Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Rule 123C To Extend the Cut-Off Times for Order Entry and Cancellation for Participation in the Closing Auction and When the Exchange Will Begin Disseminating Order Imbalance Information for the Closing Auction, 64910-64913 [2018-27278]
Download as PDF
<![CDATA[
64910
Federal Register / Vol. 83, No. 242 / Tuesday, December 18, 2018 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
amozie on DSK3GDR082PROD with NOTICES
Extension:
Rule 15c3–4, SEC File No. 270–441, OMB
Control No. 3235–0497
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 15c3–4 (17 CFR. 240.15c3–4) (the
‘‘Rule’’) under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.).
Rule 15c3–4 requires certain brokerdealers that are registered with the
Commission as OTC derivatives dealers,
or who compute their net capital
charges under Appendix E to Rule
15c3–1 (17 CFR 240.15c3–1) (‘‘ANC
firms’’), to establish, document, and
maintain a system of internal risk
management controls. The Rule sets
forth the basic elements for an OTC
derivatives dealer or an ANC firm to
consider and include when establishing,
documenting, and reviewing its internal
risk management control system, which
are designed to, among other things,
ensure the integrity of an OTC
derivatives dealer’s or an ANC firm’s
risk measurement, monitoring, and
management process, to clarify
accountability at the appropriate
organizational level, and to define the
permitted scope of the dealer’s activities
and level of risk. The Rule also requires
that management of an OTC derivatives
dealer or an ANC firm must periodically
review, in accordance with written
procedures, the firm’s business
activities for consistency with its risk
management guidelines.
The staff estimates that the average
amount of time a new OTC derivatives
dealer will spend establishing and
documenting its risk management
control system is 2,000 hours and that,
on average, a registered OTC derivatives
dealer will spend approximately 200
hours each year to maintain (e.g.,
reviewing and updating) its risk
management control system.1 Currently,
1 This notice does not cover the hour burden
associated with ANC firms, because the hour
burden for ANC firms is included in the Paperwork
VerDate Sep<11>2014
00:45 Dec 18, 2018
Jkt 247001
three firms are registered with the
Commission as OTC derivatives dealers.
The staff estimates that approximately
six additional entities may become
registered as OTC derivatives dealers
within the next three years. Thus, the
estimated annualized burden would be
600 hours for the three OTC derivatives
dealers currently registered with the
Commission to maintain their risk
management control systems,2 4,000
hours for the six new OTC derivatives
dealers to establish and document their
risk management control systems,3 and
1,200 hours for the six new OTC
derivatives dealers to maintain their risk
management control systems.4
Accordingly, the staff estimates the total
annualized burden associated with Rule
15c3–4 for the six OTC derivatives
dealers will be approximately 5,800
hours annually.
The staff believes that the internal
cost of complying with Rule 15c3–4 will
be approximately $314 per hour.5 This
per hour cost is based upon an annual
average hourly salary for a compliance
manager who would be responsible for
ensuring compliance with the
requirements of Rule 15c3–4.
Accordingly, the total annualized
internal cost of compliance for all
affected OTC derivatives dealers is
estimated to be $1,821,200.6
The records required to be made by
OTC derivatives dealers pursuant to the
Rule and the results of the periodic
reviews conducted under paragraph (d)
of Rule 15c3–4 must be preserved under
Rule 17a–4 of the Exchange Act (17 CFR
240.17a–4) for a period of not less than
three years, the first two years in an
easily accessible place. The Commission
will not generally publish or make
available to any person notice or reports
received pursuant to the Rule. The
statutory basis for the Commission’s
refusal to disclose such information to
the public is the exemption contained in
section (b)(4) of the Freedom of
Information Act (5 U.S.C. 552), which
essentially provides that the
requirement of public dissemination
Reduction Act collection for Rule 15c3–1, which
requires ANC firms to comply with specific
provisions of Rule 15c3–4 in Appendix E to Rule
15c3–1. See 17 CFR 240.15c3–1(a)(7)(iii), 17 CFR
240.15c3–1e(a)(1)(ii), and 17 CFR 240.15c3–
1e(a)(1)(viii)(C).
