Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules 7.16, 7.18, 7.31, 7.34, and 7.38, 9168-9172 [2019-04560]
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any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
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
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2019–04552 Filed 3–12–19; 8:45 am]
1. Purpose
BILLING CODE P
The Exchange proposes to amend
Rules 7.16 (Short Sales), 7.18 (Halts),
7.31 (Orders and Modifiers), 7.34
(Trading Session), and 7.38 (Odd and
Mixed Lots). The proposed rule changes
are intended to provide additional
specificity in the Exchange’s rules,
streamline order processing when a
security is halted or paused, and reduce
operational complexity when
transitioning to continuous trading.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85264; File No. SR–
NYSENAT–2019–04]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rules 7.16,
7.18, 7.31, 7.34, and 7.38
March 7, 2019.
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 February
21, 2019, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III 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
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The Exchange proposes to amend
Rules 7.16 (Short Sales), 7.18 (Halts),
7.31 (Orders and Modifiers), 7.34
(Trading Session), and 7.38 (Odd and
Mixed Lots). 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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Rule 7.16 (Short Sales)
Rule 7.16 establishes requirements
relating to short sales. Rule 7.16(f)(5)
sets forth how short sale orders are
processed during a Short Sale Period,
which is defined in Rule 7.16(f)(4).
More specifically, Rule 7.16(f)(5)(B)
provides how the Exchange processes
sell short Priority 1 and Priority 3
Orders during a Short Sale Period.3 The
current rule provides that such orders,
which are not displayed, are re-priced at
a Permitted Price 4 and are continuously
re-priced at a Permitted Price as the
national best bid moves both up and
down. Accordingly, under the current
rule, during a Short Sale Period, orders
ranked Priority 1—Market Orders, are
processed in the same manner as orders
ranked Priority 3—Non-Display Orders.
3 Pursuant to Rule 7.36(e)(1), an order ranked
‘‘Priority 1—Market Orders,’’ which is referred to in
Rule 7.16(f)(5)(B) as a ‘‘Priority 1 Order’’ refers to
unexecuted Market Orders. Pursuant to Rule
7.31(a)(1)(A), a Market Order may be held
undisplayed on the Exchange Book. Pursuant to
Rule 7.36(e)(3), an order ranked ‘‘Priority 3—NonDisplay Orders,’’ which is referred to in Rule
7.16(f)(5)(B) as a ‘‘Priority 3 Order’’ refers to nonmarketable Limit Orders for which the working
price is not displayed, including the reserve interest
of Reserve Orders.
4 The Permitted Price is one minimum price
variation above the current NBB. See Rule
7.16(f)(5)(A).
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With this proposed rule change, the
Exchange proposes to extend the
functionality currently applicable to
how sell short Market Orders on its
affiliated exchanges, NYSE Arca, Inc.
(‘‘NYSE Arca’’) and NYSE American
LLC (‘‘NYSE American’’) function
during an auction to how sell short
Market Orders would be processed on
the Exchange during continuous
trading, i.e., that during a Short Sale
Period, sell short Market Orders would
be converted into display orders and
would be ranked and allocated as a
displayed order.5 To effect this change,
the Exchange proposes to delete
references to ‘‘Priority 1 Orders’’ and
‘‘Market Orders’’ in current Rule
7.16(f)(5)(B) and add new Rule
7.16(f)(5)(C) that would be applicable
only to Market Orders. Orders ranked
Priority 3—Non-Display Orders would
continue to be processed in the same
manner as they are today under Rule
7.16(f)(5)(B).
Proposed new Rule 7.16(f)(5)(C)
would provide that, during a Short Sale
Period, a sell short Market Order would
be ranked Priority 2—Display Orders
and would be subject to Trading Collars
specified in Rule 7.31(a)(1)(B)(i).6 As
discussed below, when a sell short
Market Order is ranked as Priority 2—
Display Orders, it would be assigned a
limit price of one MPV above $0.00. The
Exchange believes that applying Limit
Order Price Protection when such
orders are ranked as Priority 2—Display
Orders would result in all such orders
being rejected as being priced too far
away from the NBBO.7 Accordingly, to
ensure that there is a mechanism
available to prevent such orders from
causing significant price dislocation
during a Sell Short Period, the Exchange
proposes that such orders would
continue to be subject to Trading
Collars, which are applicable to Market
Orders, rather than to Limit Order Price
Protection.
5 See Commentary .01(a) to NYSE Arca Rule 7.35–
E and Commentary .01(a) to NYSE American Rule
7.35E, which both provide that for purposes of
pricing an auction and ranking orders for allocation
in an auction, sell short Market Orders that are
adjusted to a Permitted Price would be processed
as Limit Orders ranked Priority 2—Display Orders.
6 During Core Trading Hours, the Trading Collar
is based on a price that is a specified percentage
away from the consolidated last sale price and is
continuously updated based on market activity. If
there is no consolidated last sale price on the same
trading day, the Exchange uses the last Official
Closing Price for the security. See Rule
7.31(a)(1)(B)(i).
7 Pursuant to Rule 7.31(a)(2)(B), a Limit Order to
buy (sell) is subject to Limit Order Price Protection
and will be rejected if it is priced at or above
(below) the greater of $0.15 or a specified
percentage away from the NBO (NBB).
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To address what would happen when
a Short Sale Period is triggered when
there is a resting Market Order on the
Exchange Book, proposed Rule
7.16(f)(5)(C) would further provide that
if a Short Sale Period is triggered when
an order ranked Priority 1—Market
Orders is resting on the Exchange Book,
such resting order would be converted
to an order ranked Priority 2—Display
Orders. This could happen if there is an
unexecuted Market Order that is
undisplayed on the Exchange Book
pursuant to Rule 7.31(a)(1)(A). In such
case, the resting order would be
converted to an order ranked Priority
2—Display Orders and would be ranked
and allocated for all purposes as a
displayed order. If the Short Sale Period
ends intraday, such order would be
converted back to an order ranked
Priority 1—Market Orders.
While a sell short Market Order
would be ranked and allocated as
Priority 2—Display Orders during a
Short Sale Period, not all functionality
applicable to displayed orders would be
applicable to such Market Orders. As
proposed, when ranked as Priority 2—
Display Orders, such order would be (1)
assigned a limit price of one MPV above
$0.00; (2) assigned a working and
(during Core Trading Hours) a display
price that is the higher of the Permitted
Price or one MPV above the lower
Trading Collar as determined under
Rule 7.31(a)(1)(B)(i); and (3) cancelled if
the Permitted Price is or becomes lower
than the Lower Price Band, as provided
in Rule 7.11(a)(5).
