Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend NYSE Rule 104 Governing Transactions by Designated Market Makers, 55763-55765 [2018-24303]
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Federal Register / Vol. 83, No. 216 / Wednesday, November 7, 2018 / Notices
organization and readability of the
Exchange’s Rulebook. The Commission
believes that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the operative delay and
designates the proposed rule change
operative upon filing.13
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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–ISE–2018–89, and should
be submitted on or before November 28,
2018.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
amozie on DSK3GDR082PROD with NOTICES1
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–
ISE–2018–89 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–ISE–2018–89. 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
[FR Doc. 2018–24310 Filed 11–6–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84515; File No. SR–NYSE–
2018–34]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend
NYSE Rule 104 Governing
Transactions by Designated Market
Makers
November 1, 2018.
I. Introduction
On July 31, 2018, New York Stock
Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend NYSE Rule 104
governing transactions by Designated
Market Makers (‘‘DMMs’’). The
proposed rule change was published for
comment in the Federal Register on
August 16, 2018.3 On September 24,
14 17
13 For
purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
17:46 Nov 06, 2018
Jkt 247001
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 83821
(Aug. 10, 2018), 83 FR 40808 (Aug. 16, 2018)
(‘‘Notice’’).
1 15
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55763
2018, the Commission extended to
November 14, 2018, the time period in
which to approve, disapprove, or
institute proceedings to determine
whether to approve or disapprove, the
proposal.4 The Commission has
received no comments on the proposal.
This order institutes proceedings under
Section 19(b)(2)(B) of the Act 5 to
determine whether to approve or
disapprove the proposal.
II. Summary of the Proposed Rule
Change
The Exchange proposes to amend
NYSE Rule 104, which governs the
dealings and responsibilities of
Designated Market Makers (‘‘DMMs’’)
on the Exchange.6 According to the
Exchange, the proposal would
consolidate and restructure current
Rules 104(g), (h), and (i), which would
be deleted and incorporated into a new
subsection (g) titled ‘‘Transactions by
DMMs.’’ 7
Rule 104 currently defines four types
of DMM transactions. Current Rule
104(g) defines Neutral Transactions,
Non-Conditional Transactions, and
Prohibited Transactions, and current
Rule 104(h) defines Conditional
Transactions.8 The Exchange proposes
to eliminate the definitions of Neutral
Transactions, Non-Conditional
Transactions, and Prohibited
Transactions and to amend the rules
regarding Conditional Transactions and
rename them ‘‘Aggressing Transactions’’
under an amended Rule 104(g).9
The Exchange proposes to define an
Aggressing Transaction in proposed
Rule 104(g)(1)(A) as a DMM unit
transaction that is (1) a purchase (sale)
that reaches across the market to trade
as the contra-side to the Exchange
published offer (bid); and (2) priced
above (below) the last differently-priced
trade on the Exchange and above
(below) the last differently-priced
published offer (bid) on the Exchange.10
According to the Exchange, under
proposed Rule 104(g)(1)(B), an
Aggressing Transaction during the last
ten seconds prior to the scheduled close
of trading that would result in a new
consolidated high (low) price for a
security during that trading day would
be prohibited, unless the transaction
would bring the price of the security
4 See Securities Exchange Act Release No. 84276
(Sep. 24, 2018), 83 FR 49143 (Sep. 28, 2018).
5 15 U.S.C. 78s(b)(2)(B).
6 Details of the proposal rule change can be found
in the Notice. See Notice, supra note 3.
7 See id. at 40809–10.
8 See id. at 40808–09 (describing current
provisions regarding these transaction types).