2 (200 hours x 3 firms) = 600.
3 ((2,000 hours/3 years) × 6 firms) = 4,000.
4 (200 hours × 6 firms) = 600.
5 The $314 per hour salary figure for a compliance
manager is from SIFMA’s Management &
Professional Earnings in the Securities Industry
2013, modified by Commission staff to account for
an 1800-hour work-year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits
and overhead.
6 5,800 hours × $314 per hour = $1,821,200.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
does not apply to commercial or
financial information which is
privileged or confidential.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: (i)
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE Washington,
DC 20549, or by sending an email to:
PRA_Mailbox@SEC.gov. Comments
must be submitted to OMB within 30
days of this notice.
Dated: December 12, 2018.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018–27270 Filed 12–17–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84804; File No. SR–NYSE–
2018–58]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend Rule 123C To Extend the CutOff Times for Order Entry and
Cancellation for Participation in the
Closing Auction and When the
Exchange Will Begin Disseminating
Order Imbalance Information for the
Closing Auction
December 12, 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
November 30, 2018, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
E:\FR\FM\18DEN1.SGM
18DEN1
Federal Register / Vol. 83, No. 242 / Tuesday, December 18, 2018 / Notices
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 123C (The Closing Procedures) to
extend the cut-off times for order entry
and cancellation for participation in the
closing auction and when the Exchange
will begin disseminating Order
Imbalance Information for the closing
auction. 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 123C (The Closing Procedures) to
extend the cut-off times for order entry
and cancellation for participation in the
closing auction and when the Exchange
would begin disseminating Order
Imbalance Information 4 for the closing
auction from 3:45 p.m. to 3:50 p.m.
Eastern Time.5 The Exchange also
proposes non-substantive amendments
to Rule 123C.
amozie on DSK3GDR082PROD with NOTICES
Proposed Amendment To Change 3:45
p.m. to 3:50 p.m. in Rule 123C
Rule 123C sets forth the closing
procedures on the Exchange. Among
other things, Rule 123C specifies the
time by which by which Market-onClose (‘‘MOC’’) Orders,6 Limit-on-Close
4 Order Imbalance Information is described under
Rule 123C(6)(a)(i) and (ii).
5 Unless otherwise noted, all times listed in this
proposal are Eastern Time.
6 An MOC Order is a Market Order in a security
that, by its terms, is to be executed in its entirety
at the closing price. See Rule 13(c)(4).
VerDate Sep<11>2014
00:45 Dec 18, 2018
Jkt 247001
64911
(‘‘LOC’’) Orders,7 and Closing Offset
(‘‘CO’’) Orders 8 may be entered or
cancelled. Until 3:45 p.m., these orders
can be entered or cancelled without
restriction.9 At 3:45 p.m., if there is a
significant imbalance of buy MOC and
marketable LOC Orders against sell
MOC and marketable LOC Orders, the
Exchange will publish a Mandatory
MOC/LOC Imbalance Publication.10
After 3:45 p.m., MOC and LOC Orders
may be entered only to offset a
Mandatory MOC/LOC Imbalance
Publication.11 In addition, between 3:45
p.m. and 3:58 p.m., MOC, LOC, and CO
Orders may be cancelled or reduced in
size only to correct a legitimate error.12
In addition, as provided for in Rule
123C(6), at 3:45 p.m., the Exchange
begins disseminating an Order
Imbalance Information Data Feed for the
close. Supplemental Material .40 to Rule
123C further provides that if not
otherwise specified, if the scheduled
close of trading is before 4:00 p.m., the
times specified in Rule 123C shall be
adjusted based on the early scheduled
time, and references to 3:45 p.m. shall
mean 15 minutes before the early
scheduled close.