The Exchange believes that assigning
a Market Order with a limit price equal
to one MPV above $0.00 would provide
for a limit price for such order while it
is functioning as an order ranked
Priority 2—Display Orders. However, as
noted above, such limit price would not
be used for purposes of Limit Order
Price Protection. Rather, the Exchange
proposes to continue applying the
Trading Collars applicable to Market
Orders even if such order converts to
displayed interest. Next, the Exchange
believes that assigning such order a
working and display price (during Core
Trading Hours) that is the higher of the
Permitted Price or one MPV above the
lower Trading Collar is consistent both
with how sell short Priority 2—Display
Orders are displayed and priced during
a Short Sale Period and with the
proposal that Trading Collars would
continue to be applicable to such orders.
Not displaying such orders until Core
Trading Hours is also consistent with
the continued behavior that such Market
Orders are not eligible to trade until the
Core Trading Session. Finally, the
Exchange proposes to cancel such order
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if the Permitted Price (i.e., the displayed
price of the order) is or becomes lower
than the Lower Price Band, which is
consistent with how Market Orders are
processed pursuant to Rule
7.11(a)(5)(A)(i) if they cannot be traded
or routed at prices at or within the Price
Bands. In other words, if the Permitted
Price would be a price at or below the
Lower Price Band, the Exchange
proposes to cancel such order rather
than repricing it once again to the Lower
Price Band, even though the Lower
Price Band would be at a price higher
than the Permitted Price. Thus, no short
sale order would be executed (effected)
at or below the NBB during a Short Sale
Period.
With the adoption of proposed Rule
7.16(f)(5)(C), the Exchange further
proposes to re-number each of current
sub-paragraphs (C)—(I) of Rule 7.16(f)(5)
as (D)—(J) without making any
substantive change to those rules.
Rule 7.18, Halts
Rule 7.18(b) states that the Exchange
does not conduct reopening auctions in
UTP Securities and sets forth how the
Exchange processes new and existing
orders during a UTP Regulatory Halt.8
Rule 7.18(b)(1) states that during a UTP
Regulatory Halt, the Exchange will
cancel any unexecuted portion of
Market Orders and orders not eligible to
trade in the current trading session on
the Exchange Book.9 The Exchange
proposes to amend this Rule to further
provide that orders that are not
displayed would also be cancelled
during a UTP Regulatory Halt. To reflect
this change, the Exchange proposes to
amend Rule 7.18(b)(1) to provide that
Non-Displayed Limit Orders,10 MidPoint Liquidity (‘‘MPL’’) Orders,11
Tracking Orders,12 and Market Pegged
Orders 13 would also be canceled during
a UTP Regulatory Halt. The Exchange
believes that cancelling these nondisplayed orders during a UTP
Regulatory Halt would streamline order
processing once trading resumes.
Rule 7.31, Orders and Modifiers
The Exchange proposes to make a
number of changes to Rule 7.31, each of
which are designed to streamline order
processing.
8 A ‘‘UTP Regulatory Halt’’ is defined in Rule 1.1
as a trade suspension, halt, or paused [sic] called
by the UTP Listing Market in a UTP Security that
requires all market centers to halt trading in that
security. The terms UTP Security and UTP Listing
Market are also defined in Rule 1.1.
9 See Rule 1.1(l).
10 See Rule 7.31(d)(2).
11 See Rule 7.31(d)(3).
12 See Rule 7.31(d)(4).
13 See Rule 7.31(h)(1).
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9169
Rule 7.31(a)(2)(C) currently describes
how the Exchange re-prices resting
orders under specified circumstances.
Specifically, if a BB (BO) that is locked
or crossed by an Away Market PBO
(PBB) is cancelled, executed or routed
and the next best-priced resting Limit
Order(s) on the Exchange Book that
would become the new BB (BO) would
have a display price that would lock or
cross the PBO (PBB), such Limit
Order(s) to buy (sell) will be assigned a
display price one MPV below (above)
the PBO (PBB) and a working price
equal to the PBO (PBB). Such Limit
Orders are re-priced when the PBBO is
updated, including if the Exchange
receives a Day ISO that would result in
at least a round lot being displayed as
the new BBO.
The Exchange proposes to amend this
text to provide that the arrival of anysized Day ISO would result in the repricing of such resting orders. The
arrival of a Day ISO of any size provides
the Exchange with notice that the ETP
Holder 14 that has entered such order
has met the requirement under Rule
7.31(e)(3)(A)(ii) to simultaneously route
one or more additional Limit Orders to
trade against the full displayed size of
any protected bids (for sell orders) or
protected offers (for buy orders) on
Away Markets. Accordingly, the
Exchange would adjust the PBBO based
on the arrival of any-sized Day ISO.
Because the PBBO would be adjusted
based on the arrival of any-sized Day
ISO, the Exchange believes it would no
longer be necessary to wait for a roundlot sized Day ISO before repricing orders
under Rule 7.31(a)(2)(C). Accordingly,
the Exchange proposes to delete the
following text in the second sentence of
current Rule 7.31(a)(2)(C)—‘‘and would
result in at least a round lot being
displayed as a new BB (BO)’’—and the
third and last sentence of current Rule
7.31(a)(2)(C).
The Exchange also proposes to
provide additional specificity in Rule
7.31(h)(2)(B) regarding when a Primary
Pegged Order’s display price and
working price would be adjusted when
the PBBO is locked or crossed.15
Specifically, the Exchange proposes to
specify that Primary Pegged Orders
would be re-priced whenever a Limit
Order is re-priced pursuant to Rules
7.31(a)(2)(C). Re-pricing a Primary
Pegged Order like a Limit Order
pursuant to Rule 7.31(a)(2)(C) ensures
that if the PBBO is locked or crossed, a
14 See
Rule 1.1(i).
to Rule 7.31(h)(2), a Primary Pegged
Order is a displayed Pegged Order to buy (sell) with
a working price that is pegged to the PBB (PBO),
with no offset allowed.
15 Pursuant
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resting Primary Pegged Order would not
be re-priced to a locking or crossing
price, for example, if the Exchange BBO
changes.16 To effect this change, the
Exchange proposes to amend Rule
7.31(h)(2)(B) to specify that if a resting
Limit Order on the Exchange Book is
assigned a new display price and
working price pursuant to Rules
7.31(a)(2)(C) and the PBBO is still
locked or crossed, a resting Primary
Pegged Order would also be assigned a
new display price and working price
pursuant to Rule 7.31E(a)(2)(C). The
proposed text represents current
functionality. The Exchange believes
that this proposed rule change would
provide clarity and transparency in
Exchange rules of when a Primary
Pegged Order would be re-priced
consistent with Rule 7.31(a)(2)(C).
Rule 7.34, Trading Sessions
Rule 7.34(c)(1) describes order entry
during the Early Trading Session.17 The
Exchange proposes to add new
subparagraph (F) to Rule 7.34(c)(1) to
provide that the following nondisplayed orders would be rejected if
entered before the Early Trading Session
begins: Non-Displayed Limit Orders,
MPL Orders, and Tracking Orders.
