Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31E Relating to Reserve Orders and Re-Name an Order Type, 43919-43923 [2018-18570]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
2. Analysis
The Exchange asserts that approval of
the proposal would enhance
competition among market participants,
to the benefit of investors.69 One
commenter asserts that approval of the
proposal will provide greater security,
transparency, and liquidity, as well as
safe custody, for investors in
cryptocurrencies.70 And one commenter
suggests that the Commission should
seek to protect investors through
disclosure requirements or suitability
standards, rather than disapproving a
bitcoin-ETP proposal.71
The Commission acknowledges that,
compared to trading in unregulated
bitcoin spot markets, trading a bitcoinbased ETP on a national securities
exchange may provide some additional
protection to investors, but the
Commission must consider this
potential benefit in the broader context
of whether the proposal meets each of
the applicable requirements of the
Exchange Act. Pursuant to Section
19(b)(2) of the Exchange Act, the
Commission must disapprove a
proposed rule change filed by a national
securities exchange if it does not find
that the proposed rule change is
consistent with the applicable
requirements of the Exchange Act—
including the requirement under
Section 6(b)(5) that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices.
Thus, even if a proposed rule change
would provide certain benefits to
investors and the markets, the proposed
rule change may still fail to meet other
requirements under the Exchange Act.
For the reasons discussed above, the
Exchange has not met its burden of
demonstrating an adequate basis in the
record for the Commission to find that
the proposal is consistent with
Exchange Act Section 6(b)(5), and,
accordingly, the Commission must
disapprove the proposal.
D. Other Comments
daltland on DSKBBV9HB2PROD with NOTICES
69 See
Notice, supra note 3, 83 FR at 3387.
70 See supra note 66 and accompanying text.
71 See supra note 68 and accompanying text. The
Commission also notes that the Exchange did not
respond to questions in the Order Instituting
Proceedings seeking comment on how the Funds’
striking NAV as of 11:00 a.m. E.T. (five hours before
the close of the regular trading session) would affect
arbitrage, and what the potential effect on investors
would be if the arbitrage mechanism were impaired.
See Order Instituting Proceedings, supra note 7, 83
FR at 18605.
72 See Ahn Letter, supra note 9.
20:00 Aug 27, 2018
E. Basis for Disapproval
The record before the Commission
does not provide a basis for the
Commission to conclude that the
Exchange has met its burden under the
Exchange Act and the Commission’s
Rules of Practice to demonstrate that its
proposed rule change is consistent with
Exchange Act Section 6(b)(5).78
IV. Conclusion
For the reasons set forth above, the
Commission does not find, pursuant to
Section 19(b)(2) of the Exchange Act,
that the proposed rule change is
consistent with the requirements of the
Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange, and in
particular, with Section 6(b)(5) of the
Exchange Act.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,
that proposed rule change SR–
NYSEArca–2018–02 is disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.79
Brent J. Fields,
Secretary.
[FR Doc. 2018–18577 Filed 8–27–18; 8:45 am]
Comment letters also addressed the
intrinsic value of bitcoin 72; the desire of
individuals to invest in a bitcoin-based
VerDate Sep<11>2014
ETP 73; the ways in which approval of
the proposal would increase investor
confidence 74; the ways in which
promoting the adoption of bitcoin and
other cryptocurrencies would ease intergenerational tension and wealth
inequality and foster the confidence of
younger generations in the economic
system 75; the Commission’s process for
granting Exchange Act exemptive relief
in connection with ETP approval 76; and
the potential impact of Commission
approval of the proposed ETPs on the
price of bitcoin.77 Ultimately, however,
additional discussion of these tangential
topics is unnecessary, as they do not
bear on the basis for the Commission’s
decision to disapprove the proposal.
Jkt 244001
BILLING CODE 8011–01–P
73 See Galt Letter, supra note 9; Santos Letter,
supra note 9.
74 See David Letter, supra note 9; Santos Letter,
supra note 9.
75 See David Letter, supra note 9.
76 See Williams Letter, supra note 9, at 1.
77 See Santos Letter, supra note 9.
78 In disapproving the proposed rule change, the
Commission has considered its impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). See also supra note 67 and
accompanying text.
79 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
43919
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83898; File No. SR–
NYSEAMER–2018–41]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.31E
Relating to Reserve Orders and ReName an Order Type
August 22, 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 August
10, 2018, 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.
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 Reserve Orders
and re-name an order type. 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 its
Cash Equities Pillar Platform Rule 7.31E
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
E:\FR\FM\28AUN1.SGM
28AUN1
43920
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
relating to Reserve Orders and re-name
an order type.
Background
Rule 7.31E(d)(1) defines a Reserve
Order as a Limit or Inside Limit Order
with a quantity of the size displayed
and with a reserve quantity of the size
(‘‘reserve interest’’) that is not
displayed. The displayed quantity of a
Reserve Order is ranked Priority 2—
Display Orders and the reserve interest
is ranked Priority 3—Non-Display
Orders.4 Rule 7.31E(d)(1)(A) provides
that on entry, the display quantity of a
Reserve Order must be entered in round
lots and the displayed portion of a
Reserve Order will be replenished
following any execution. That rule
further provides that the Exchange will
display the full size of the Reserve
Order when the unfilled quantity is less
than the minimum display size for the
order. Rule 7.31E(d)(1)(B) provides that
each time a Reserve Order is
replenished from reserve interest, a new
working time is assigned to the
replenished quantity of the Reserve
Order, while the reserve interest retains
the working time of original order entry.