The Exchange proposes to amend
Rule 123C to change all references to
3:45 p.m. in the Rule to 3:50 p.m.13 The
Exchange also proposes to amend
Supplementary Material .40 to Rule
123C to provide that references to 3:50
p.m. shall mean 10 minutes before the
early scheduled close. This proposed
rule change would have the substantive
effect of changing: (1) The publication
time for the Mandatory MOC/LOC
Imbalance Publication; (2) the cut-off
time for unrestricted entry and
cancellation of MOC Orders and LOC
Orders; (3) cancellation of CO Orders;
and (4) the time when the Exchange
would begin disseminating Order
Imbalance Information for the close.
As the equities markets continue to
evolve and become more efficient and
automated, the Exchange believes that
the current cut-off times can be
extended and still serve the same
purpose. The Exchange believes that the
proposed changes would give member
organizations greater control over their
MOC, LOC, and CO Orders while
continuing to provide market
participants enough time at the end of
the trading day to react to and offset
closing order imbalances. Shortening
the time frame for order entry and
cancellation restrictions and when
Order Imbalance Information would be
disseminated is also consistent with the
related cut-off times available on other
equity exchanges.14
7 An LOC Order is a Limit Order in a security that
is entered for execution at the closing price of the
security on the Exchange provided that the closing
price is at or within the specified limit. See [sic]
13(c)(2).
8 A CO Order is a day Limit Order to buy or sell
as part of the closing transaction where the
eligibility to participate in the closing transaction
is contingent upon: (i) An imbalance in the security
on the opposite side of the market from the CO
Order; (ii) after taking into account all other types
of interest eligible for execution at the closing price,
there is still an imbalance in the security on the
opposite side of the market from the CO Order; and
(iii) the limit price of the CO Order being at or
within the price of the closing transaction. See Rule
13(c)(1).
9 See Rule 123C(2)(a).
10 A Mandatory MOC/LOC Imbalance Publication
is the dissemination of information that indicates a
disparity between MOC and marketable LOC
interest to buy and MOC and marketable LOC
interest to sell, measured at 3:45 p.m. See Rule
123C(1)(d). Rule 123C(4) sets forth how the MOC
and LOC Imbalance is to be calculated and Rule
123C(5) sets forth the circumstances of when a
Mandatory MOC/LOC Imbalance Publication would
be published.
11 See Rules 123C(2)(b)(i) and (ii).
12 See Rule 123C(3)(b). A ‘‘legitimate error’’
means an error in any term of an MOC or LOC
Order, such as price, number of shares, side of the
transaction (buy or sell) or identification of the
security. See Rule 123C(1)(c). After 3:58 p.m., MOC,
LOC, and CO Orders may not be cancelled for any
reason. Rule 123(c)(3)[sic].
13 To effect this change, the Exchange proposes to
amend Rules 123C(1)(b), (d), (d)(ii), and (f);
123C(2)(a), (a)(i), (b), (b)(ii), (c)(i), (c)(ii), and (c)(iii);
123C(3)(a), (b); 123C(4)(a)(i); Rule 123C(5)(a), (b),
(b)(i), (b)(ii), (c); and Rule 123C(6)(a)(iv), (a)(v), and
(b).
Non-Substantive Amendments to Rule
123C
The Exchange proposes to amend
Rule 123C(1)(c) to include CO Orders in
the definition of ‘‘legitimate error’’. This
change would harmonize the definition
of ‘‘legitimate error’’ with Rule
123C(3)(B), which sets forth the cut-off
time for when an MOC, LOC, and CO
Order may be cancelled or reduced in
size to correct a legitimate error.
The Exchange also proposes the
following non-substantive changes to
Rule 123C: (i) Remove the period from
the titles of the sections (1), (2), (3), and
(5) to conform to the punctuation in
other sections the Rule; and (ii)
capitalize the word ‘‘Orders’’ in the title
of section (3). The Exchange proposes a
non-substantive correction to add a ‘‘.’’