Similar to how the Exchange proposes
to cancel non-displayed orders during a
halt or pause, the Exchange believes that
rejecting these non-displayed orders
when the Exchange is not engaged in
continuous trading would reduce
operational complexity when the
Exchange transitions to continuous
trading. ETP Holders seeking to enter
theses order types may do so once the
Early Trading Session begins.
Rule 7.38, Odd and Mixed Lots
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The Exchange proposes to amend
Rule 7.38 relating to Odd and Mixed
Lots. Rule 7.38 sets forth requirements
relating to odd lot and mixed lot trading
on the Exchange. Rule 7.38(b) further
provides that round lot, mixed lot, and
odd lot orders are treated in the same
16 For example, if the PBBO is 10.00 x 10.02, and
Exchange’s BB is 10.00, a Primary Pegged Order to
buy would peg to that 10.00. If next, an Away
Market PBO is displayed at 9.98, crossing the
Exchange BB, pursuant to Rule 7.31–E(h)(2)(B), the
Primary Pegged Order would remain displayed at
10.00. If next, the 10.00 BB on the Exchange
cancels, the Primary Pegged Order would need to
reprice, but at that point, the PBBO is crossed
because of the Away Market PBO of 9.98. In this
scenario, the Primary Pegged Order would be
repriced to 9.97 as provided for in Rule
7.31(a)(2)(C).
17 The Early Trading Session begins at 7 a.m.
Eastern Time and concludes at the commencement
of the Core Trading Session. See Rule 7.34(a)(1).
The Core Trading Session begins at 9:30 a.m.
Eastern Time and ends at the conclusion of Core
Trading Hours. See Rule 7.34(a)(2).
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manner on the Exchange, provided that
the working price of an odd lot order is
adjusted both on arrival and when
resting on the Exchange Book based on
the limit price of the order. Currently,
if the limit price of an odd lot order to
buy (sell) is at or below (above) the PBO
(PBB), the order has a working price
equal to the limit price. If the limit price
of an odd lot order to buy (sell) is above
(below) the PBO (PBB), the order has a
working price equal to the PBO (PBB).
The rule further provides that if the
limit price of an odd lot order to buy
(sell) is above (below) the PBO (PBB)
and the PBBO is crossed, the order has
a working price equal to the PBB (PBO).
Under the current rule, although the
working price of an odd lot order is
adjusted based on the PBBO, the display
price of an odd lot order ranked Priority
2—Display Orders is not adjusted based
on the PBBO. Additionally, the rule
provides that an odd lot order ranked
Priority 2—Display Orders will not be
assigned a new working time if its
working price is adjusted under the
rule. If the display price of an odd lot
order to buy (sell) is above (below) its
working price, the order is ranked and
allocated based on its display price. As
a result, an odd lot bid or offer can be
displayed on the Exchange’s proprietary
data feeds at a price that appears to
cross the PBBO, even if such order
would not be eligible to trade at that
price.
The Exchange proposes to amend
Rule 7.38(b) to provide that the display
price of an odd lot order would be
adjusted whenever the working price is
adjusted. To effect this change, the
Exchange proposes to amend current
Rule 7.38(b)(1) to provide that the
working and display price of an odd lot
order would be adjusted both on arrival
and when resting on the Exchange Book.
The Exchange further proposes to break
current Rule 7.38(b)(1) into
subparagraphs (A)—(C) so that the rule
provides how odd lot orders are ranked
and executed under each of the
instances provided in the current rule
that are described above.
Proposed Rule 7.38(b)(1)(A) would
provide that if the limit price of an odd
lot order to buy (sell) is at or below
(above) the PBO (PBB), the order would
have a working price and display price
equal to the limit price of the order.
This proposed rule text does not change
any functionality, but rather, provides
greater specificity of what the display
price would be when the limit price of
an odd lot order is not through the
PBBO.
Proposed Rule 7.38(b)(1)(B) would
provide that if the limit price of an odd
lot order to buy (sell) is above (below)
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the PBO (PBB), the order would have a
working price and display price equal to
the PBO (PBB) unless the order’s
instruction requires a display price to be
different from the PBBO. This proposed
rule text represents new functionality
that the display price of an odd lot order
would be adjusted at the same time as
the working price is currently adjusted
for such order. This proposed
amendment does not change the price at
which such odd-lot order would be
eligible to trade, only the price at which
it is displayed on the Exchange’s
proprietary data feeds. The proposed
rule text includes that the display price
would be adjusted to the contra-side
PBBO unless the order’s instruction
requires a display price to be different
from the PBBO to account for those
order types that, by their terms, do not
allow the display price to be equal to a
contra-side PBBO. For example, a NonRoutable Limit Order does not have a
display price equal to the contra-side
PBBO.18 Accordingly, if an odd lot order
were to be a Non-Routable Limit Order,
pursuant to that order’s instructions, it
would have a display price different
from the contra-side PBBO.
Proposed Rule 7.38(b)(1)(C) would
address what the display price of an odd
lot order would be if the PBBO is locked
or crossed. The Exchange proposes to
expand the current rule text to include
locked markets and add that both the
display price and working price would
be adjusted to the same-side PBBO if the
PBBO is locked or crossed. Accordingly,
as proposed, if the limit price of an odd
lot order to buy (sell) is above (below)
the PBO (PBB) and the PBBO is locked
or crossed, the order would have a
working price and display price equal to
the PBB (PBO). The proposed rule
would further provide that the working
price and the display price of such odd
lot order would not be adjusted again
until the PBBO unlocks or uncrosses.
Additionally, the Exchange proposes
to delete the last two sentences of
current Rule 7.38(b)(1) regarding the
display price of odd lot orders and their
ranking given the changes proposed to
the current rule regarding the display
price of an odd lot order render this text
moot. By deleting this rule text, the
general rules governing when a working
time is assigned to an order, as specified
in Rule 7.36(f)(2), would be applicable
to odd lot orders.
*
*
*
*
*
Because of the technology changes
associated with this proposed rule
change, the Exchange will announce the
implementation date of this proposed
rule change by Trader Update. The
18 See
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Exchange anticipates that the
implementation date will be in the
second quarter of 2019.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),19 in general, and furthers the
objectives of Section 6(b)(5),20 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 because it would provide
additional specificity in the Exchange’s
rules, streamline order processing when
a security is halted or paused, and
reduce operational complexity when
transitioning to continuous trading.