Pursuant to Rule 7.31E(d)(1)(C), a
Reserve Order must be designated Day
and may be combined with a NonRoutable Limit Order.
Proposed Rule Change Relating To
Renaming of Order Type
The Exchange proposes nonsubstantive amendments to Rules 7.31E
and 7.46E to rename the ‘‘Limit NonDisplayed Order’’ as the ‘‘NonDisplayed Limit Order.’’ The Exchange
believes this proposed rule change
would conform the style of this order
type with the name of the Non-Routable
Limit Order. The Exchange therefore
believes that this proposed rule change
would promote clarity and consistency
in its rules.
daltland on DSKBBV9HB2PROD with NOTICES
Proposed Rule Change Relating to
Reserve Orders
The Exchange proposes to amend
Rule 7.31E(d)(1) to change the manner
by which the display portion of a
Reserve Order would be replenished. As
proposed, rather than replenishing the
display quantity following any
execution, the Exchange proposes to
replenish the Reserve Order when the
display quantity is decremented to
below a round lot. The changes that the
Exchange is proposing to Rule 7.31
relating to Reserve Orders are identical
to changes that were recently approved
4 The terms ‘‘Priority 2—Display Orders’’ and
‘‘Priority 3—Non-Display Orders’’ are defined in
Rule 7.36E(e).
VerDate Sep<11>2014
20:00 Aug 27, 2018
Jkt 244001
for the Exchange’s affiliate, New York
Stock Exchange LLC (‘‘NYSE’’).5 In
addition, the proposed changes to how
Reserve Orders would be replenished
are consistent with how Reserve Orders
are replenished on other equity
exchanges.6
As is currently the case, the replenish
quantity would be the minimum display
size of the order or the remaining
quantity of reserve interest if it is less
than the minimum display quantity. To
reflect this functionality, the Exchange
proposes that Rule 7.31E(d)(1)(A) would
be amended as follows (deleted text
bracketed; new text underlined):
(A) On entry, the display quantity of a
Reserve Order must be entered in round lots.
The displayed portion of a Reserve Order
will be replenished when the display
quantity is decremented to below a round lot.
The replenish quantity will be the minimum
display quantity of the order or the remaining
quantity of the reserve interest if it is less
than the minimum display quantity
[following any execution. The Exchange will
display the full size of the Reserve Order
when the unfilled quantity is less than the
minimum display size for the order].
Under current functionality, because
the replenished quantity is assigned a
new working time, it is feasible for a
single Reserve Order to have multiple
replenished quantities with separate
working times, each, a ‘‘child’’ order.
The proposed change to limit when a
Reserve Order would be replenished to
when the display quantity is
decremented to below a round lot only
would reduce the number of child
orders for a Reserve Order. The
Exchange believes that minimizing the
number of child orders for a Reserve
Order would reduce the potential for
market participants to detect that a child
order displayed on the Exchange’s
proprietary market data feeds is
associated with a Reserve Order.
In most cases, the maximum number
of child orders for a Reserve Order
would be two. For example, assume a
Reserve Order to buy has a display
quantity of 100 shares and an additional
200 shares of reserve interest. A sell
order of 50 shares would trade with the
display quantity of such Reserve Order,
which would decrement the display
quantity to 50 shares. As proposed, the
Exchange would then replenish the
Reserve Order with 100 shares from the
reserve interest, i.e., the minimum
display size for the order. After this
second replenishment, the Reserve
5 See Securities Exchange Act Release No. 83768
(August 3, 2018), 83 FR 39488 (August 9, 2018)
(SR–NYSE–2018–26) (Approval Order).
6 See Cboe BZX Exchange, Inc. (‘‘BZX’’) Rule
11.9(c)(1); Nasdaq Stock Market LLC (‘‘Nasdaq’’)
Rule 7503(h).
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
Order would have two child orders, one
for 50 shares, the other for 100 shares,
each with different working times.
Generally, when there are two child
orders, the older child order of less than
a round lot will be executed before the
second child order. However, there are
limited circumstances when a Reserve
Order could have two child orders that
equal less than a round lot, which, as
proposed, would trigger a
replenishment. For such circumstance,
the Exchange proposes that when a
Reserve Order is replenished from
reserve interest and already has two
child orders that equal less than a round
lot, the child order with the later
working time would be reassigned the
new working time assigned to the next
replenished quantity.
For example, taking the same Reserve
Order as above:
• If 100 shares of such order (‘‘A’’) are
routed on arrival, it would have a
display quantity of 100 shares (‘‘B’’) and
100 shares in reserve interest.
• While ‘‘A’’ is routed, a sell order of
50 shares would trade with ‘‘B,’’
decrementing ‘‘B’’ to 50 shares and the
Reserve Order would be replenished
from reserve interest, creating a second
child order ‘‘C’’ of 100 shares.
• Next, the Exchange receives a
request to reduce the size of the Reserve
Order from 300 shares to 230 shares.
Because ‘‘A’’ is still routed away and
there is no reserve interest, and as
described in more detail below, this 70
share reduction in size would be
applied against the most recent child
order of ‘‘C,’’ which would be reduced
to 30 shares. Together with ‘‘B,’’ which
would still be 50 shares, the two
displayed child orders would equal less
than a round lot, but with no quantity
in reserve interest.
