resting orders with an MTS
Modifier.\10\ The Exchange proposes a non-substantive change to Rule
7.31E(i)(3)(E) to change the term ``order(s)'' to ``orders,'' which the
Exchange believes is a more technically accurate way to describe that a
resting order with an MTS Modifier will be evaluated against individual
orders.
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\10\ A resting order with an MTS Modifier that becomes an
Aggressing Order would trade consistent with Rule 7.31E(i)(3)(E) and
therefore would trade with individual orders that each meet the MTS.
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First, the Exchange proposes to amend Rule 7.31E(i)(3)(E)(i) to use
the term ``Aggressing Order.'' Use of this proposed new definition
would not change the functionality associated with this rule.
Accordingly, as proposed, the rule would provide that if an Aggressing
Order to sell (buy) does not meet the MTS of the resting order to buy
(sell) with an MTS Modifier, that Aggressing Order will not trade with
and may trade through such order with an MTS Modifier (proposed new
text in italics). The Exchange believes that use of the term
``Aggressing Order'' in the context of this rule would promote
transparency of which order is trading with the resting order with an
MTS Modifier.
Second, the Exchange proposes to amend Rule 7.31E(i)(3)(E)(ii) to
provide that if a resting sell (buy) non-displayed 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 such resting non-displayed sell (buy) order at
that price (proposed new text in italics), e.g., at the internal
locking price. The Exchange proposes to amend this rule to provide that
the subsequently arriving order could trade ahead of a resting non-
displayed order at that price. As described above, the proposed
amendment to Rule 7.31E(i)(3)(C)(i) would address circumstances when an
order with an MTS Modifier is locked by a displayed order. In such
case, the subsequently arriving order would not trade with the order
with an MTS Modifier.
Finally, the Exchange proposes to delete current Rule
7.31E(i)(3)(iii) as superseded by proposed Rule 7.31E(i)(3)(C)(i) and
(ii) and the amendments to Rule 7.31E(i)(3)(E)(i) and (ii).
Because of the technology changes associated with these 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 first quarter of 2018.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and
furthers the objectives of Section 6(b)(5),\12\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, to protect investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed definition of ``Aggressing
Order'' in Rule 7.36E would remove impediments to, and perfect the
mechanism of, a free and open market and a national market system and,
in general, protect investors and the public interest because it would
provide for a definition in Exchange rules that describes orders that
are or become marketable. The Exchange believes that the proposed
definition would promote transparency in Exchange rules by providing
detail regarding circumstances when a resting order may become
marketable, and thus would be an Aggressing Order. The Exchange further
believes that use of such definition would promote clarity in Exchange
rules, particularly in the context of the amendments to MPL Orders and
orders with an MTS Modifier.
The Exchange believes that the proposed amendments to Rule
7.31E(d)(3)(C) to use the term ``Aggressing Order'' and to describe the
prices at which an Aggressing MPL Order would trade would remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system and, in general, protect investors and the
public interest because it would promote clarity and transparency in
Exchange rules regarding the behavior of marketable MPL Orders. In
particular, the rule would provide greater specificity regarding how a
resting MPL Order that becomes an Aggressing Order would trade.
Finally, the Exchange believes that the proposed amendments
relating to when a resting order with an MTS Modifier 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,
protect investors and the public interest, because the proposed rule
change would ensure that there would not be an execution of a resting
order with an MTS Modifier that either would be inconsistent with
intra-market price priority or would result in a non-displayed order
trading ahead of a same-side, same-priced displayed order. 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.
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 not designed to address any competitive
issues, but rather to add further clarity to Exchange rules by defining
the term ``Aggressing Order'' and using that term in connection with
MPL Orders. In addition, the rule is
[[Page 1445]]
designed to ensure that resting orders with an MTS Modifier would not
trade through displayed orders or violate intra-market priority.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2017-40 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-2017-40. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. 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-NYSEAMER-2017-40 and should be submitted
on or before February 1, 2018.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00306 Filed 1-10-18; 8:45 am]
BILLING CODE 8011-01-P
