Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-E Relating To Reserve Orders, To Re-Name Two Order Types, and To Delete Inoperative Rule Text, 44984-44988 [2018-19059]
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Federal Register / Vol. 83, No. 171 / Tuesday, September 4, 2018 / Notices
Rules 17Ad–22(e)(23)(i) and (ii) under
the Act.44
comments on the proposed rule change
from interested persons.
III. Conclusion
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes amend Rule
7.31–E relating to Reserve Orders, to rename two order types, and to delete
inoperative rule text. 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.
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 45 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,46 that
proposed rule change SR–NSCC–2017–
018, as modified by Amendment No. 1,
be, and it hereby is, approved 47 as of
the date of this order or the date of a
notice by the Commission authorizing
NSCC to implement advance notice SR–
NSCC–2017–806, as modified by
Amendment No. 1, whichever is later.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–19053 Filed 8–31–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83967; File No. SR–
NYSEARCA–2018–61]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.31–E
Relating To Reserve Orders, To ReName Two Order Types, and To Delete
Inoperative Rule Text
August 28, 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
15, 2018, NYSE Arca, Inc. (‘‘Exchange’’
or ‘‘NYSE Arca’’) 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
sradovich on DSK3GMQ082PROD with NOTICES
44 17
CFR 240.17Ad–22(e)(23)(i) and (ii).
U.S.C. 78q–1.
46 15 U.S.C. 78s(b)(2).
47 In approving the Proposed Rule Change, the
Commission has considered the Proposed Rule
Change’s impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
48 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
45 15
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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 7.31–E relating to Reserve Orders,
to re-name two order types, and to
delete inoperative rule text.
Background
Rule 7.31–E(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 7.31–E(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 7.31–E(d)(1)(B) provides that
each time a Reserve Order is
4 The terms ‘‘Priority 2—Display Orders’’ and
‘‘Priority 3—Non-Display Orders’’ are defined in
Rule 7.36–E(e).
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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 7.31–E(d)(1)(C), a
Reserve Order must be designated Day
and may be combined with an Arca
Only Order or a Primary Pegged Order.
Rule 7.31–E(d)(2) defines a ‘‘Limit
Non-Displayed Order,’’ which is a Limit
Order that is not displayed and does not
route. Rule 7.31–E(e)(1) defines an
‘‘Arca Only Order,’’ which is a Limit
Order that does not route.
Proposed Rule Change Relating to Order
Type Names
The Exchange proposes nonsubstantive amendments to Rules 7.31–
E and 7.46–E to re-name the ‘‘Arca Only
Order’’ as the ‘‘Non-Routable Limit
Order.’’ This proposed rule change is
based on the term used by the
Exchange’s affiliate, NYSE American
LLC (‘‘NYSE American’’) for the same
order type.
The Exchange also proposes nonsubstantive amendments to Rules 7.31–
E and 7.46–E to re-name the ‘‘Limit
Non-Displayed Order’’ as the ‘‘NonDisplayed Limit Order.’’ The Exchange
believes that this proposed rule change
would conform the style of this order
type with the name ‘‘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 7.31–E(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 (and Primary
Pegged 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).
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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 7.31–E(d)(1)(A)
would be amended as follows (deleted
text bracketed; new text italic):
(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
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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 7.31–
E(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
7.31–E(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
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44985
rejoin the reserve interest and be
assigned the new working time assigned
to the next replenished quantity.
The Exchange also proposes new Rule
7.31–E(d)(1)(B)(ii) to provide that if a
Reserve Order is not routable (i.e., is
combined with either a Non-Routable
Limit Order or a Primary Pegged 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
7.31–E(e)(1)(A)(i).7 The Exchange
believes that this proposed rule text
would provide transparency and clarity
to Exchange rules.
For a Primary Pegged Reserve Order,
the Exchange proposes that the
replenished quantity would follow Rule
7.31–E(h)(2)(B), which provides that a
Primary Pegged Order would be rejected
if the PBBO is locked or crossed.
Because a Primary Pegged Reserve
Order would have resting reserve
interest, the Exchange proposes to
amend Rule 7.31–E(h)(2)(B) to provide
that if the PBBO is locked or crossed
when the display quantity of a Primary
Pegged Reserve Order is replenished,
the entire order would be cancelled. The
Exchange believes that cancelling the
entire order is consistent with the
current rule that provides that the entire
order would be rejected on arrival if the
display quantity would lock or cross the
PBBO.