• Next, ‘‘A’’ is returned unexecuted,
and as described below, becomes
reserve interest and is evaluated for
replenishment. Because the total display
quantity (‘‘B’’ + ‘‘C’’) is less than a
round lot, this Reserve Order would be
replenished. But because the Reserve
Order already has two child orders, the
child order with the later working time,
‘‘C,’’ would be returned to the reserve
interest, which would now have a
quantity of 130 shares (‘‘C’’ + ‘‘A’’), and
the Reserve Order would be replenished
with 100 shares from the reserve interest
with a new working time, which would
be a new child order ‘‘D.’’
• After this replenishment, this
Reserve Order would have two child
orders of ‘‘B’’ for 50 shares and ‘‘D’’ for
100 shares, and a reserve interest of 30
shares.
To effect these changes, the Exchange
proposes to amend current Rule
E:\FR\FM\28AUN1.SGM
28AUN1
daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
7.31E(d)(1)(B) to specify that each
display quantity of a Reserve Order with
a different working time would be
referred to as a child order. The
Exchange further proposes new Rule
7.31E(d)(1)(B)(i) that would provide that
when a Reserve Order is replenished
from reserve interest and already has
two child orders that equal less than a
round lot, the child order with the later
working time would rejoin the reserve
interest and be assigned the new
working time assigned to the next
replenished quantity.
The Exchange also proposes new Rule
7.31E(d)(1)(B)(ii) to provide that if a
Reserve Order is not routable (i.e., is
combined with a Non-Routable Limit
Order), the replenish quantity would be
assigned a display and working price
consistent with the instructions for the
order, which represents current
functionality. For example, for a NonRoutable Limit Reserve Order, if the
display price would lock or cross the
contra-side PBBO, the replenished
quantity would be assigned a display
price one MPV worse than the PBBO
and a working price equal to the contraside PBBO, as provided for in Rule
7.31E(e)(1)(A)(i).7 The Exchange
believes that this proposed rule text
would provide transparency and clarity
to Exchange rules.
The Exchange further proposes to add
new subsection (D) to Rule 7.31E(d)(1)
to describe when a Reserve Order would
be routed. As proposed, a routable
Reserve Order would be evaluated for
routing both on arrival and each time
the display quantity is replenished.
Proposed Rule 7.31E(d)(1)(D)(i) would
provide that if routing is required, the
Exchange would route from reserve
interest before publishing the display
quantity. In addition, if after routing,
there is less than a round lot available
to display, the Exchange would wait
until the routed quantity returns
(executed or unexecuted) before
publishing the display quantity. In the
example described above, the Exchange
would have published the display
quantity before the routed quantity
returned because the display quantity
was at least a round lot. If, however, 250
shares of a Reserve Order of 300 shares
had been routed on arrival, because the
unrouted quantity was less than a round
lot (50 shares), the Exchange would wait
for the routed quantity to return, either
executed or unexecuted, before
publishing the display quantity.
The Exchange proposes this
functionality to reduce the possibility
for a Reserve Order to have more than
7 The
term ‘‘PBBO’’ is defined in Rule 1.1E. The
term ‘‘MPV’’ is defined in Rule 7.6E.
VerDate Sep<11>2014
20:00 Aug 27, 2018
Jkt 244001
one child order. If the Exchange did not
wait, and instead displayed the 50
shares when the balance of the Reserve
Order has routed, if the 250 shares
returns unexecuted, such Reserve Order
would be replenished and would have
two child orders—one for the 50 shares
that was displayed when the order was
entered and a second for the 100 shares
that replenished the Reserve Order from
the quantity that returned unexecuted.
By contrast, by waiting for a report on
the routed quantity, if the routed
quantity was not executed, the
Exchange would display the minimum
display quantity as a single child order.
If the routed quantity was executed, the
Exchange would display the 50 shares,
but only because that would be the full
remaining quantity of the Reserve
Order.
Proposed Rule 7.31E(d)(1)(D)(ii)
would provide that any quantity of a
Reserve Order that is returned
unexecuted would join the working
time of the reserve interest, which is
current functionality. If there is no
quantity of reserve interest to join, the
returned quantity would be assigned a
new working time as reserve interest. As
further proposed, in either case, such
reserve interest would replenish the
display quantity as provided for in
Rules 7.31E(d)(1)(A) and (B). The
Exchange believes that this proposed
rule text would promote transparency
and clarity in Exchange rules. The
Exchange further believes it is
appropriate for a returned quantity of a
Reserve Order to join the reserve
interest first because the order may not
be eligible for a replenishment to the
display quantity.
Proposed Rule 7.31E(d)(1)(E) would
provide that a request to reduce in size
a Reserve Order would cancel the
reserve interest before canceling the
display quantity and if there is more
than one child order, the child order
with the later working time would be
cancelled first. This represents current
functionality and the example set forth
above demonstrates how this would
function. The Exchange believes that
canceling reserve interest before a child
order would promote the display of
liquidity on an exchange. The Exchange
further believes that canceling a latertimed child order would respect the
time priority of the first child order, and
any priority such child order may have
for allocations.