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
14 The Commission recently approved a proposed
rule change by the Nasdaq Stock Market LLC
(‘‘Nasdaq’’) to move the cut-off times for the entry
of MOC and LOC Orders from 3:50 p.m. to 3:55 p.m.
See Securities Exchange Act Release No. 84454
(October 19, 2018), 83 FR 53923 (October 25, 2018)
(SR–Nasdaq–2018–68) (Approval Order). In
addition, Cboe BZX Exchange, Inc. (‘‘BZX’’) offers
‘‘Late-Limit-On-Close Order’’ and accepts this order
until 4:00 p.m. and BZX uses a 3:55 p.m. cut-off for
regular MOC and LOC Order entry in its closing
auction. See BZX Rules 11.23(a)(11) and (c)(1)(A).
Finally, the Exchange’s affiliate, NYSE Arca, Inc.
(‘‘NYSE Arca’’) initiates its ‘‘Closing Auction
Imbalance Freeze’’ for all MOC and LOC Orders at
3:59 p.m. See NYSE Arca Rule 7.35–E(d)(2).
E:\FR\FM\18DEN1.SGM
18DEN1
64912
Federal Register / Vol. 83, No. 242 / Tuesday, December 18, 2018 / Notices
amozie on DSK3GDR082PROD with NOTICES
at the end of the Rules 123C(4)(a)(i) and
Rule 123(1)(b) [sic]. Finally, the
Exchange proposes a non-substantive
amendment to Rule 123C(5)(c) to
capitalize the term ‘‘Trading Halt’’ as
that is a defined term under Rule
123C(1)(g).
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,15 in general, and furthers the
objectives of Section 6(b)(5),16 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that extending
the cut-off times for entry and
cancellation of MOC and LOC Orders,
cancellation of CO Orders, as well as
when the Exchange would begin
disseminating Order Imbalance
Information for the close would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would allow market participants to
retain control over their orders for a
longer period of time, and thereby assist
those market participants in managing
their trading at the close. As the equities
markets continue to evolve and become
more efficient and automated, the
Exchange believes that the current 3:45
p.m. cut-off time is no longer necessary
for market participants to respond to
offset auction imbalances. The Exchange
believes that the proposed 3:50 p.m. cutoff time reflects the efficiency and more
automated nature of trading in today’s
market, while also retaining sufficient
time for market participants to react to
and offset any order imbalances leading
into the close. The proposed rule change
should also improve price discovery by
facilitating additional participation in
the closing auction.
The Exchange further believes that the
proposed rule change would remove
impediments to and perfect the
mechanism of free and open market and
a national market system because it
would more closely align the
Exchange’s cut-off times with those of
other equity exchanges. For example,
the Commission recently approved a
proposed rule change by Nasdaq to
move the cut-off times for the entry of
MOC and LOC Orders from 3:50 p.m. to
3:55 p.m.17 In addition, BZX offers
‘‘Late-Limit-On-Close Order’’ and
accepts this order until 4:00 p.m. and
also uses a 3:55 p.m. cut-off for regular
MOC and LOC Order entry in its closing
auction.18 Finally, the Exchange’s
affiliate, NYSE Arca, initiates its
‘‘Closing Auction Imbalance Freeze’’ for
all MOC and LOC Orders at 3:59 p.m.19
The Exchange, therefore, believes that
there is ample precedent in the industry
for extending the order entry cut-off
time to 3:50 p.m. as proposed.