Rule 7.16, Short Sales. The Exchange
believes that the proposed processing of
sell short Market Orders during a Short
Sale Period, as proposed in Rule
7.16(f)(5)(C), would remove
impediments to and perfect the
mechanism of a fair and orderly market
because it would use a method of
processing of sell short Market Orders
that is already in place on auctions on
NYSE Arca and NYSE American. As
described in Commentary .01(a) to
NYSE Arca Rule 7.35–E and
Commentary .01(a) to NYSE American
Rule 7.35E, during a Short Sale Period,
sell short Market Orders are currently
processed as Limit Orders ranked
Priority 2—Display Orders. 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
this functionality to how sell short
Market Orders are processed during
continuous trading. The Exchange
further believes that because Market
Orders would be assigned a limit price
of one MPV above $0.00, it would
remove impediments to and perfect the
mechanism of a free and open market
for sell short Market Orders that have
been converted to an order ranked
Priority 2—Display Orders to continue
to be subject to Trading Collars and be
cancelled if the Permitted Price is equal
to or below the Lower Price Band. The
Exchange believes that the proposed
changes will provide clarity on the short
sale order handling procedures
19 15
20 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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employed by the Exchange so that such
orders are handled by the Exchange
consistent with Regulation SHO. The
Exchange also believes that the
proposed functionality related to the
processing of short sale orders will
assist ETP Holders in executing or
displaying their orders consistent with
Regulation SHO.
Rule 7.18, Halts. The proposed change
to Rule 7.18(b) to cancel certain nondisplayed orders in UTP Securities
during UTP Regulatory Halt promotes
just and equitable principles of trade
and removes impediments to, and
perfects the mechanism of, a free and
open market and a national market
system because it would reduce the
operational complexity of processing
these orders following a halt or pause.
Rule 7.31, Orders and Modifiers. The
Exchange believes that the proposed
rule change would remove impediments
to and perfect the mechanism of a free
and open market and a national market
system by providing specificity
regarding when resting orders would be
re-priced due to the arrival of a Day ISO.
Specifically, as proposed, because anysized Day ISO would result in a new
PBBO, it is not necessary for an arriving
Day ISO to result in a round lot or more
being displayed as a new BBO before
resting orders would be re-priced under
Rule 7.31(a)(2)(C). The Exchange
therefore believes that this proposed
change would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system because it would promote the
display of orders at their limit price
without locking or crossing the PBBO.
Amending Rule 7.31(h)(2)(B) to
describe when a resting Primary Pegged
Order would be re-priced pursuant to
Rule 7.31(a)(2)(C) removes impediments
to, and perfects the mechanism of, a free
and open market and a national market
system because it does not propose new
functionality, but rather provides
additional specificity in the Exchange’s
rules regarding the operation of Primary
Pegged Orders such that it prevents a
resting Primary Pegged Order from
being re-priced to peg to a locked or
crossed market. This change does not
alter the operation of Primary Pegged
Orders. Rather, it would further clarify
the Exchange’s rules regarding when a
Primary Pegged Order would be repriced to avoid pegging to a locked or
crossed PBBO.
Rule 7.34, Trading Sessions. The
proposed changes to Rule 7.34(c)
promote just and equitable principles of
trade and remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
system because rejecting Non-Displayed
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
9171
Limit Orders, MPL Orders, and Tracking
Orders entered before the Early Trading
Session begins would reduce
operational complexity when the
Exchange transitions to continuous
trading. It would also streamline order
processing when the Exchange begins
continuous trading. ETP Holders
seeking to enter these order types may
do so once the Early Trading Session
begins.
Rule 7.38, Odd and Mixed Lots. The
Exchange believes that the proposed
processing of odd lot orders would
remove impediments to and perfect the
mechanism of a fair and orderly market
because the proposed change would
align the working price and display
price of odd lot orders. The proposed
change would not alter the price at
which an odd lot order would be
eligible to trade, but rather, would
provide greater transparency regarding
what price an odd lot order would trade
by aligning the display price of such
order with its working price. The
Exchange believes that this proposed
rule change would further remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
reducing the potential for an odd lot
order to appear on the Exchange’s
proprietary data feeds as though it is
locking or crossing the PBBO. The
Exchange further believes the proposed
rule change, which proposes to assign a
display price that is equal to the
working price for odd lot orders, would
remove impediments to and perfect the
mechanism of a fair and orderly market
because it would promote transparency
in the ranking and execution of such
orders. Additionally, the Exchange
believes the proposed change to how the
working time of an odd lot order would
be adjusted would remove impediments
to and perfect the mechanism of a free
and open market by aligning the
processing of odd lot orders with the
standard manner by which the working
time is assigned to an order, as provided
for in Rule 7.36(f)(2).
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 changes to Rules 7.18, 7.31,
and 7.34 are designed to provide
additional specificity to the Exchange’s
rules, reduce operational complexity
during a halt or pause, and streamline
order processing when transitioning to
continuous trading when continuous
trading begins. The proposed changes to
E:\FR\FM\13MRN1.SGM
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9172
Federal Register / Vol. 84, No. 49 / Wednesday, March 13, 2019 / Notices
Rules 7.16, 7.31, and 7.38 are also
designed to provide additional
specificity to the Exchange’s rules and
reduce operational complexity by (i)
aligning the display price of an odd lot
order with its working price, (ii)
converting sell short Market Orders to
displayed interest, (iii) clarifying that
Primary Pegged Orders would not be repriced to a locked or crossed PBBO, and
(iv) promoting transparency in the
ranking and execution of odd lot orders.
These proposed changes should,
therefore, promote competition by
enhancing the Exchange’s rules to
provide greater specificity to market
participants and improving the
efficiency of the Exchange’s order
handling processes.
IV. Solicitation of Comments
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
No written comments were solicited
or received with respect to the proposed
rule change.
amozie on DSK9F9SC42PROD with NOTICES
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 21 and Rule
19b–4(f)(6) thereunder.22 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.
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) 23 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
21 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
23 15 U.S.C. 78s(b)(2)(B).
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:
• 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–
NYSENAT–2019–04 on the subject line.
17:45 Mar 12, 2019
Jkt 247001
All submissions should refer to File
Number SR–NYSENAT–2019–04. 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
a.m. and 3 p.m. Copies of this filing will
also 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–
NYSENAT–2019–04, and should be
submitted on or before April 3, 2019.
PO 00000
CFR 200.30–3(a)(12).
Frm 00099
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BILLING CODE 8011–01–P
[Investment Company Act Release No.
33393; 812–14959]
American Beacon Sound Point
Enhanced Income Fund, et al.
March 8, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Paper Comments
22 17
VerDate Sep<11>2014
[FR Doc. 2019–04560 Filed 3–12–19; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
24 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Deputy Secretary.