The Exchange further proposes to add
new subsection (D) to Rule 7.31–E(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 7.31–E(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
7 The term ‘‘PBBO’’ is defined in Rule 1.1. The
term ‘‘MPV’’ is defined in Rule 7.6–E.
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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 7.31–E(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 7.31(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 7.31–E(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
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time priority of the first child order, and
any priority such child order may have
for allocations.
Additional Proposed Rule Changes
The Exchange proposes additional
non-substantive amendments to its rules
to remove inoperative rule text.
First, the Exchange proposes to
amend Rule 7.35–E (Auctions) to
remove Commentary .02, which sets
forth rules that were operative no later
than February 28, 2018. Because the
amendments described in that
Commentary .02 have been
implemented, Commentary .02 is now
moot and can be deleted.8
Second, the Exchange proposes to
amend Rule 7.39–E (Adjustment of
Open Orders) to delete the title and text
of the rule and designate the rule
‘‘Reserved.’’ Rule 7.39–E relates to the
adjustment of open orders, i.e., orders
with a Good Till Cancelled (‘‘GTC’’) or
Good Till Date (‘‘GTD’’) time-in-force
modifier. On Pillar, the Exchange does
not offer GTC or GTD time-in-force
modifiers.9 When the Exchange deleted
its pre-Pillar order type rules, it
inadvertently did not delete Rule 7.39–
E.10 Because this rule is now
inoperative, the Exchange proposes to
delete it as moot.
*
*
*
*
*
Because of the technology changes
associated with the proposed rule
changes relating 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’’),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
8 See Securities Exchange Act Release No. 82140
(November 21, 2017), 82 FR 56304 (November 28,
2017) (SR–NYSEArca–2017–133) (Notice of filing
and immediate effectiveness of proposed rule
change to add temporary rule).
9 See Securities Exchange Act Release No. 76267
(October 26, 2015), 80 FR 66951 (October 30, 2015)
(SR–NYSEArca–2015–56) (Approval Order).
10 See Securities Exchange Act Release No. 79078
(October 11, 2016), 81 FR 71559 (October 17, 2017)
(SR–NYSEArca–2016–135) (Notice of filing and
immediate effectiveness).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
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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 and Primary Pegged 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.13
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
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
13 See
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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 7.31–E would
promote transparency and clarity in
Exchange rules.
The Exchange believes that the
proposed change to Primary Pegged
Reserve Orders would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
similar to how a Primary Pegged Order
would function on arrival, if the
replenish quantity of a Primary Pegged
Reserve Order would lock or cross the
PBBO, the entire Reserve Order would
be cancelled. The Exchange believes
that by cancelling the entire order, the
Exchange would reduce the potential for
such order to be displayed at a price
that would lock or cross the PBBO.
The Exchange believes that the
proposed non-substantive amendments
to rename the ‘‘Limit Non-Displayed
Order’’ as the ‘‘Non-Displayed Limit
Order’’ and to rename the ‘‘Arca Only
Order’’ as the ‘‘Non-Routable Limit
Order’’ would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system because the proposed changes
are designed to promote clarity and
consistency in Exchange rules by
moving the modifier describing the
function of the order type before the
term ‘‘Limit Order’’ and using order
type names that are used on NYSE
American.
Finally, the Exchange believes that
removing inoperative rule text would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system because
these proposed rule changes would
promote clarity in Exchange rules.
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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 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 14 and Rule
19b–4(f)(6) thereunder.15 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) 16 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),17 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
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
15 17
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44987
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 18 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• 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–
NYSEArca–2018–61 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–NYSEArca–2018–61. 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
18 15
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U.S.C. 78s(b)(2)(B).
04SEN1
44988
Federal Register / Vol. 83, No. 171 / Tuesday, September 4, 2018 / Notices
submissions should refer to File
Number SR–NYSEArca–2018–61 and
should be submitted on or before
September 25, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–19059 Filed 8–31–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83974; File No. SR–NSCC–
2017–017]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt a
Recovery & Wind-Down Plan and
Related Rules
August 28, 2018.
On December 18, 2017, National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change SR–NSCC–2017–
017 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2 to
adopt a recovery and wind-down plan
and related rules.3 The proposed rule
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 On December 18, 2017, NSCC filed the proposed
rule change as advance notice SR–NSCC–2017–805
with the Commission pursuant to Section 806(e)(1)
of Title VIII of the Dodd-Frank Wall Street Reform
and Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’) and Rule 19b–
4(n)(1)(i) of the Act (‘‘Advance Notice’’). 12 U.S.C.