The Exchange also believes the
proposal would promote just and
equitable principles of trade because the
proposed rule change would not alter
the basic operations of the Exchange’s
closing procedures. Rather, the
proposed rule change would provide
more time for unrestricted order entry
and cancellation leading into the close,
while maintaining existing requirements
for how to determine whether to publish
a Mandatory MOC/LOC Imbalance
Publication, the order entry and
cancellation requirements in the Rule,
and the content of Order Imbalance
Information. Finally, the Exchange
believes that the proposed nonsubstantive amendments to Rule 123C
would promote clarity and consistency
in Exchange rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, but rather
will serve to improve competition for
order flow at the close of trading. The
Commission recently approved a
proposed rule change by Nasdaq to
move the cut-off times for the entry of
MOC and LOC Orders from 3:50 to 3:55
p.m.20 In addition, other exchanges
operate closing auctions with later cutoff times than proposed by the
Exchange. The Exchange believes that
market participants that trade in the
Exchange’s closing auction would
similarly benefit from a later cut-off
time, while also continuing to have a
period to enter orders to offset a
published imbalance. The proposed cutoff time would apply equally to all
market participants and reflects the
current market environment where
trading is increasingly more automated
and efficient. The non-substantive
17 See
supra note 14.
18 Id.
15 15
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
00:45 Dec 18, 2018
19 Id.
20 See
Jkt 247001
PO 00000
supra note 14.
Frm 00104
Fmt 4703
Sfmt 4703
amendments to Rule 123C are not
designed to address any competitive
issues.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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 rulecomments@sec.gov. Please include File
Number SR–NYSE–2018–58 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–2018–58. 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
E:\FR\FM\18DEN1.SGM
18DEN1
Federal Register / Vol. 83, No. 242 / Tuesday, December 18, 2018 / Notices
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–2018–58 and should
be submitted on or before January 8,
2019.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2018–27278 Filed 12–17–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
December 20, 2018.
PLACE: The meeting will be held at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
Commissioner Jackson, as duty
officer, voted to consider the items
listed for the closed meeting in closed
session.
amozie on DSK3GDR082PROD with NOTICES
TIME AND DATE:
Dated: December 13, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–27417 Filed 12–14–18; 11:15 am]
BILLING CODE 8011–01–P
[Release No. 34–84806; File No. SR–NYSE–
2018–52]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend Rule 7.31 Relating to
Discretionary Orders, Auction-Only
Orders, Discretionary Modifier, and
Yielding Modifier and Related
Amendments to Rules 7.16, 7.34, 7.36,
and 7.37
December 12, 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
November 29, 2018, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.31 (Orders and Modifiers) to: (i)
Add a new order type, Discretionary
Orders; (ii) add two new order type
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
21 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
00:45 Dec 18, 2018
Jkt 247001
PO 00000
Frm 00105
Fmt 4703
64913
modifiers, the Last Sale Peg Modifier
and the Yielding Modifier; and (iii)
make related changes to Rules 7.16,
7.34, 7.36, and 7.37. 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 (Orders and Modifiers) to: (i)
Add a new order type, Discretionary
Orders; (ii) add two new order type
modifiers, the Last Sale Peg Modifier
and the Yielding Modifier; and (iii)
make related changes to Rules 7.16,
7.34, 7.36, and 7.37.
Each of these proposed changes is
designed to introduce on Pillar order
types and modifiers that are currently
available for trading securities listed on
the Exchange. First, the proposed new
order type, Discretionary Orders, or ‘‘D
Orders,’’ is based on current d-Quote
functionality.4 Second, the proposed
Last Sale Peg Modifier is based on the
Buy Minus Zero Plus Instruction.5
Finally, the proposed Yielding Modifier
is based on e-Quotes that yield (‘‘gQuotes’’).6 The Exchange also proposes
to make related changes to Rules 7.16
(Short Sales), 7.34 (Trading Sessions),
7.36 (Order Ranking and Display), and
7.37 (Order Execution and Routing).
Currently, only UTP Securities are
traded on the Exchange’s Pillar trading
platform.7 Accordingly, at this time, the
4 See Supplementary Material .25 to Rule 70
(‘‘Rule 70.25’’).