*
*
*
*
*
Because of the technology changes
associated with the proposed rule
changes to Reserve Orders, the
Exchange will announce by Trader
Update when these changes will be
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
43921
implemented, which the Exchange
anticipates will be in the third 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’’),8 in general, and furthers the
objectives of Section 6(b)(5),9 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 rule change to replenish a
Reserve Order only if the display
quantity is decremented to below a
round lot would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system because it would reduce the
number of child orders associated with
a single Reserve Order. By reducing the
number of child orders, the Exchange
believes it would reduce the potential
for market participants to detect that a
child order is associated with a Reserve
Order. The proposed changes to Reserve
Orders are identical to recently
approved changes to the rules of its
affiliated exchange, NYSE, and how a
Reserve Order would be replenished is
also consistent with how Reserve Orders
function on BZX and Nasdaq.10
For similar reasons, the Exchange
believes that if a Reserve Order has two
child orders that equal less than a round
lot, it would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system to assign a new working time to
the later child order so that when such
Reserve Order is replenished, it would
have a maximum of only two child
orders. The Exchange believes that this
proposed change would streamline the
operation of Reserve Orders and meet
the objective to reduce the potential for
market participants to be able to identify
that a child order is associated with a
Reserve Order.
The Exchange further believes that the
proposed rule change to evaluate a
Reserve Order for routing both on
arrival and when replenishing would
remove impediments to and perfect the
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 See supra notes 5 and 6.
9 15
E:\FR\FM\28AUN1.SGM
28AUN1
43922
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
mechanism of a free and open market
and a national market system because it
would reduce the potential for the
display quantity of a Reserve Order to
lock or cross the PBBO of an away
market. The Exchange further believes
that routing from reserve interest would
promote the display of liquidity on the
Exchange, because if there is at least a
round lot remaining of a Reserve Order
that is not routed, the Exchange would
display that quantity. The Exchange also
believes that it would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system to wait to
display a Reserve Order if there is less
than a round lot remaining after routing
because it would reduce the potential
for such Reserve Order to have more
than one child order. Finally, the
Exchange believes that joining any
quantity of a Reserve Order that is
returned unexecuted with reserve
interest first would be consistent with
the proposed replenishment logic that a
Reserve Order would be replenished
only if the display quantity is
decremented to below a round lot.
The Exchange believes that it would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system to apply
a request to reduce in size a Reserve
Order to the reserve interest first, and
then next to the child order with the
later working time, because such
functionality would promote the display
of liquidity on the Exchange and honor
the priority of the first child order with
the earlier working time. The Exchange
believes that including this existing
functionality in Rule 7.31E would
promote transparency and clarity in
Exchange rules.
The Exchange believes that the
proposed non-substantive amendment
to rename the ‘‘Limit Non-Displayed
Order’’ as the ‘‘Non-Displayed Limit
Order’’ would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system because the proposed change
would conform to the naming
convention of the Exchange’s NonRoutable Limit Order and would
therefore promote clarity and
consistency in Exchange rules.
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
proposed rule change is not designed to
address any competitive issues. Rather,
the proposed rule change to Reserve
VerDate Sep<11>2014
20:00 Aug 27, 2018
Jkt 244001
Orders is designed to reduce the
potential for market participants to
identify that a child order is related to
a Reserve Order. The additional
proposed rule changes are nonsubstantive and are designed to promote
clarity and consistency in Exchange
rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 11 and Rule
19b–4(f)(6) thereunder.12 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 13 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),14 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 15 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
11 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6)(iii).
15 15 U.S.C. 78s(b)(2)(B).
12 17
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
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 rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2018–41 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–2018–41. 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–2018–41 and
should be submitted on or
beforeSeptember 18, 2018.
16 17
E:\FR\FM\28AUN1.SGM
CFR 200.30–3(a)(12).
28AUN1
Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–18570 Filed 8–27–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83913; File No. SR–
CboeBZX–2018–001]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order
Disapproving a Proposed Rule Change
To List and Trade the Shares of the
GraniteShares Bitcoin ETF and the
GraniteShares Short Bitcoin ETF
August 22, 2018.
I. Introduction
On January 5, 2018, Cboe BZX
Exchange, Inc. (‘‘BZX’’ 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 19b–4 thereunder,2 a
proposed rule change to list and trade
the shares (‘‘Shares’’) of the
GraniteShares Bitcoin ETF (‘‘Long
Fund’’) and the GraniteShares Short
Bitcoin ETF (‘‘Short Fund’’) (each a
‘‘Fund’’ and, collectively, ‘‘Funds’’)
issued by the GraniteShares ETP Trust
(‘‘Trust’’) 3 under BZX Rule 14.11(f)(4).4
The proposed rule change was
published for comment in the Federal
Register on January 18, 2018.5 The
comment period for the Notice of
Proposed Rule Change closed on
February 8, 2018.
On February 22, 2018, pursuant to
Section 19(b)(2) of the Exchange Act,6
the Commission designated a longer
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Trust filed a registration statement with the
Commission on December 15, 2017. See
Registration Statement on Form S–1, dated
December 15, 2017 (File No. 333–222109)
(‘‘Registration Statement’’). The Registration
Statement ‘‘will be effective as of the date of any
offer and sale pursuant to the Registration
Statement.’’ Notice, infra note 5, 83 FR at 2705 n.7.