5465(e)(1) and 17 CFR 240.19b–4(n)(1)(i),
respectively. The Advance Notice was published for
comment in the Federal Register on January 30,
2018. In that publication, the Commission also
extended the review period of the Advance Notice
for an additional 60 days, pursuant to Section
806(e)(1)(H) of the Clearing Supervision Act. 12
U.S.C. 5465(e)(1)(H); Securities Exchange Act
Release No. 82581 (January 24, 2018), 83 FR 4327
(January 30, 2018) (SR–NSCC–2017–805). On April
10, 2018, the Commission required additional
information from NSCC pursuant to Section
806(e)(1)(D) of the Clearing Supervision Act, which
tolled the Commission’s period of review of the
Advance Notice until 60 days from the date the
information required by the Commission was
received by the Commission. 12 U.S.C.
5465(e)(1)(D); see 12 U.S.C. 5465(e)(1)(E)(ii) and
(G)(ii); see Memorandum from the Office of
Clearance and Settlement Supervision, Division of
Trading and Markets, titled ‘‘Commission’s Request
for Additional Information,’’ available at https://
www.sec.gov/rules/sro/nscc-an.htm. On June 28,
2018, NSCC filed Amendment No. 1 to the Advance
Notice to amend and replace in its entirety the
Advance Notice as originally filed on December 18,
sradovich on DSK3GMQ082PROD with NOTICES
1 15
VerDate Sep<11>2014
17:54 Aug 31, 2018
Jkt 244001
change was published for comment in
the Federal Register on January 8,
2018.4 On February 8, 2018, the
Commission designated a longer period
within which to approve, disapprove, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change.5 On March 20,
2018, the Commission instituted
proceedings to determine whether to
approve or disapprove the proposed
rule change.6 On June 25, 2018, the
Commission designated a longer period
for Commission action on the
proceedings to determine whether to
approve or disapprove the proposed
rule change.7 On June 28, 2018, NSCC
filed Amendment No. 1 to the proposed
rule change to amend and replace in its
entirety the proposed rule change as
originally submitted on December 18,
2017.8 The Commission did not receive
any comments. This order approves the
proposed rule change, as modified by
Amendment No. 1 (hereinafter
‘‘Proposed Rule Change’’).
2017. Securities Exchange Act Release No. 83745
(July 31, 2018), 83 FR 38329 (August 6, 2018) (SR–
NSCC–2017–805). NSCC submitted a courtesy copy
of Amendment No. 1 to the Advance Notice through
the Commission’s electronic public comment letter
mechanism. Accordingly, Amendment No. 1 to the
Advance Notice has been publicly available on the
Commission’s website at https://www.sec.gov/rules/
sro/nscc-an.htm since June 29, 2018. On July 6,
2018, the Commission received a response to its
request for additional information in consideration
of the Advance Notice, which, in turn, added a
further 60-days to the review period pursuant to
Section 806(e)(1)(E) and (G) of the Clearing
Supervision Act. 12 U.S.C. 5465(e)(1)(E) and (G);
see Memorandum from the Office of Clearance and
Settlement Supervision, Division of Trading and
Markets, titled ‘‘Response to the Commission’s
Request for Additional Information,’’ available at
https://www.sec.gov/rules/sro/nscc-an.htm. The
Commission did not receive any comments. The
proposal, as set forth in both the Advance Notice
and the proposed rule change, each as modified by
Amendments No. 1, shall not take effect until all
required regulatory actions are completed.
4 Securities Exchange Act Release No. 82430
(January 2, 2018), 83 FR 841 (January 8, 2018) (SR–
NSCC–2017–017).
5 Securities Exchange Act Release No. 82669
(February 8, 2018), 83 FR 6653 (February 14, 2018)
(SR–DTC–2017–021, SR–FICC–2017–021, SR–
NSCC–2017–017).
6 Securities Exchange Act Release No. 82908
(March 20, 2018), 83 FR 12986 (March 26, 2018)
(SR–NSCC–2017–017).
7 Securities Exchange Act Release No. 83509
(June 25, 2018), 83 FR 30785 (June 29, 2018) (SR–
DTC–2017–021, SR–FICC–2017–021, SR–NSCC–
2017–017).
8 Securities Exchange Act Release No. 83632 (July
13, 2018), 83 FR 34166 (July 19, 2018) (SR–NSCC–
2017–017). NSCC submitted a courtesy copy of
Amendment No. 1 to the proposed rule change
through the Commission’s electronic public
comment letter mechanism. Accordingly,
Amendment No. 1 to the proposed rule change has
been publicly available on the Commission’s
website at https://www.sec.gov/rules/sro/nscc.htm
since June 29, 2018.