Sfmt 4703
Notice of an application under section
6(c) of the Investment Company Act of
1940 (the ‘‘Act’’) for an exemption from
sections 18(a)(2), 18(c) and 18(i) of the
Act, under sections 6(c) and 23(c) of the
Act for an exemption from rule 23c–3
under the Act, and for an order pursuant
to section 17(d) of the Act and rule
17d–1 under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares and to impose assetbased distribution and/or service fees
and early withdrawal charges (‘‘EWCs’’).
APPLICANTS: American Beacon Sound
Point Enhanced Income Fund (the
‘‘Sound Point Fund’’) and American
Beacon Apollo Total Return Fund (the
‘‘Apollo Total Return Fund,’’ and
together, the ‘‘Applicant Funds’’),
American Beacon Advisors, Inc. (the
‘‘Manager’’), and Resolute Investment
Distributors, Inc. (the ‘‘Distributor’’).
FILING DATES: The application was filed
on October 1, 2018, and amended on
March 7, 2019.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on April 2, 2019, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
E:\FR\FM\13MRN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 49 (Wednesday, March 13, 2019)]
[Notices]
[Pages 9168-9172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04560]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85264; File No. SR-NYSENAT-2019-04]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rules 7.16, 7.18, 7.31, 7.34, and 7.38
March 7, 2019.
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 February 21, 2019, NYSE National, Inc. (``NYSE National'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 Rules 7.16 (Short Sales), 7.18
(Halts), 7.31 (Orders and Modifiers), 7.34 (Trading Session), and 7.38
(Odd and Mixed Lots). 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 Rules 7.16 (Short Sales), 7.18
(Halts), 7.31 (Orders and Modifiers), 7.34 (Trading Session), and 7.38
(Odd and Mixed Lots). The proposed rule changes are intended to provide
additional specificity in the Exchange's rules, streamline order
processing when a security is halted or paused, and reduce operational
complexity when transitioning to continuous trading.
Rule 7.16 (Short Sales)
Rule 7.16 establishes requirements relating to short sales. Rule
7.16(f)(5) sets forth how short sale orders are processed during a
Short Sale Period, which is defined in Rule 7.16(f)(4). More
specifically, Rule 7.16(f)(5)(B) provides how the Exchange processes
sell short Priority 1 and Priority 3 Orders during a Short Sale
Period.\3\ The current rule provides that such orders, which are not
displayed, are re-priced at a Permitted Price \4\ and are continuously
re-priced at a Permitted Price as the national best bid moves both up
and down. Accordingly, under the current rule, during a Short Sale
Period, orders ranked Priority 1--Market Orders, are processed in the
same manner as orders ranked Priority 3--Non-Display Orders.
---------------------------------------------------------------------------
\3\ Pursuant to Rule 7.36(e)(1), an order ranked ``Priority 1--
Market Orders,'' which is referred to in Rule 7.16(f)(5)(B) as a
``Priority 1 Order'' refers to unexecuted Market Orders. Pursuant to
Rule 7.31(a)(1)(A), a Market Order may be held undisplayed on the
Exchange Book. Pursuant to Rule 7.36(e)(3), an order ranked
``Priority 3--Non-Display Orders,'' which is referred to in Rule
7.16(f)(5)(B) as a ``Priority 3 Order'' refers to non-marketable
Limit Orders for which the working price is not displayed, including
the reserve interest of Reserve Orders.
\4\ The Permitted Price is one minimum price variation above the
current NBB. See Rule 7.16(f)(5)(A).
---------------------------------------------------------------------------
With this proposed rule change, the Exchange proposes to extend the
functionality currently applicable to how sell short Market Orders on
its affiliated exchanges, NYSE Arca, Inc. (``NYSE Arca'') and NYSE
American LLC (``NYSE American'') function during an auction to how sell
short Market Orders would be processed on the Exchange during
continuous trading, i.e., that during a Short Sale Period, sell short
Market Orders would be converted into display orders and would be
ranked and allocated as a displayed order.\5\ To effect this change,
the Exchange proposes to delete references to ``Priority 1 Orders'' and
``Market Orders'' in current Rule 7.16(f)(5)(B) and add new Rule
7.16(f)(5)(C) that would be applicable only to Market Orders. Orders
ranked Priority 3--Non-Display Orders would continue to be processed in
the same manner as they are today under Rule 7.16(f)(5)(B).
---------------------------------------------------------------------------
\5\ See Commentary .01(a) to NYSE Arca Rule 7.35-E and
Commentary .01(a) to NYSE American Rule 7.35E, which both provide
that for purposes of pricing an auction and ranking orders for
allocation in an auction, sell short Market Orders that are adjusted
to a Permitted Price would be processed as Limit Orders ranked
Priority 2--Display Orders.
---------------------------------------------------------------------------
Proposed new Rule 7.16(f)(5)(C) would provide that, during a Short
Sale Period, a sell short Market Order would be ranked Priority 2--
Display Orders and would be subject to Trading Collars specified in
Rule 7.31(a)(1)(B)(i).\6\ As discussed below, when a sell short Market
Order is ranked as Priority 2--Display Orders, it would be assigned a
limit price of one MPV above $0.00. The Exchange believes that applying
Limit Order Price Protection when such orders are ranked as Priority
2--Display Orders would result in all such orders being rejected as
being priced too far away from the NBBO.\7\ Accordingly, to ensure that
there is a mechanism available to prevent such orders from causing
significant price dislocation during a Sell Short Period, the Exchange
proposes that such orders would continue to be subject to Trading
Collars, which are applicable to Market Orders, rather than to Limit
Order Price Protection.
---------------------------------------------------------------------------
\6\ During Core Trading Hours, the Trading Collar is based on a
price that is a specified percentage away from the consolidated last
sale price and is continuously updated based on market activity. If
there is no consolidated last sale price on the same trading day,
the Exchange uses the last Official Closing Price for the security.
See Rule 7.31(a)(1)(B)(i).
\7\ Pursuant to Rule 7.31(a)(2)(B), a Limit Order to buy (sell)
is subject to Limit Order Price Protection and will be rejected if
it is priced at or above (below) the greater of $0.15 or a specified
percentage away from the NBO (NBB).
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[[Page 9169]]
To address what would happen when a Short Sale Period is triggered
when there is a resting Market Order on the Exchange Book, proposed
Rule 7.16(f)(5)(C) would further provide that if a Short Sale Period is
triggered when an order ranked Priority 1--Market Orders is resting on
the Exchange Book, such resting order would be converted to an order
ranked Priority 2--Display Orders. This could happen if there is an
unexecuted Market Order that is undisplayed on the Exchange Book
pursuant to Rule 7.31(a)(1)(A). In such case, the resting order would
be converted to an order ranked Priority 2--Display Orders and would be
ranked and allocated for all purposes as a displayed order. If the
Short Sale Period ends intraday, such order would be converted back to
an order ranked Priority 1--Market Orders.