4 On August 21, 2018, the Exchange filed
Amendment No. 1 to the proposal, and on August
22, 2018, the Exchange filed Amendment No. 2 to
the proposal. As discussed below, however, see
Section III.E, infra, the Commission views these
amendments as untimely. Furthermore, even if
these amendments had been timely filed, they
would not alter the Commission’s conclusion that
the Exchange’s proposal is not consistent with the
Exchange Act. See id.
5 See Securities Exchange Act Release No. 82484
(Jan. 11, 2018), 83 FR 2704 (Jan. 18, 2018)
(‘‘Notice’’).
6 15 U.S.C. 78s(b)(2).
daltland on DSKBBV9HB2PROD with NOTICES
2 17
VerDate Sep<11>2014
20:00 Aug 27, 2018
Jkt 244001
period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the proposed
rule change.7 On April 5, 2018, the
Commission instituted proceedings
under Section 19(b)(2)(B) of the
Exchange Act 8 to determine whether to
approve or disapprove the proposed
rule change.9 The comment period and
rebuttal comment period for the Order
Instituting Proceedings closed on May 1,
2018, and May 15, 2018, respectively.10
Finally, on June 28, 2018, the
Commission extended the period for
consideration of the proposed rule
change to September 15, 2018.11 As of
August 21, 2018, the Commission had
received 15 comments on the proposed
rule change.12
This order disapproves the proposed
rule change. Although the Commission
is disapproving this proposed rule
change, the Commission emphasizes
that its disapproval does not rest on an
evaluation of whether bitcoin, or
blockchain technology more generally,
has utility or value as an innovation or
an investment. Rather, the Commission
is disapproving this proposed rule
change because, as discussed below, the
Exchange has not met its burden under
the Exchange Act and the Commission’s
Rules of Practice to demonstrate that its
proposal is consistent with the
requirements of the Exchange Act
Section 6(b)(5), in particular the
requirement that a national securities
exchange’s rules be designed to prevent
fraudulent and manipulative acts and
practices.13 Among other things, the
7 See Securities Exchange Act Release No. 82759
(Feb. 22, 2018), 83 FR 8719 (Feb. 28, 2018).
8 15 U.S.C. 78s(b)(2)(B).
9 See Securities Exchange Act Release No. 82995
(Apr. 5, 2018), 83 FR 15425 (Apr. 10, 2018) (‘‘Order
Instituting Proceedings’’).
10 See id. at 15426.
11 See Securities Exchange Act Release No. 83548
(June 28, 2018), 83 FR 31246 (July 3, 2018).
12 See Letters from Anita Desai (Apr. 6, 2018)
(‘‘Desai Letter’’); Ed Kaleda (Apr. 6, 2018) (‘‘Kaleda
Letter’’); Don Krohn (Apr. 7, 2018) (‘‘Krohn Letter’’);
Adam Malkin (Apr. 8, 2018) (‘‘Malkin Letter’’);
Shravan Kumar (Apr. 11, 2018) (‘‘Kumar Letter’’);
David Barnwell (Apr. 12, 2018) (‘‘Barnwell Letter’’);
Louise Fitzgerald (Apr. 18, 2018) (‘‘Fitzgerald
Letter’’); Sharon Brown-Hruska, Managing Director,
and Trevor Wagener, Consultant, NERA Economic
Consulting (May 18, 2018) (‘‘NERA Letter’’); Alex
Hales (July 8, 2018) (‘‘Hales Letter’’); Anthony C.
Otenyi (July 18, 2018) (‘‘Otenyi Letter’’); V.K. Bhat
(July 28, 2018) (‘‘Bhat Letter’’); Sami Santos (Aug.
7, 2018) (‘‘Santos Letter’’); Arthur Netto (Aug. 9,
2018) (‘‘Netto Letter’’); Sam M. Ahn (Aug. 17, 2018)
(‘‘Ahn Letter’’); and William Rhind, CEO,
GraniteShares (Aug. 20, 2018) (‘‘GraniteShares
Letter’’). All comments on the proposed rule change
are available on the Commission’s website at:
https://www.sec.gov/comments/sr-cboebzx-2018001/cboebzx2018001.htm.
13 See 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
43923
Exchange has offered no record
evidence to demonstrate that bitcoin
futures markets are ‘‘markets of
significant size.’’ That failure is critical
because, as explained below, the
Exchange has failed to establish that
other means to prevent fraudulent and
manipulative acts and practices will be
sufficient, and therefore surveillancesharing with a regulated market of
significant size related to bitcoin is
necessary to satisfy the statutory
requirement that the Exchange’s rules be
designed to prevent fraudulent and
manipulative acts and practices.14
II. Description of the Proposal
The Exchange proposes to list and
trade the Shares under BZX Rule
14.11(f)(4), which governs the listing
and trading of Trust Issued Receipts on
the Exchange.15 Each Fund will be a
series of the Trust, and the Trust and the
Funds will be managed and controlled
by GraniteShares Advisors LLC
(‘‘Sponsor’’). Bank of New York Mellon
will serve as administrator, custodian,
and transfer agent for the Funds.