5 See Rule 13(f)(4).
6 See Rule 70(a)(ii) and (iii).
7 ‘‘UTP Security’’ is defined as a security that is
listed on a national securities exchange other than
the Exchange and that trades on the Exchange
Continued
Sfmt 4703
E:\FR\FM\18DEN1.SGM
18DEN1
]]>Agencies
[Federal Register Volume 83, Number 242 (Tuesday, December 18, 2018)]
[Notices]
[Pages 64910-64913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27278]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84804; File No. SR-NYSE-2018-58]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Amend Rule 123C To Extend
the Cut-Off Times for Order Entry and Cancellation for Participation in
the Closing Auction and When the Exchange Will Begin Disseminating
Order Imbalance Information for the Closing Auction
December 12, 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 November 30, 2018, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') 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
[[Page 64911]]
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 123C (The Closing Procedures)
to extend the cut-off times for order entry and cancellation for
participation in the closing auction and when the Exchange will begin
disseminating Order Imbalance Information for the closing auction. 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 123C (The Closing Procedures)
to extend the cut-off times for order entry and cancellation for
participation in the closing auction and when the Exchange would begin
disseminating Order Imbalance Information \4\ for the closing auction
from 3:45 p.m. to 3:50 p.m. Eastern Time.\5\ The Exchange also proposes
non-substantive amendments to Rule 123C.
---------------------------------------------------------------------------
\4\ Order Imbalance Information is described under Rule
123C(6)(a)(i) and (ii).
\5\ Unless otherwise noted, all times listed in this proposal
are Eastern Time.
---------------------------------------------------------------------------
Proposed Amendment To Change 3:45 p.m. to 3:50 p.m. in Rule 123C
Rule 123C sets forth the closing procedures on the Exchange. Among
other things, Rule 123C specifies the time by which by which Market-on-
Close (``MOC'') Orders,\6\ Limit-on-Close (``LOC'') Orders,\7\ and
Closing Offset (``CO'') Orders \8\ may be entered or cancelled. Until
3:45 p.m., these orders can be entered or cancelled without
restriction.\9\ At 3:45 p.m., if there is a significant imbalance of
buy MOC and marketable LOC Orders against sell MOC and marketable LOC
Orders, the Exchange will publish a Mandatory MOC/LOC Imbalance
Publication.\10\ After 3:45 p.m., MOC and LOC Orders may be entered
only to offset a Mandatory MOC/LOC Imbalance Publication.\11\ In
addition, between 3:45 p.m. and 3:58 p.m., MOC, LOC, and CO Orders may
be cancelled or reduced in size only to correct a legitimate error.\12\
In addition, as provided for in Rule 123C(6), at 3:45 p.m., the
Exchange begins disseminating an Order Imbalance Information Data Feed
for the close. Supplemental Material .40 to Rule 123C further provides
that if not otherwise specified, if the scheduled close of trading is
before 4:00 p.m., the times specified in Rule 123C shall be adjusted
based on the early scheduled time, and references to 3:45 p.m. shall
mean 15 minutes before the early scheduled close.
---------------------------------------------------------------------------
\6\ An MOC Order is a Market Order in a security that, by its
terms, is to be executed in its entirety at the closing price. See
Rule 13(c)(4).
\7\ An LOC Order is a Limit Order in a security that is entered
for execution at the closing price of the security on the Exchange
provided that the closing price is at or within the specified limit.
See [sic] 13(c)(2).
\8\ A CO Order is a day Limit Order to buy or sell as part of
the closing transaction where the eligibility to participate in the
closing transaction is contingent upon: (i) An imbalance in the
security on the opposite side of the market from the CO Order; (ii)
after taking into account all other types of interest eligible for
execution at the closing price, there is still an imbalance in the
security on the opposite side of the market from the CO Order; and
(iii) the limit price of the CO Order being at or within the price
of the closing transaction. See Rule 13(c)(1).
\9\ See Rule 123C(2)(a).
\10\ A Mandatory MOC/LOC Imbalance Publication is the
dissemination of information that indicates a disparity between MOC
and marketable LOC interest to buy and MOC and marketable LOC
interest to sell, measured at 3:45 p.m. See Rule 123C(1)(d). Rule
123C(4) sets forth how the MOC and LOC Imbalance is to be calculated
and Rule 123C(5) sets forth the circumstances of when a Mandatory
MOC/LOC Imbalance Publication would be published.