9 See id. at 40809–10.
10 See id. at 40810.
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55764
Federal Register / Vol. 83, No. 216 / Wednesday, November 7, 2018 / Notices
into parity with an underlying or related
security or asset.11
According to the Exchange, proposed
Rule 104(g)(2)—‘‘Re-Entry
Obligations’’—would provide that the
DMM unit’s obligation to maintain a fair
and orderly market may require re-entry
on the opposite side of the market after
effecting one or more transactions.12
According to the Exchange, proposed
Rule 104(g)(2) would provide that this
re-entry should be commensurate with
the size of the transactions and the
immediate and anticipated needs of the
market, and the Exchange states that
these are the same requirements
currently specified for Neutral and NonConditional Transactions and for certain
Conditional Transactions.13
Proposed Rule 104(g)(2)(A) would
require that, after an Aggressing
Transaction, a DMM unit must re-enter
the opposite side of the market at or
before the applicable Price Participation
Point—which would be defined in
proposed Rule 104(g)(3)—for that
security, commensurate with the size of
the Aggressing Transaction.14 Proposed
Rule 104(g)(2)(B) would require that,
following an Aggressing Transaction
that is 10,000 shares or more or has a
market value of $200,000 or more and
exceeds 50% of the published offer (bid)
size, the DMM unit must immediately
re-enter the opposite side of the market
at or before the applicable Price
Participation Point for that security
commensurate with the size of the
Aggressing Transaction.15
According to the Exchange, under
proposed Rule 104(g)(3)(A), the
Exchange would periodically issue Price
Participation Point guidelines that
identify the price at or before which a
DMM unit is expected to re-enter the
market following an Aggressing
Transaction.16 Proposed Rule
104(g)(3)(A) would also provide that,
the Price Participation Points are only
minimum guidelines and compliance
with them does not guarantee that a
DMM unit is meeting its obligations.17
Proposed Rule 104(g)(3)(B) would
provide that, notwithstanding that a
security may not have reached the Price
Participation Point, the DMM unit may
be required to re-enter the market
immediately after an Aggressing
Transaction based on the price and/or
volume of the DMM unit’s trading in
reference to the market in the security
11 See
id.
id. at 40811.
13 See id.
14 See id.
15 See id.
16 See id. at 40812.
17 See id.
12 See
VerDate Sep<11>2014
17:46 Nov 06, 2018
at the time of the trading.18 In such
situations, proposed Rule 104(g)(3)(B)
would state, DMM units may or may not
rely on the fact and circumstance that
there may have been one or more
independent trades following the DMM
unit’s trading to justify a failure to reenter the market.19
III. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 20 to determine
whether the proposal should be
approved or disapproved. Institution of
proceedings is appropriate at this time
in view of the legal and policy issues
raised by the proposal, as discussed
below. Institution of disapproval
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as described in
greater detail below, the Commission
seeks and encourages interested persons
to provide additional comment on the
proposal.
Pursuant to Section 19(b)(2)(B) of the
Act, the Commission is providing notice
of the grounds for disapproval under
consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act,21 which requires that
the rules of an exchange be designed,
among other things, to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest, and which prohibits the
rules of an exchange from being
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers, and with
Section 6(b)(8) of the Act, which
requires that the rules of an exchange
not impose any burden on competition
not necessary or appropriate in
furtherance of the purposes of the Act.
IV. Solicitation of Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the concerns
identified above, as well as any other
18 See
id.
id.
20 15 U.S.C. 78s(b)(2)(B).
21 15 U.S.C. 78f(b)(5).
19 See
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concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposal is inconsistent with Section
6(b)(5) or any other provisions of the
Act, or the rules and regulation
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval which would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.22
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by November 28, 2018.
Any person who wishes to file a rebuttal
to any other person’s submission must
file that rebuttal by December 12, 2018.
In particular, the Commission is
interested in public comment on the
following topics.
1. What are commenters’ views
regarding the Exchange’s proposal to
replace the existing rule against
Prohibited Transactions, which is in
effect during the last 10 minutes of
trading, with the proposed prohibition
of Aggressing Transactions during the
last 10 seconds of trading that would
result in a new consolidated high (low)
price for a security during that trading
day? 23
2. Do commenters believe that a
prohibition against Aggressing
Transactions during the last 10 seconds
of trading that would result in a new
consolidated high (low) price for a
security during that trading day would
be sufficient to prevent DMMs from
aggressively taking liquidity and moving
prices on the Exchange immediately
before the closing auction? Why or why
not? What are commenters’ views on the
trading statistics offered by the
Exchange to support its proposal to
prohibit Aggressing Transactions only
during the last 10 seconds of trading? 24
Do commenters believe that a different
22 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
23 As noted above, such transaction would be
permitted if they would bring the price of the
security into parity with an underlying security or
asset. See supra note 11 & accompanying text.
24 See Notice, supra note 3, 83 FR 40813, nn.14
& 18.
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Federal Register / Vol. 83, No. 216 / Wednesday, November 7, 2018 / Notices
amozie on DSK3GDR082PROD with NOTICES1
duration for such a prohibition would
be preferable? If so, what duration and
why?
3. What are commenters’ views on the
significance of the proposed change
from the current prohibition against
certain transactions that would set a
new high or low price on the Exchange
for the day to the proposed prohibition
against certain transactions that would
result in a new consolidated high or low
price for the day? Do commenters
believe that this change would have
additional consequences for the
operation of Rule 104?
4. What are commenters’ views on
how the obligations imposed on DMMs
by proposed NYSE Rule 104 during the
rest of the trading day would compare
with the obligations imposed by current
NYSE Rule 104?