Foreside Fund Services, LLC will serve
as the distributor of the Shares
(‘‘Distributor’’). The Trust will offer
Shares of the Funds for sale through the
Distributor in ‘‘Creation Units’’ in
transactions with ‘‘Authorized
Participants’’ who have entered into
agreements with the Distributor.16
According to the Exchange, the Long
Fund’s investment objective will be to
seek results (before fees and expenses)
that, both for a single day and over time,
correspond to the performance of lead
month bitcoin futures contracts listed
and traded on the Cboe Futures
Exchange, Inc. (‘‘CFE’’) (‘‘Benchmark
Futures Contracts’’). Conversely, the
Short Fund’s investment objective will
be to seek results (before fees and
expenses) that, on a daily basis,
correspond to the inverse (¥1x) of the
daily performance of the Benchmark
Futures Contracts for a single day. Each
Fund generally intends to invest
substantially all of its assets in the
Benchmark Futures Contracts and cash
and cash equivalents (which would be
used to collateralize the Benchmark
Futures Contracts), but may invest in
other U.S. exchange listed bitcoin
futures contracts, as available (together
14 See
infra notes 31–33 and accompanying text.
Rule 14.11(f)(4) applies to Trust Issued
Receipts that invest in ‘‘Financial Instruments.’’
The term ‘‘Financial Instruments,’’ as defined in
BZX Rule 14.11(f)(4)(A)(iv), means any combination
of investments, including cash; securities; options
on securities and indices; futures contracts; options
on futures contracts; forward contracts; equity caps,
collars, and floors; and swap agreements.
16 See Notice, supra note 5, 83 FR at 2707.
15 BZX
E:\FR\FM\28AUN1.SGM
28AUN1
]]>Agencies
[Federal Register Volume 83, Number 167 (Tuesday, August 28, 2018)]
[Notices]
[Pages 43919-43923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18570]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83898; File No. SR-NYSEAMER-2018-41]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 7.31E Relating to Reserve Orders and Re-Name an Order Type
August 22, 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 August 10, 2018, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.31E relating to Reserve
Orders and re-name an order type. 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 its Cash Equities Pillar Platform
Rule 7.31E
[[Page 43920]]
relating to Reserve Orders and re-name an order type.
Background
Rule 7.31E(d)(1) defines a Reserve Order as a Limit or Inside Limit
Order with a quantity of the size displayed and with a reserve quantity
of the size (``reserve interest'') that is not displayed. The displayed
quantity of a Reserve Order is ranked Priority 2--Display Orders and
the reserve interest is ranked Priority 3--Non-Display Orders.\4\ Rule
7.31E(d)(1)(A) provides that on entry, the display quantity of a
Reserve Order must be entered in round lots and the displayed portion
of a Reserve Order will be replenished following any execution. That
rule further provides that the Exchange will display the full size of
the Reserve Order when the unfilled quantity is less than the minimum
display size for the order. Rule 7.31E(d)(1)(B) provides that each time
a Reserve Order is replenished from reserve interest, a new working
time is assigned to the replenished quantity of the Reserve Order,
while the reserve interest retains the working time of original order
entry. Pursuant to Rule 7.31E(d)(1)(C), a Reserve Order must be
designated Day and may be combined with a Non-Routable Limit Order.
---------------------------------------------------------------------------
\4\ The terms ``Priority 2--Display Orders'' and ``Priority 3--
Non-Display Orders'' are defined in Rule 7.36E(e).
---------------------------------------------------------------------------
Proposed Rule Change Relating To Renaming of Order Type
The Exchange proposes non-substantive amendments to Rules 7.31E and
7.46E to rename the ``Limit Non-Displayed Order'' as the ``Non-
Displayed Limit Order.'' The Exchange believes this proposed rule
change would conform the style of this order type with the name of the
Non-Routable Limit Order. The Exchange therefore believes that this
proposed rule change would promote clarity and consistency in its
rules.
Proposed Rule Change Relating to Reserve Orders
The Exchange proposes to amend Rule 7.31E(d)(1) to change the
manner by which the display portion of a Reserve Order would be
replenished. As proposed, rather than replenishing the display quantity
following any execution, the Exchange proposes to replenish the Reserve
Order when the display quantity is decremented to below a round lot.
The changes that the Exchange is proposing to Rule 7.31 relating to
Reserve Orders are identical to changes that were recently approved for
the Exchange's affiliate, New York Stock Exchange LLC (``NYSE'').\5\ In
addition, the proposed changes to how Reserve Orders would be
replenished are consistent with how Reserve Orders are replenished on
other equity exchanges.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 83768 (August 3,
2018), 83 FR 39488 (August 9, 2018) (SR-NYSE-2018-26) (Approval
Order).
\6\ See Cboe BZX Exchange, Inc. (``BZX'') Rule 11.9(c)(1);
Nasdaq Stock Market LLC (``Nasdaq'') Rule 7503(h).
---------------------------------------------------------------------------
As is currently the case, the replenish quantity would be the
minimum display size of the order or the remaining quantity of reserve
interest if it is less than the minimum display quantity. To reflect
this functionality, the Exchange proposes that Rule 7.31E(d)(1)(A)
would be amended as follows (deleted text bracketed; new text
underlined):
(A) On entry, the display quantity of a Reserve Order must be
entered in round lots. The displayed portion of a Reserve Order will
be replenished when the display quantity is decremented to below a
round lot. The replenish quantity will be the minimum display
quantity of the order or the remaining quantity of the reserve
interest if it is less than the minimum display quantity [following
any execution. The Exchange will display the full size of the
Reserve Order when the unfilled quantity is less than the minimum
display size for the order].