\11\ See Rules 123C(2)(b)(i) and (ii).
\12\ See Rule 123C(3)(b). A ``legitimate error'' means an error
in any term of an MOC or LOC Order, such as price, number of shares,
side of the transaction (buy or sell) or identification of the
security. See Rule 123C(1)(c). After 3:58 p.m., MOC, LOC, and CO
Orders may not be cancelled for any reason. Rule 123(c)(3)[sic].
---------------------------------------------------------------------------
The Exchange proposes to amend Rule 123C to change all references
to 3:45 p.m. in the Rule to 3:50 p.m.\13\ The Exchange also proposes to
amend Supplementary Material .40 to Rule 123C to provide that
references to 3:50 p.m. shall mean 10 minutes before the early
scheduled close. This proposed rule change would have the substantive
effect of changing: (1) The publication time for the Mandatory MOC/LOC
Imbalance Publication; (2) the cut-off time for unrestricted entry and
cancellation of MOC Orders and LOC Orders; (3) cancellation of CO
Orders; and (4) the time when the Exchange would begin disseminating
Order Imbalance Information for the close.
---------------------------------------------------------------------------
\13\ To effect this change, the Exchange proposes to amend Rules
123C(1)(b), (d), (d)(ii), and (f); 123C(2)(a), (a)(i), (b), (b)(ii),
(c)(i), (c)(ii), and (c)(iii); 123C(3)(a), (b); 123C(4)(a)(i); Rule
123C(5)(a), (b), (b)(i), (b)(ii), (c); and Rule 123C(6)(a)(iv),
(a)(v), and (b).
---------------------------------------------------------------------------
As the equities markets continue to evolve and become more
efficient and automated, the Exchange believes that the current cut-off
times can be extended and still serve the same purpose. The Exchange
believes that the proposed changes would give member organizations
greater control over their MOC, LOC, and CO Orders while continuing to
provide market participants enough time at the end of the trading day
to react to and offset closing order imbalances. Shortening the time
frame for order entry and cancellation restrictions and when Order
Imbalance Information would be disseminated is also consistent with the
related cut-off times available on other equity exchanges.\14\
---------------------------------------------------------------------------
\14\ The Commission recently approved a proposed rule change by
the Nasdaq Stock Market LLC (``Nasdaq'') to move the cut-off times
for the entry of MOC and LOC Orders from 3:50 p.m. to 3:55 p.m. See
Securities Exchange Act Release No. 84454 (October 19, 2018), 83 FR
53923 (October 25, 2018) (SR-Nasdaq-2018-68) (Approval Order). In
addition, Cboe BZX Exchange, Inc. (``BZX'') offers ``Late-Limit-On-
Close Order'' and accepts this order until 4:00 p.m. and BZX uses a
3:55 p.m. cut-off for regular MOC and LOC Order entry in its closing
auction. See BZX Rules 11.23(a)(11) and (c)(1)(A). Finally, the
Exchange's affiliate, NYSE Arca, Inc. (``NYSE Arca'') initiates its
``Closing Auction Imbalance Freeze'' for all MOC and LOC Orders at
3:59 p.m. See NYSE Arca Rule 7.35-E(d)(2).
---------------------------------------------------------------------------
Non-Substantive Amendments to Rule 123C
The Exchange proposes to amend Rule 123C(1)(c) to include CO Orders
in the definition of ``legitimate error''. This change would harmonize
the definition of ``legitimate error'' with Rule 123C(3)(B), which sets
forth the cut-off time for when an MOC, LOC, and CO Order may be
cancelled or reduced in size to correct a legitimate error.
The Exchange also proposes the following non-substantive changes to
Rule 123C: (i) Remove the period from the titles of the sections (1),
(2), (3), and (5) to conform to the punctuation in other sections the
Rule; and (ii) capitalize the word ``Orders'' in the title of section
(3). The Exchange proposes a non-substantive correction to add a ``.''