While a sell short Market Order would be ranked and allocated as
Priority 2--Display Orders during a Short Sale Period, not all
functionality applicable to displayed orders would be applicable to
such Market Orders. As proposed, when ranked as Priority 2--Display
Orders, such order would be (1) assigned a limit price of one MPV above
$0.00; (2) assigned a working and (during Core Trading Hours) a display
price that is the higher of the Permitted Price or one MPV above the
lower Trading Collar as determined under Rule 7.31(a)(1)(B)(i); and (3)
cancelled if the Permitted Price is or becomes lower than the Lower
Price Band, as provided in Rule 7.11(a)(5).
The Exchange believes that assigning a Market Order with a limit
price equal to one MPV above $0.00 would provide for a limit price for
such order while it is functioning as an order ranked Priority 2--
Display Orders. However, as noted above, such limit price would not be
used for purposes of Limit Order Price Protection. Rather, the Exchange
proposes to continue applying the Trading Collars applicable to Market
Orders even if such order converts to displayed interest. Next, the
Exchange believes that assigning such order a working and display price
(during Core Trading Hours) that is the higher of the Permitted Price
or one MPV above the lower Trading Collar is consistent both with how
sell short Priority 2--Display Orders are displayed and priced during a
Short Sale Period and with the proposal that Trading Collars would
continue to be applicable to such orders. Not displaying such orders
until Core Trading Hours is also consistent with the continued behavior
that such Market Orders are not eligible to trade until the Core
Trading Session. Finally, the Exchange proposes to cancel such order if
the Permitted Price (i.e., the displayed price of the order) is or
becomes lower than the Lower Price Band, which is consistent with how
Market Orders are processed pursuant to Rule 7.11(a)(5)(A)(i) if they
cannot be traded or routed at prices at or within the Price Bands. In
other words, if the Permitted Price would be a price at or below the
Lower Price Band, the Exchange proposes to cancel such order rather
than repricing it once again to the Lower Price Band, even though the
Lower Price Band would be at a price higher than the Permitted Price.
Thus, no short sale order would be executed (effected) at or below the
NBB during a Short Sale Period.
With the adoption of proposed Rule 7.16(f)(5)(C), the Exchange
further proposes to re-number each of current sub-paragraphs (C)--(I)
of Rule 7.16(f)(5) as (D)--(J) without making any substantive change to
those rules.
Rule 7.18, Halts
Rule 7.18(b) states that the Exchange does not conduct reopening
auctions in UTP Securities and sets forth how the Exchange processes
new and existing orders during a UTP Regulatory Halt.\8\ Rule
7.18(b)(1) states that during a UTP Regulatory Halt, the Exchange will
cancel any unexecuted portion of Market Orders and orders not eligible
to trade in the current trading session on the Exchange Book.\9\ The
Exchange proposes to amend this Rule to further provide that orders
that are not displayed would also be cancelled during a UTP Regulatory
Halt. To reflect this change, the Exchange proposes to amend Rule
7.18(b)(1) to provide that Non-Displayed Limit Orders,\10\ Mid-Point
Liquidity (``MPL'') Orders,\11\ Tracking Orders,\12\ and Market Pegged
Orders \13\ would also be canceled during a UTP Regulatory Halt. The
Exchange believes that cancelling these non-displayed orders during a
UTP Regulatory Halt would streamline order processing once trading
resumes.
---------------------------------------------------------------------------
\8\ A ``UTP Regulatory Halt'' is defined in Rule 1.1 as a trade
suspension, halt, or paused [sic] called by the UTP Listing Market
in a UTP Security that requires all market centers to halt trading
in that security. The terms UTP Security and UTP Listing Market are
also defined in Rule 1.1.
\9\ See Rule 1.1(l).
\10\ See Rule 7.31(d)(2).
\11\ See Rule 7.31(d)(3).
\12\ See Rule 7.31(d)(4).
\13\ See Rule 7.31(h)(1).
---------------------------------------------------------------------------
Rule 7.31, Orders and Modifiers
The Exchange proposes to make a number of changes to Rule 7.31,
each of which are designed to streamline order processing.
Rule 7.31(a)(2)(C) currently describes how the Exchange re-prices
resting orders under specified circumstances. Specifically, if a BB
(BO) that is locked or crossed by an Away Market PBO (PBB) is
cancelled, executed or routed and the next best-priced resting Limit
Order(s) on the Exchange Book that would become the new BB (BO) would
have a display price that would lock or cross the PBO (PBB), such Limit
Order(s) to buy (sell) will be assigned a display price one MPV below
(above) the PBO (PBB) and a working price equal to the PBO (PBB). Such
Limit Orders are re-priced when the PBBO is updated, including if the
Exchange receives a Day ISO that would result in at least a round lot
being displayed as the new BBO.
The Exchange proposes to amend this text to provide that the
arrival of any-sized Day ISO would result in the re-pricing of such
resting orders. The arrival of a Day ISO of any size provides the
Exchange with notice that the ETP Holder \14\ that has entered such
order has met the requirement under Rule 7.31(e)(3)(A)(ii) to
simultaneously route one or more additional Limit Orders to trade
against the full displayed size of any protected bids (for sell orders)
or protected offers (for buy orders) on Away Markets. Accordingly, the
Exchange would adjust the PBBO based on the arrival of any-sized Day
ISO. Because the PBBO would be adjusted based on the arrival of any-
sized Day ISO, the Exchange believes it would no longer be necessary to
wait for a round-lot sized Day ISO before repricing orders under Rule
7.31(a)(2)(C). Accordingly, the Exchange proposes to delete the
following text in the second sentence of current Rule 7.31(a)(2)(C)--
``and would result in at least a round lot being displayed as a new BB
(BO)''--and the third and last sentence of current Rule 7.31(a)(2)(C).
---------------------------------------------------------------------------
\14\ See Rule 1.1(i).
---------------------------------------------------------------------------
The Exchange also proposes to provide additional specificity in
Rule 7.31(h)(2)(B) regarding when a Primary Pegged Order's display
price and working price would be adjusted when the PBBO is locked or
crossed.\15\ Specifically, the Exchange proposes to specify that
Primary Pegged Orders would be re-priced whenever a Limit Order is re-
priced pursuant to Rules 7.31(a)(2)(C). Re-pricing a Primary Pegged
Order like a Limit Order pursuant to Rule 7.31(a)(2)(C) ensures that if
the PBBO is locked or crossed, a
[[Page 9170]]
resting Primary Pegged Order would not be re-priced to a locking or
crossing price, for example, if the Exchange BBO changes.\16\ To effect
this change, the Exchange proposes to amend Rule 7.31(h)(2)(B) to
specify that if a resting Limit Order on the Exchange Book is assigned
a new display price and working price pursuant to Rules 7.31(a)(2)(C)
and the PBBO is still locked or crossed, a resting Primary Pegged Order
would also be assigned a new display price and working price pursuant
to Rule 7.31E(a)(2)(C). The proposed text represents current
functionality. The Exchange believes that this proposed rule change
would provide clarity and transparency in Exchange rules of when a
Primary Pegged Order would be re-priced consistent with Rule
7.31(a)(2)(C).