Under current functionality, because the replenished quantity is
assigned a new working time, it is feasible for a single Reserve Order
to have multiple replenished quantities with separate working times,
each, a ``child'' order. The proposed change to limit when a Reserve
Order would be replenished to when the display quantity is decremented
to below a round lot only would reduce the number of child orders for a
Reserve Order. The Exchange believes that minimizing the number of
child orders for a Reserve Order would reduce the potential for market
participants to detect that a child order displayed on the Exchange's
proprietary market data feeds is associated with a Reserve Order.
In most cases, the maximum number of child orders for a Reserve
Order would be two. For example, assume a Reserve Order to buy has a
display quantity of 100 shares and an additional 200 shares of reserve
interest. A sell order of 50 shares would trade with the display
quantity of such Reserve Order, which would decrement the display
quantity to 50 shares. As proposed, the Exchange would then replenish
the Reserve Order with 100 shares from the reserve interest, i.e., the
minimum display size for the order. After this second replenishment,
the Reserve Order would have two child orders, one for 50 shares, the
other for 100 shares, each with different working times.
Generally, when there are two child orders, the older child order
of less than a round lot will be executed before the second child
order. However, there are limited circumstances when a Reserve Order
could have two child orders that equal less than a round lot, which, as
proposed, would trigger a replenishment. For such circumstance, the
Exchange proposes that when a Reserve Order is replenished from reserve
interest and already has two child orders that equal less than a round
lot, the child order with the later working time would be reassigned
the new working time assigned to the next replenished quantity.
For example, taking the same Reserve Order as above:
If 100 shares of such order (``A'') are routed on arrival,
it would have a display quantity of 100 shares (``B'') and 100 shares
in reserve interest.
While ``A'' is routed, a sell order of 50 shares would
trade with ``B,'' decrementing ``B'' to 50 shares and the Reserve Order
would be replenished from reserve interest, creating a second child
order ``C'' of 100 shares.
Next, the Exchange receives a request to reduce the size
of the Reserve Order from 300 shares to 230 shares. Because ``A'' is
still routed away and there is no reserve interest, and as described in
more detail below, this 70 share reduction in size would be applied
against the most recent child order of ``C,'' which would be reduced to
30 shares. Together with ``B,'' which would still be 50 shares, the two
displayed child orders would equal less than a round lot, but with no
quantity in reserve interest.
Next, ``A'' is returned unexecuted, and as described
below, becomes reserve interest and is evaluated for replenishment.
Because the total display quantity (``B'' + ``C'') is less than a round
lot, this Reserve Order would be replenished. But because the Reserve
Order already has two child orders, the child order with the later
working time, ``C,'' would be returned to the reserve interest, which
would now have a quantity of 130 shares (``C'' + ``A''), and the
Reserve Order would be replenished with 100 shares from the reserve
interest with a new working time, which would be a new child order
``D.''
After this replenishment, this Reserve Order would have
two child orders of ``B'' for 50 shares and ``D'' for 100 shares, and a
reserve interest of 30 shares.
To effect these changes, the Exchange proposes to amend current
Rule
[[Page 43921]]
7.31E(d)(1)(B) to specify that each display quantity of a Reserve Order
with a different working time would be referred to as a child order.
The Exchange further proposes new Rule 7.31E(d)(1)(B)(i) that would
provide that when a Reserve Order is replenished from reserve interest
and already has two child orders that equal less than a round lot, the
child order with the later working time would rejoin the reserve
interest and be assigned the new working time assigned to the next
replenished quantity.
The Exchange also proposes new Rule 7.31E(d)(1)(B)(ii) to provide
that if a Reserve Order is not routable (i.e., is combined with a Non-
Routable Limit Order), the replenish quantity would be assigned a
display and working price consistent with the instructions for the
order, which represents current functionality. For example, for a Non-
Routable Limit Reserve Order, if the display price would lock or cross
the contra-side PBBO, the replenished quantity would be assigned a
display price one MPV worse than the PBBO and a working price equal to
the contra-side PBBO, as provided for in Rule 7.31E(e)(1)(A)(i).\7\ The
Exchange believes that this proposed rule text would provide
transparency and clarity to Exchange rules.
---------------------------------------------------------------------------
\7\ The term ``PBBO'' is defined in Rule 1.1E. The term ``MPV''
is defined in Rule 7.6E.
---------------------------------------------------------------------------
The Exchange further proposes to add new subsection (D) to Rule
7.31E(d)(1) to describe when a Reserve Order would be routed. As
proposed, a routable Reserve Order would be evaluated for routing both
on arrival and each time the display quantity is replenished.
Proposed Rule 7.31E(d)(1)(D)(i) would provide that if routing is
required, the Exchange would route from reserve interest before
publishing the display quantity. In addition, if after routing, there
is less than a round lot available to display, the Exchange would wait
until the routed quantity returns (executed or unexecuted) before
publishing the display quantity. In the example described above, the
Exchange would have published the display quantity before the routed
quantity returned because the display quantity was at least a round
lot. If, however, 250 shares of a Reserve Order of 300 shares had been
routed on arrival, because the unrouted quantity was less than a round
lot (50 shares), the Exchange would wait for the routed quantity to
return, either executed or unexecuted, before publishing the display
quantity.