[[Page 64912]]
at the end of the Rules 123C(4)(a)(i) and Rule 123(1)(b) [sic].
Finally, the Exchange proposes a non-substantive amendment to Rule
123C(5)(c) to capitalize the term ``Trading Halt'' as that is a defined
term under Rule 123C(1)(g).
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\15\ in general, and furthers the objectives of Section
6(b)(5),\16\ 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.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that extending the cut-off times for entry
and cancellation of MOC and LOC Orders, cancellation of CO Orders, as
well as when the Exchange would begin disseminating Order Imbalance
Information for the close would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because it would allow market participants to retain control over their
orders for a longer period of time, and thereby assist those market
participants in managing their trading at the close. As the equities
markets continue to evolve and become more efficient and automated, the
Exchange believes that the current 3:45 p.m. cut-off time is no longer
necessary for market participants to respond to offset auction
imbalances. The Exchange believes that the proposed 3:50 p.m. cut-off
time reflects the efficiency and more automated nature of trading in
today's market, while also retaining sufficient time for market
participants to react to and offset any order imbalances leading into
the close. The proposed rule change should also improve price discovery
by facilitating additional participation in the closing auction.
The Exchange further believes that the proposed rule change would
remove impediments to and perfect the mechanism of free and open market
and a national market system because it would more closely align the
Exchange's cut-off times with those of other equity exchanges. For
example, the Commission recently approved a proposed rule change by
Nasdaq to move the cut-off times for the entry of MOC and LOC Orders
from 3:50 p.m. to 3:55 p.m.\17\ In addition, BZX offers ``Late-Limit-
On-Close Order'' and accepts this order until 4:00 p.m. and also uses a
3:55 p.m. cut-off for regular MOC and LOC Order entry in its closing
auction.\18\ Finally, the Exchange's affiliate, NYSE Arca, initiates
its ``Closing Auction Imbalance Freeze'' for all MOC and LOC Orders at
3:59 p.m.\19\ The Exchange, therefore, believes that there is ample
precedent in the industry for extending the order entry cut-off time to
3:50 p.m. as proposed.
---------------------------------------------------------------------------
\17\ See supra note 14.
\18\ Id.
\19\ Id.
---------------------------------------------------------------------------
The Exchange also believes the proposal would promote just and
equitable principles of trade because the proposed rule change would
not alter the basic operations of the Exchange's closing procedures.
Rather, the proposed rule change would provide more time for
unrestricted order entry and cancellation leading into the close, while
maintaining existing requirements for how to determine whether to
publish a Mandatory MOC/LOC Imbalance Publication, the order entry and
cancellation requirements in the Rule, and the content of Order
Imbalance Information. Finally, the Exchange believes that the proposed
non-substantive amendments to Rule 123C would promote clarity and
consistency in Exchange rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act, but rather will serve to
improve competition for order flow at the close of trading. The
Commission recently approved a proposed rule change by Nasdaq to move
the cut-off times for the entry of MOC and LOC Orders from 3:50 to 3:55
p.m.\20\ In addition, other exchanges operate closing auctions with
later cut-off times than proposed by the Exchange. The Exchange
believes that market participants that trade in the Exchange's closing
auction would similarly benefit from a later cut-off time, while also
continuing to have a period to enter orders to offset a published
imbalance. The proposed cut-off time would apply equally to all market
participants and reflects the current market environment where trading
is increasingly more automated and efficient. The non-substantive
amendments to Rule 123C are not designed to address any competitive
issues.
---------------------------------------------------------------------------
\20\ See supra note 14.
---------------------------------------------------------------------------
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
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-NYSE-2018-58 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-2018-58. 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
[[Page 64913]]
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-2018-58 and should be
submitted on or before January 8, 2019.
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27278 Filed 12-17-18; 8:45 am]
BILLING CODE 8011-01-P