5. What are commenters’ views on the
Exchange’s argument that changes to
NYSE Rule 104 would promote
aggressive DMM quoting in their
assigned securities? What are
commenters’ views on the Exchange’s
argument that DMMs are currently at a
competitive disadvantage because of
NYSE Rule 104 and that the current rule
‘‘thwarts the ability of the DMM to meet
their affirmative obligations to quote
aggressively in assigned securities’’?
6. What are commenters’ views on
whether the ‘‘Price Participation Points’’
that the Exchange provides to its DMMs
would be sufficient under the proposed
changes to NYSE Rule 104 to prevent
DMMs from aggressively taking
liquidity and moving prices on the
Exchange immediately before the
closing auction?
7. Existing Rules 104(g) and (h) refer
to ‘‘DMMs,’’ and proposed Rule 104(g)
would refer instead to ‘‘DMM units.’’
What are commenters’ views of the
significance, if any, of this change in
wording? What are commenters’ views
on whether the amended rule should
apply to the activities of individuals
trading as DMMs on the Exchange floor?
8. Generally, would the Exchange’s
proposal maintain an appropriate
balance between the benefits and
obligations of being a DMM on the
Exchange? 25 In light of DMMs’ special
25 Current NYSE Rule 104 was originally
approved as part of the NYSE pilot program called
the ‘‘New Market Model.’’ See Securities Exchange
Act Release No. 58845 (Oct. 24, 2008), 73 FR 64379
(Oct. 29, 2008). As the Commission stated when
approving the NYSE’s proposal to conduct the New
Market Model pilot, ‘‘[w]e carefully review trading
rule proposals that seek to offer special advantages
to market makers. Although an exchange may
reward such participants for the benefits they
provide to the exchange’s market, such reward must
not be disproportionate to the services provided.’’
See id. In 2015, the Commission permanently
approved the New Market Model pilot and noted
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17:46 Nov 06, 2018
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responsibility for closing auctions under
NYSE rules, would the obligations of
DMMs under NYSE rules be reasonably
designed to prevent DMMs from
inappropriately influencing or
manipulating the close if the proposed
rule change were approved?
Comments may be submitted by any
of the following methods:
55765
2018. Rebuttal comments should be
submitted by December 12, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24303 Filed 11–6–18; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2018–34 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–NYSE–2018–34. 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–NYSE–2018–34 and should
be submitted on or before November 28,
that the pilot had been conducted to seek ‘‘further
evidence that the benefits proposed for DMMs are
not disproportionate to their obligations.’’ See
Securities Exchange Act Release No. 75578 (July 31,
2015), 80 FR 47008 (Aug. 6, 2015).
PO 00000
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84520; File No. SR–BX–
2018–050]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Add Definitions to
Chapter I, Section 1, Titled General
Provisions and Also Amend Chapter
VI, Section 18, Titled Risk Protections
November 1, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
18, 2018, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add
definitions to Chapter I, Section 1, titled
‘‘General Provisions’’ and also amend
Chapter VI, Section 18, titled, ‘‘Risk
Protections.’’
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
26 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 83, Number 216 (Wednesday, November 7, 2018)]
[Notices]
[Pages 55763-55765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24303]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84515; File No. SR-NYSE-2018-34]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Amend NYSE Rule 104 Governing Transactions by
Designated Market Makers
November 1, 2018.
I. Introduction
On July 31, 2018, New York Stock Exchange LLC (``Exchange'' or
``NYSE'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Rule 104 governing transactions by
Designated Market Makers (``DMMs''). The proposed rule change was
published for comment in the Federal Register on August 16, 2018.\3\ On
September 24, 2018, the Commission extended to November 14, 2018, the
time period in which to approve, disapprove, or institute proceedings
to determine whether to approve or disapprove, the proposal.\4\ The
Commission has received no comments on the proposal. This order
institutes proceedings under Section 19(b)(2)(B) of the Act \5\ to
determine whether to approve or disapprove the proposal.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 83821 (Aug. 10,
2018), 83 FR 40808 (Aug. 16, 2018) (``Notice'').
\4\ See Securities Exchange Act Release No. 84276 (Sep. 24,
2018), 83 FR 49143 (Sep. 28, 2018).
\5\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Summary of the Proposed Rule Change
The Exchange proposes to amend NYSE Rule 104, which governs the
dealings and responsibilities of Designated Market Makers (``DMMs'') on
the Exchange.\6\ According to the Exchange, the proposal would
consolidate and restructure current Rules 104(g), (h), and (i), which
would be deleted and incorporated into a new subsection (g) titled
``Transactions by DMMs.'' \7\
---------------------------------------------------------------------------
\6\ Details of the proposal rule change can be found in the
Notice. See Notice, supra note 3.