---------------------------------------------------------------------------
\15\ Pursuant to Rule 7.31(h)(2), a Primary Pegged Order is a
displayed Pegged Order to buy (sell) with a working price that is
pegged to the PBB (PBO), with no offset allowed.
\16\ For example, if the PBBO is 10.00 x 10.02, and Exchange's
BB is 10.00, a Primary Pegged Order to buy would peg to that 10.00.
If next, an Away Market PBO is displayed at 9.98, crossing the
Exchange BB, pursuant to Rule 7.31-E(h)(2)(B), the Primary Pegged
Order would remain displayed at 10.00. If next, the 10.00 BB on the
Exchange cancels, the Primary Pegged Order would need to reprice,
but at that point, the PBBO is crossed because of the Away Market
PBO of 9.98. In this scenario, the Primary Pegged Order would be
repriced to 9.97 as provided for in Rule 7.31(a)(2)(C).
---------------------------------------------------------------------------
Rule 7.34, Trading Sessions
Rule 7.34(c)(1) describes order entry during the Early Trading
Session.\17\ The Exchange proposes to add new subparagraph (F) to Rule
7.34(c)(1) to provide that the following non-displayed orders would be
rejected if entered before the Early Trading Session begins: Non-
Displayed Limit Orders, MPL Orders, and Tracking Orders. Similar to how
the Exchange proposes to cancel non-displayed orders during a halt or
pause, the Exchange believes that rejecting these non-displayed orders
when the Exchange is not engaged in continuous trading would reduce
operational complexity when the Exchange transitions to continuous
trading. ETP Holders seeking to enter theses order types may do so once
the Early Trading Session begins.
---------------------------------------------------------------------------
\17\ The Early Trading Session begins at 7 a.m. Eastern Time and
concludes at the commencement of the Core Trading Session. See Rule
7.34(a)(1). The Core Trading Session begins at 9:30 a.m. Eastern
Time and ends at the conclusion of Core Trading Hours. See Rule
7.34(a)(2).
---------------------------------------------------------------------------
Rule 7.38, Odd and Mixed Lots
The Exchange proposes to amend Rule 7.38 relating to Odd and Mixed
Lots. Rule 7.38 sets forth requirements relating to odd lot and mixed
lot trading on the Exchange. Rule 7.38(b) further provides that round
lot, mixed lot, and odd lot orders are treated in the same manner on
the Exchange, provided that the working price of an odd lot order is
adjusted both on arrival and when resting on the Exchange Book based on
the limit price of the order. Currently, if the limit price of an odd
lot order to buy (sell) is at or below (above) the PBO (PBB), the order
has a working price equal to the limit price. If the limit price of an
odd lot order to buy (sell) is above (below) the PBO (PBB), the order
has a working price equal to the PBO (PBB). The rule further provides
that if the limit price of an odd lot order to buy (sell) is above
(below) the PBO (PBB) and the PBBO is crossed, the order has a working
price equal to the PBB (PBO).
Under the current rule, although the working price of an odd lot
order is adjusted based on the PBBO, the display price of an odd lot
order ranked Priority 2--Display Orders is not adjusted based on the
PBBO. Additionally, the rule provides that an odd lot order ranked
Priority 2--Display Orders will not be assigned a new working time if
its working price is adjusted under the rule. If the display price of
an odd lot order to buy (sell) is above (below) its working price, the
order is ranked and allocated based on its display price. As a result,
an odd lot bid or offer can be displayed on the Exchange's proprietary
data feeds at a price that appears to cross the PBBO, even if such
order would not be eligible to trade at that price.
The Exchange proposes to amend Rule 7.38(b) to provide that the
display price of an odd lot order would be adjusted whenever the
working price is adjusted. To effect this change, the Exchange proposes
to amend current Rule 7.38(b)(1) to provide that the working and
display price of an odd lot order would be adjusted both on arrival and
when resting on the Exchange Book. The Exchange further proposes to
break current Rule 7.38(b)(1) into subparagraphs (A)--(C) so that the
rule provides how odd lot orders are ranked and executed under each of
the instances provided in the current rule that are described above.
Proposed Rule 7.38(b)(1)(A) would provide that if the limit price
of an odd lot order to buy (sell) is at or below (above) the PBO (PBB),
the order would have a working price and display price equal to the
limit price of the order. This proposed rule text does not change any
functionality, but rather, provides greater specificity of what the
display price would be when the limit price of an odd lot order is not
through the PBBO.
Proposed Rule 7.38(b)(1)(B) would provide that if the limit price
of an odd lot order to buy (sell) is above (below) the PBO (PBB), the
order would have a working price and display price equal to the PBO
(PBB) unless the order's instruction requires a display price to be
different from the PBBO. This proposed rule text represents new
functionality that the display price of an odd lot order would be
adjusted at the same time as the working price is currently adjusted
for such order. This proposed amendment does not change the price at
which such odd-lot order would be eligible to trade, only the price at
which it is displayed on the Exchange's proprietary data feeds. The
proposed rule text includes that the display price would be adjusted to
the contra-side PBBO unless the order's instruction requires a display
price to be different from the PBBO to account for those order types
that, by their terms, do not allow the display price to be equal to a
contra-side PBBO. For example, a Non-Routable Limit Order does not have
a display price equal to the contra-side PBBO.\18\ Accordingly, if an
odd lot order were to be a Non-Routable Limit Order, pursuant to that
order's instructions, it would have a display price different from the
contra-side PBBO.
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\18\ See Rule 7.31(e)(1).
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Proposed Rule 7.38(b)(1)(C) would address what the display price of
an odd lot order would be if the PBBO is locked or crossed. The
Exchange proposes to expand the current rule text to include locked
markets and add that both the display price and working price would be
adjusted to the same-side PBBO if the PBBO is locked or crossed.
Accordingly, as proposed, if the limit price of an odd lot order to buy
(sell) is above (below) the PBO (PBB) and the PBBO is locked or
crossed, the order would have a working price and display price equal
to the PBB (PBO). The proposed rule would further provide that the
working price and the display price of such odd lot order would not be
adjusted again until the PBBO unlocks or uncrosses.
Additionally, the Exchange proposes to delete the last two
sentences of current Rule 7.38(b)(1) regarding the display price of odd
lot orders and their ranking given the changes proposed to the current
rule regarding the display price of an odd lot order render this text
moot. By deleting this rule text, the general rules governing when a
working time is assigned to an order, as specified in Rule 7.36(f)(2),
would be applicable to odd lot orders.