PO 00000
Frm 00132
Fmt 4703
Sfmt 4703
I. Description
In the Advance Notice, NSCC
proposes to (1) adopt an R&W Plan; (2)
amend NSCC’s Rules & Procedures
(‘‘Rules’’) 9 to adopt Rule 41
(Corporation Default), Rule 42 (Winddown of the Corporation), and Rule 60
(Market Disruption and Force Majeure)
(each a ‘‘Proposed Rule’’ and,
collectively, the ‘‘Proposed Rules’’); and
(3) re-number current Rule 42 (Winddown of a Member, Fund Member or
Insurance Carrier/Retirement Services
Member) to Rule 40, which is currently
reserved for future use.
NSCC states that the R&W Plan would
be used by the Board of Directors of
NSCC (‘‘Board’’) and management of
NSCC in the event NSCC encounters
scenarios that could potentially prevent
it from being able to provide its critical
services as a going concern.
NSCC states that the Proposed Rules
are designed to (1) facilitate the
implementation of the R&W Plan when
necessary and, in particular, allow
NSCC to effectuate its strategy for
winding down and transferring its
business; (2) provide Members and
Limited Members with transparency
around critical provisions of the R&W
Plan that relate to their rights,
responsibilities and obligations; and (3)
provide NSCC with the legal basis to
implement those provisions of the R&W
Plan when necessary.
A. NSCC R&W Plan
The R&W Plan would be structured to
provide a roadmap, define the strategy,
and identify the tools available to NSCC
to either (i) recover, in the event it
experiences losses that exceed its
prefunded resources (such strategies
and tools referred to herein as the
‘‘Recovery Plan’’) or (ii) wind-down its
business in a manner designed to permit
the continuation of its critical services
in the event that such recovery efforts
are not successful (such strategies and
tools referred to herein as the ‘‘Winddown Plan’’).
The R&W Plan would identify (i) the
recovery tools available to NSCC to
address the risks of (a) uncovered losses
or liquidity shortfalls resulting from the
default of one or more Members, and (b)
losses arising from non-default events,
such as damage to its physical assets, a
cyber-attack, or custody and investment
losses, and (ii) the strategy for
implementation of such tools. The R&W
Plan would also establish the strategy
and framework for the orderly winddown of NSCC and the transfer of its
business in the remote event the
9 Capitalized terms used herein and not otherwise
defined herein are defined in the Rules.
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]]>Agencies
[Federal Register Volume 83, Number 171 (Tuesday, September 4, 2018)]
[Notices]
[Pages 44984-44988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19059]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83967; File No. SR-NYSEARCA-2018-61]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-
E Relating To Reserve Orders, To Re-Name Two Order Types, and To Delete
Inoperative Rule Text
August 28, 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 15, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 amend Rule 7.31-E relating to Reserve Orders,
to re-name two order types, and to delete inoperative rule text. 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 7.31-E relating to Reserve
Orders, to re-name two order types, and to delete inoperative rule
text.
Background
Rule 7.31-E(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 7.31-E(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 7.31-E(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 7.31-E(d)(1)(C), a Reserve
Order must be designated Day and may be combined with an Arca Only
Order or a Primary Pegged Order.
---------------------------------------------------------------------------
\4\ The terms ``Priority 2--Display Orders'' and ``Priority 3--
Non-Display Orders'' are defined in Rule 7.36-E(e).
---------------------------------------------------------------------------
Rule 7.31-E(d)(2) defines a ``Limit Non-Displayed Order,'' which is
a Limit Order that is not displayed and does not route. Rule 7.31-
E(e)(1) defines an ``Arca Only Order,'' which is a Limit Order that
does not route.
Proposed Rule Change Relating to Order Type Names
The Exchange proposes non-substantive amendments to Rules 7.31-E
and 7.46-E to re-name the ``Arca Only Order'' as the ``Non-Routable
Limit Order.'' This proposed rule change is based on the term used by
the Exchange's affiliate, NYSE American LLC (``NYSE American'') for the
same order type.
The Exchange also proposes non-substantive amendments to Rules
7.31-E and 7.46-E to re-name the ``Limit Non-Displayed Order'' as the
``Non-Displayed Limit Order.'' The Exchange believes that this proposed
rule change would conform the style of this order type with the name
``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 7.31-E(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 (and Primary Pegged 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).