The Exchange proposes this functionality to reduce the possibility
for a Reserve Order to have more than one child order. If the Exchange
did not wait, and instead displayed the 50 shares when the balance of
the Reserve Order has routed, if the 250 shares returns unexecuted,
such Reserve Order would be replenished and would have two child
orders--one for the 50 shares that was displayed when the order was
entered and a second for the 100 shares that replenished the Reserve
Order from the quantity that returned unexecuted. By contrast, by
waiting for a report on the routed quantity, if the routed quantity was
not executed, the Exchange would display the minimum display quantity
as a single child order. If the routed quantity was executed, the
Exchange would display the 50 shares, but only because that would be
the full remaining quantity of the Reserve Order.
Proposed Rule 7.31E(d)(1)(D)(ii) would provide that any quantity of
a Reserve Order that is returned unexecuted would join the working time
of the reserve interest, which is current functionality. If there is no
quantity of reserve interest to join, the returned quantity would be
assigned a new working time as reserve interest. As further proposed,
in either case, such reserve interest would replenish the display
quantity as provided for in Rules 7.31E(d)(1)(A) and (B). The Exchange
believes that this proposed rule text would promote transparency and
clarity in Exchange rules. The Exchange further believes it is
appropriate for a returned quantity of a Reserve Order to join the
reserve interest first because the order may not be eligible for a
replenishment to the display quantity.
Proposed Rule 7.31E(d)(1)(E) would provide that a request to reduce
in size a Reserve Order would cancel the reserve interest before
canceling the display quantity and if there is more than one child
order, the child order with the later working time would be cancelled
first. This represents current functionality and the example set forth
above demonstrates how this would function. The Exchange believes that
canceling reserve interest before a child order would promote the
display of liquidity on an exchange. The Exchange further believes that
canceling a later-timed child order would respect the time priority of
the first child order, and any priority such child order may have for
allocations.
* * * * *
Because of the technology changes associated with the proposed rule
changes to Reserve Orders, the Exchange will announce by Trader Update
when these changes will be implemented, which the Exchange anticipates
will be in the third 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''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change to replenish a
Reserve Order only if the display quantity is decremented to below a
round lot would remove impediments to and perfect the mechanism of a
free and open market and a national market system because it would
reduce the number of child orders associated with a single Reserve
Order. By reducing the number of child orders, the Exchange believes it
would reduce the potential for market participants to detect that a
child order is associated with a Reserve Order. The proposed changes to
Reserve Orders are identical to recently approved changes to the rules
of its affiliated exchange, NYSE, and how a Reserve Order would be
replenished is also consistent with how Reserve Orders function on BZX
and Nasdaq.\10\
---------------------------------------------------------------------------
\10\ See supra notes 5 and 6.
---------------------------------------------------------------------------
For similar reasons, the Exchange believes that if a Reserve Order
has two child orders that equal less than a round lot, it would remove
impediments to and perfect the mechanism of a free and open market and
a national market system to assign a new working time to the later
child order so that when such Reserve Order is replenished, it would
have a maximum of only two child orders. The Exchange believes that
this proposed change would streamline the operation of Reserve Orders
and meet the objective to reduce the potential for market participants
to be able to identify that a child order is associated with a Reserve
Order.
The Exchange further believes that the proposed rule change to
evaluate a Reserve Order for routing both on arrival and when
replenishing would remove impediments to and perfect the
[[Page 43922]]
mechanism of a free and open market and a national market system
because it would reduce the potential for the display quantity of a
Reserve Order to lock or cross the PBBO of an away market. The Exchange
further believes that routing from reserve interest would promote the
display of liquidity on the Exchange, because if there is at least a
round lot remaining of a Reserve Order that is not routed, the Exchange
would display that quantity. The Exchange also believes that it would
remove impediments to and perfect the mechanism of a free and open
market and a national market system to wait to display a Reserve Order
if there is less than a round lot remaining after routing because it
would reduce the potential for such Reserve Order to have more than one
child order. Finally, the Exchange believes that joining any quantity
of a Reserve Order that is returned unexecuted with reserve interest
first would be consistent with the proposed replenishment logic that a
Reserve Order would be replenished only if the display quantity is
decremented to below a round lot.
The Exchange believes that it would remove impediments to and
perfect the mechanism of a free and open market and a national market
system to apply a request to reduce in size a Reserve Order to the
reserve interest first, and then next to the child order with the later
working time, because such functionality would promote the display of
liquidity on the Exchange and honor the priority of the first child
order with the earlier working time. The Exchange believes that
including this existing functionality in Rule 7.31E would promote
transparency and clarity in Exchange rules.
The Exchange believes that the proposed non-substantive amendment
to rename the ``Limit Non-Displayed Order'' as the ``Non-Displayed
Limit Order'' would remove impediments to and perfect the mechanism of
a free and open market and a national market system because the
proposed change would conform to the naming convention of the
Exchange's Non-Routable Limit Order and would therefore promote clarity
and consistency in Exchange rules.
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 proposed rule change is
not designed to address any competitive issues. Rather, the proposed
rule change to Reserve Orders is designed to reduce the potential for
market participants to identify that a child order is related to a
Reserve Order. The additional proposed rule changes are non-substantive
and are designed to promote clarity and consistency in Exchange rules.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2018-41 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-2018-41. 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-2018-41 and should be submitted
on or before September 18, 2018.
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
[[Page 43923]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18570 Filed 8-27-18; 8:45 am]
BILLING CODE 8011-01-P