* * * * *
Because of the technology changes associated with this proposed
rule change, the Exchange will announce the implementation date of this
proposed rule change by Trader Update. The
[[Page 9171]]
Exchange anticipates that the implementation date will be in the second
quarter of 2019.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\19\ in general, and
furthers the objectives of Section 6(b)(5),\20\ 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 because it
would provide additional specificity in the Exchange's rules,
streamline order processing when a security is halted or paused, and
reduce operational complexity when transitioning to continuous trading.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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Rule 7.16, Short Sales. The Exchange believes that the proposed
processing of sell short Market Orders during a Short Sale Period, as
proposed in Rule 7.16(f)(5)(C), would remove impediments to and perfect
the mechanism of a fair and orderly market because it would use a
method of processing of sell short Market Orders that is already in
place on auctions on NYSE Arca and NYSE American. As described in
Commentary .01(a) to NYSE Arca Rule 7.35-E and Commentary .01(a) to
NYSE American Rule 7.35E, during a Short Sale Period, sell short Market
Orders are currently processed as Limit Orders ranked Priority 2--
Display Orders. 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 this functionality to how sell short Market
Orders are processed during continuous trading. The Exchange further
believes that because Market Orders would be assigned a limit price of
one MPV above $0.00, it would remove impediments to and perfect the
mechanism of a free and open market for sell short Market Orders that
have been converted to an order ranked Priority 2--Display Orders to
continue to be subject to Trading Collars and be cancelled if the
Permitted Price is equal to or below the Lower Price Band. The Exchange
believes that the proposed changes will provide clarity on the short
sale order handling procedures employed by the Exchange so that such
orders are handled by the Exchange consistent with Regulation SHO. The
Exchange also believes that the proposed functionality related to the
processing of short sale orders will assist ETP Holders in executing or
displaying their orders consistent with Regulation SHO.
Rule 7.18, Halts. The proposed change to Rule 7.18(b) to cancel
certain non-displayed orders in UTP Securities during UTP Regulatory
Halt promotes just and equitable principles of trade and removes
impediments to, and perfects the mechanism of, a free and open market
and a national market system because it would reduce the operational
complexity of processing these orders following a halt or pause.
Rule 7.31, Orders and Modifiers. The Exchange believes that the
proposed rule change would remove impediments to and perfect the
mechanism of a free and open market and a national market system by
providing specificity regarding when resting orders would be re-priced
due to the arrival of a Day ISO. Specifically, as proposed, because
any-sized Day ISO would result in a new PBBO, it is not necessary for
an arriving Day ISO to result in a round lot or more being displayed as
a new BBO before resting orders would be re-priced under Rule
7.31(a)(2)(C). The Exchange therefore believes that this proposed
change would remove impediments to and perfect the mechanism of a free
and open market and a national market system because it would promote
the display of orders at their limit price without locking or crossing
the PBBO.
Amending Rule 7.31(h)(2)(B) to describe when a resting Primary
Pegged Order would be re-priced pursuant to Rule 7.31(a)(2)(C) removes
impediments to, and perfects the mechanism of, a free and open market
and a national market system because it does not propose new
functionality, but rather provides additional specificity in the
Exchange's rules regarding the operation of Primary Pegged Orders such
that it prevents a resting Primary Pegged Order from being re-priced to
peg to a locked or crossed market. This change does not alter the
operation of Primary Pegged Orders. Rather, it would further clarify
the Exchange's rules regarding when a Primary Pegged Order would be re-
priced to avoid pegging to a locked or crossed PBBO.
Rule 7.34, Trading Sessions. The proposed changes to Rule 7.34(c)
promote just and equitable principles of trade and remove impediments
to, and perfect the mechanism of, a free and open market and a national
market system because rejecting Non-Displayed Limit Orders, MPL Orders,
and Tracking Orders entered before the Early Trading Session begins
would reduce operational complexity when the Exchange transitions to
continuous trading. It would also streamline order processing when the
Exchange begins continuous trading. ETP Holders seeking to enter these
order types may do so once the Early Trading Session begins.
Rule 7.38, Odd and Mixed Lots. The Exchange believes that the
proposed processing of odd lot orders would remove impediments to and
perfect the mechanism of a fair and orderly market because the proposed
change would align the working price and display price of odd lot
orders. The proposed change would not alter the price at which an odd
lot order would be eligible to trade, but rather, would provide greater
transparency regarding what price an odd lot order would trade by
aligning the display price of such order with its working price. The
Exchange believes that this proposed rule change would further remove
impediments to and perfect the mechanism of a free and open market and
a national market system by reducing the potential for an odd lot order
to appear on the Exchange's proprietary data feeds as though it is
locking or crossing the PBBO. The Exchange further believes the
proposed rule change, which proposes to assign a display price that is
equal to the working price for odd lot orders, would remove impediments
to and perfect the mechanism of a fair and orderly market because it
would promote transparency in the ranking and execution of such orders.
Additionally, the Exchange believes the proposed change to how the
working time of an odd lot order would be adjusted would remove
impediments to and perfect the mechanism of a free and open market by
aligning the processing of odd lot orders with the standard manner by
which the working time is assigned to an order, as provided for in Rule
7.36(f)(2).
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 changes to
Rules 7.18, 7.31, and 7.34 are designed to provide additional
specificity to the Exchange's rules, reduce operational complexity
during a halt or pause, and streamline order processing when
transitioning to continuous trading when continuous trading begins. The
proposed changes to
[[Page 9172]]
Rules 7.16, 7.31, and 7.38 are also designed to provide additional
specificity to the Exchange's rules and reduce operational complexity
by (i) aligning the display price of an odd lot order with its working
price, (ii) converting sell short Market Orders to displayed interest,
(iii) clarifying that Primary Pegged Orders would not be re-priced to a
locked or crossed PBBO, and (iv) promoting transparency in the ranking
and execution of odd lot orders. These proposed changes should,
therefore, promote competition by enhancing the Exchange's rules to
provide greater specificity to market participants and improving the
efficiency of the Exchange's order handling processes.
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 \21\ and Rule 19b-4(f)(6) thereunder.\22\
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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\21\ 15 U.S.C. 78s(b)(3)(A)(iii).
\22\ 17 CFR 240.19b-4(f)(6).
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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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 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 rule-comments@sec.gov. Please include
File Number SR-NYSENAT-2019-04 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-NYSENAT-2019-04. 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 a.m. and 3 p.m.
Copies of this filing will also 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-
NYSENAT-2019-04, and should be submitted on or before April 3, 2019.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04560 Filed 3-12-19; 8:45 am]
BILLING CODE 8011-01-P