---------------------------------------------------------------------------
[[Page 44985]]
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 7.31-E(d)(1)(A)
would be amended as follows (deleted text bracketed; new text italic):
(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 7.31-E(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 7.31-E(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 7.31-E(d)(1)(B)(ii) to provide
that if a Reserve Order is not routable (i.e., is combined with either
a Non-Routable Limit Order or a Primary Pegged 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 7.31-E(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 1.1. The term ``MPV''
is defined in Rule 7.6-E.
---------------------------------------------------------------------------
For a Primary Pegged Reserve Order, the Exchange proposes that the
replenished quantity would follow Rule 7.31-E(h)(2)(B), which provides
that a Primary Pegged Order would be rejected if the PBBO is locked or
crossed. Because a Primary Pegged Reserve Order would have resting
reserve interest, the Exchange proposes to amend Rule 7.31-E(h)(2)(B)
to provide that if the PBBO is locked or crossed when the display
quantity of a Primary Pegged Reserve Order is replenished, the entire
order would be cancelled. The Exchange believes that cancelling the
entire order is consistent with the current rule that provides that the
entire order would be rejected on arrival if the display quantity would
lock or cross the PBBO.
The Exchange further proposes to add new subsection (D) to Rule
7.31-E(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 7.31-E(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
[[Page 44986]]
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 7.31-E(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 7.31(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 7.31-E(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.
Additional Proposed Rule Changes
The Exchange proposes additional non-substantive amendments to its
rules to remove inoperative rule text.
First, the Exchange proposes to amend Rule 7.35-E (Auctions) to
remove Commentary .02, which sets forth rules that were operative no
later than February 28, 2018. Because the amendments described in that
Commentary .02 have been implemented, Commentary .02 is now moot and
can be deleted.\8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 82140 (November 21,
2017), 82 FR 56304 (November 28, 2017) (SR-NYSEArca-2017-133)
(Notice of filing and immediate effectiveness of proposed rule
change to add temporary rule).
---------------------------------------------------------------------------
Second, the Exchange proposes to amend Rule 7.39-E (Adjustment of
Open Orders) to delete the title and text of the rule and designate the
rule ``Reserved.'' Rule 7.39-E relates to the adjustment of open
orders, i.e., orders with a Good Till Cancelled (``GTC'') or Good Till
Date (``GTD'') time-in-force modifier. On Pillar, the Exchange does not
offer GTC or GTD time-in-force modifiers.\9\ When the Exchange deleted
its pre-Pillar order type rules, it inadvertently did not delete Rule
7.39-E.\10\ Because this rule is now inoperative, the Exchange proposes
to delete it as moot.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 76267 (October 26,
2015), 80 FR 66951 (October 30, 2015) (SR-NYSEArca-2015-56)
(Approval Order).
\10\ See Securities Exchange Act Release No. 79078 (October 11,
2016), 81 FR 71559 (October 17, 2017) (SR-NYSEArca-2016-135) (Notice
of filing and immediate effectiveness).
---------------------------------------------------------------------------
* * * * *
Because of the technology changes associated with the proposed rule
changes relating 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''),\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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 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 and Primary Pegged 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.\13\
---------------------------------------------------------------------------
\13\ 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 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
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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 7.31-E would promote
transparency and clarity in Exchange rules.
The Exchange believes that the proposed change to Primary Pegged
Reserve Orders would remove impediments to and perfect the mechanism of
a free and open market and a national market system because similar to
how a Primary Pegged Order would function on arrival, if the replenish
quantity of a Primary Pegged Reserve Order would lock or cross the
PBBO, the entire Reserve Order would be cancelled. The Exchange
believes that by cancelling the entire order, the Exchange would reduce
the potential for such order to be displayed at a price that would lock
or cross the PBBO.
The Exchange believes that the proposed non-substantive amendments
to rename the ``Limit Non-Displayed Order'' as the ``Non-Displayed
Limit Order'' and to rename the ``Arca Only Order'' as the ``Non-
Routable Limit Order'' would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed changes are designed to promote clarity and
consistency in Exchange rules by moving the modifier describing the
function of the order type before the term ``Limit Order'' and using
order type names that are used on NYSE American.
Finally, the Exchange believes that removing inoperative rule text
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because these proposed rule
changes would promote clarity 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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ 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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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 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-NYSEArca-2018-61 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-NYSEArca-2018-61. 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
[[Page 44988]]
submissions should refer to File Number SR-NYSEArca-2018-61 and should
be submitted on or before September 25, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-19059 Filed 8-31-18; 8:45 am]
BILLING CODE 8011-01-P