\7\ See id. at 40809-10.
---------------------------------------------------------------------------
Rule 104 currently defines four types of DMM transactions. Current
Rule 104(g) defines Neutral Transactions, Non-Conditional Transactions,
and Prohibited Transactions, and current Rule 104(h) defines
Conditional Transactions.\8\ The Exchange proposes to eliminate the
definitions of Neutral Transactions, Non-Conditional Transactions, and
Prohibited Transactions and to amend the rules regarding Conditional
Transactions and rename them ``Aggressing Transactions'' under an
amended Rule 104(g).\9\
---------------------------------------------------------------------------
\8\ See id. at 40808-09 (describing current provisions regarding
these transaction types).
\9\ See id. at 40809-10.
---------------------------------------------------------------------------
The Exchange proposes to define an Aggressing Transaction in
proposed Rule 104(g)(1)(A) as a DMM unit transaction that is (1) a
purchase (sale) that reaches across the market to trade as the contra-
side to the Exchange published offer (bid); and (2) priced above
(below) the last differently-priced trade on the Exchange and above
(below) the last differently-priced published offer (bid) on the
Exchange.\10\ According to the Exchange, under proposed Rule
104(g)(1)(B), an Aggressing Transaction during the last ten seconds
prior to the scheduled close of trading that would result in a new
consolidated high (low) price for a security during that trading day
would be prohibited, unless the transaction would bring the price of
the security
[[Page 55764]]
into parity with an underlying or related security or asset.\11\
---------------------------------------------------------------------------
\10\ See id. at 40810.
\11\ See id.
---------------------------------------------------------------------------
According to the Exchange, proposed Rule 104(g)(2)--``Re-Entry
Obligations''--would provide that the DMM unit's obligation to maintain
a fair and orderly market may require re-entry on the opposite side of
the market after effecting one or more transactions.\12\ According to
the Exchange, proposed Rule 104(g)(2) would provide that this re-entry
should be commensurate with the size of the transactions and the
immediate and anticipated needs of the market, and the Exchange states
that these are the same requirements currently specified for Neutral
and Non-Conditional Transactions and for certain Conditional
Transactions.\13\
---------------------------------------------------------------------------
\12\ See id. at 40811.
\13\ See id.
---------------------------------------------------------------------------
Proposed Rule 104(g)(2)(A) would require that, after an Aggressing
Transaction, a DMM unit must re-enter the opposite side of the market
at or before the applicable Price Participation Point--which would be
defined in proposed Rule 104(g)(3)--for that security, commensurate
with the size of the Aggressing Transaction.\14\ Proposed Rule
104(g)(2)(B) would require that, following an Aggressing Transaction
that is 10,000 shares or more or has a market value of $200,000 or more
and exceeds 50% of the published offer (bid) size, the DMM unit must
immediately re-enter the opposite side of the market at or before the
applicable Price Participation Point for that security commensurate
with the size of the Aggressing Transaction.\15\
---------------------------------------------------------------------------
\14\ See id.
\15\ See id.
---------------------------------------------------------------------------
According to the Exchange, under proposed Rule 104(g)(3)(A), the
Exchange would periodically issue Price Participation Point guidelines
that identify the price at or before which a DMM unit is expected to
re-enter the market following an Aggressing Transaction.\16\ Proposed
Rule 104(g)(3)(A) would also provide that, the Price Participation
Points are only minimum guidelines and compliance with them does not
guarantee that a DMM unit is meeting its obligations.\17\
---------------------------------------------------------------------------
\16\ See id. at 40812.
\17\ See id.
---------------------------------------------------------------------------
Proposed Rule 104(g)(3)(B) would provide that, notwithstanding that
a security may not have reached the Price Participation Point, the DMM
unit may be required to re-enter the market immediately after an
Aggressing Transaction based on the price and/or volume of the DMM
unit's trading in reference to the market in the security at the time
of the trading.\18\ In such situations, proposed Rule 104(g)(3)(B)
would state, DMM units may or may not rely on the fact and circumstance
that there may have been one or more independent trades following the
DMM unit's trading to justify a failure to re-enter the market.\19\
---------------------------------------------------------------------------
\18\ See id.
\19\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \20\ to determine whether the proposal should be
approved or disapproved. Institution of proceedings is appropriate at
this time in view of the legal and policy issues raised by the
proposal, as discussed below. Institution of disapproval proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described in greater
detail below, the Commission seeks and encourages interested persons to
provide additional comment on the proposal.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act,\21\ which requires that the rules of an exchange be
designed, among other things, to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest, and which prohibits the rules of an
exchange from being designed to permit unfair discrimination between
customers, issuers, brokers, or dealers, and with Section 6(b)(8) of
the Act, which requires that the rules of an exchange not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
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\21\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
inconsistent with Section 6(b)(5) or any other provisions of the Act,
or the rules and regulation thereunder. Although there do not appear to
be any issues relevant to approval or disapproval which would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\22\
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\22\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by November 28, 2018. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
December 12, 2018.
In particular, the Commission is interested in public comment on
the following topics.
1. What are commenters' views regarding the Exchange's proposal to
replace the existing rule against Prohibited Transactions, which is in
effect during the last 10 minutes of trading, with the proposed
prohibition of Aggressing Transactions during the last 10 seconds of
trading that would result in a new consolidated high (low) price for a
security during that trading day? \23\
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\23\ As noted above, such transaction would be permitted if they
would bring the price of the security into parity with an underlying
security or asset. See supra note 11 & accompanying text.
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2. Do commenters believe that a prohibition against Aggressing
Transactions during the last 10 seconds of trading that would result in
a new consolidated high (low) price for a security during that trading
day would be sufficient to prevent DMMs from aggressively taking
liquidity and moving prices on the Exchange immediately before the
closing auction? Why or why not? What are commenters' views on the
trading statistics offered by the Exchange to support its proposal to
prohibit Aggressing Transactions only during the last 10 seconds of
trading? \24\ Do commenters believe that a different
[[Page 55765]]
duration for such a prohibition would be preferable? If so, what
duration and why?
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\24\ See Notice, supra note 3, 83 FR 40813, nn.14 & 18.
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3. What are commenters' views on the significance of the proposed
change from the current prohibition against certain transactions that
would set a new high or low price on the Exchange for the day to the
proposed prohibition against certain transactions that would result in
a new consolidated high or low price for the day? Do commenters believe
that this change would have additional consequences for the operation
of Rule 104?
4. What are commenters' views on how the obligations imposed on
DMMs by proposed NYSE Rule 104 during the rest of the trading day would
compare with the obligations imposed by current NYSE Rule 104?
5. What are commenters' views on the Exchange's argument that
changes to NYSE Rule 104 would promote aggressive DMM quoting in their
assigned securities? What are commenters' views on the Exchange's
argument that DMMs are currently at a competitive disadvantage because
of NYSE Rule 104 and that the current rule ``thwarts the ability of the
DMM to meet their affirmative obligations to quote aggressively in
assigned securities''?
6. What are commenters' views on whether the ``Price Participation
Points'' that the Exchange provides to its DMMs would be sufficient
under the proposed changes to NYSE Rule 104 to prevent DMMs from
aggressively taking liquidity and moving prices on the Exchange
immediately before the closing auction?
7. Existing Rules 104(g) and (h) refer to ``DMMs,'' and proposed
Rule 104(g) would refer instead to ``DMM units.'' What are commenters'
views of the significance, if any, of this change in wording? What are
commenters' views on whether the amended rule should apply to the
activities of individuals trading as DMMs on the Exchange floor?
8. Generally, would the Exchange's proposal maintain an appropriate
balance between the benefits and obligations of being a DMM on the
Exchange? \25\ In light of DMMs' special responsibility for closing
auctions under NYSE rules, would the obligations of DMMs under NYSE
rules be reasonably designed to prevent DMMs from inappropriately
influencing or manipulating the close if the proposed rule change were
approved?
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\25\ Current NYSE Rule 104 was originally approved as part of
the NYSE pilot program called the ``New Market Model.'' See
Securities Exchange Act Release No. 58845 (Oct. 24, 2008), 73 FR
64379 (Oct. 29, 2008). As the Commission stated when approving the
NYSE's proposal to conduct the New Market Model pilot, ``[w]e
carefully review trading rule proposals that seek to offer special
advantages to market makers. Although an exchange may reward such
participants for the benefits they provide to the exchange's market,
such reward must not be disproportionate to the services provided.''
See id. In 2015, the Commission permanently approved the New Market
Model pilot and noted that the pilot had been conducted to seek
``further evidence that the benefits proposed for DMMs are not
disproportionate to their obligations.'' See Securities Exchange Act
Release No. 75578 (July 31, 2015), 80 FR 47008 (Aug. 6, 2015).
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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-NYSE-2018-34 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-NYSE-2018-34. 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-NYSE-2018-34 and should be submitted on
or before November 28, 2018. Rebuttal comments should be submitted by
December 12, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24303 Filed 11-6-18; 8:45 am]
BILLING CODE 8011-01-P
