Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Exchange Rules 1.1E and 7.29E To Eliminate the Delay Mechanism and Amend Exchange Rule 7.31E and Related Exchange Rules To Re-Introduce Previously-Approved Order Types and Modifiers, 64359-64363 [2019-25207]
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Federal Register / Vol. 84, No. 225 / Thursday, November 21, 2019 / Notices
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
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Sean Robinson,
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[FR Doc. 2019–25185 Filed 11–20–19; 8:45 am]
BILLING CODE 7710–12–P
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
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
[Release No. 34–87550; File No. SR–
NYSEAMER–2019–48]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Exchange
Rules 1.1E and 7.29E To Eliminate the
Delay Mechanism and Amend
Exchange Rule 7.31E and Related
Exchange Rules To Re-Introduce
Previously-Approved Order Types and
Modifiers
The Exchange proposes to
decommission its Delay Mechanism and
re-introduce orders and modifiers that
were eliminated in connection with
launching the Delay Mechanism. To
effect these changes, the Exchange
proposes to amend Rules 1.1E and 7.29E
to eliminate the Delay Mechanism and
amend Rule 7.31E and related rules to
re-introduce previously-approved order
types and modifiers.
November 15, 2019.
Background
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
4, 2019, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
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
Rules 1.1E and 7.29E to eliminate the
Delay Mechanism and amend Rule
7.31E and related rules to re-introduce
previously-approved order types and
modifiers. 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
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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In 2017, the Exchange transitioned to
trading on the Pillar trading platform. In
advance of that transition, the Exchange
amended its rules to transition from a
Floor-based point-of-sale trading model
to a fully automated price-time priority
allocation model.4 In the Pillar Filing,
the Exchange added Rule 7.31E, which
describes the order types and modifiers
that would be available on the Exchange
once it transitioned to Pillar, and which
was based on NYSE Arca, Inc. (‘‘NYSE
Arca’’) Rule 7.31–E. Among the orders
and modifiers that were approved in the
Pillar Filing were ALO Orders,
Intermarket Sweep Orders designated
Day (‘‘Day ISO’’), Non-Display Remove
Modifiers, and MPL–ALO Orders.5
In connection with the transition to
the Pillar trading platform, the Exchange
introduced the Delay Mechanism,
4 See Securities Exchange Act Release Nos. 79993
(February 9, 2017), 82 FR 10814 (February 15, 2017)
(SR–NYSEMKT–2017–01) (‘‘Pillar Filing’’) and
80590 (May 4, 2017), 82 FR 21843 (May 10, 2017)
(SR–NYSEMKT–2017–01) (Approval Order). The
Exchange separately filed to establish the rules
governing market makers on the Exchange. See
Securities Exchange Act Release No. 80577 (May 2,
2017), 82 FR 21446 (May 8, 2017) (SR–NYSEMKT–
2017–04) (Approval Order).
5 See Pillar Filing, id. (Rules 7.31E(e)(2),
7.31E(e)(3)(D), 7.31E(e)(2)(B)(iv)(b), 7.31E(3)(F),
7.31E(d)(3)(G)).
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64359
which was approved in a separate
proposed rule change.6 Rule 1.1E(y)
defines the Delay Mechanism to mean a
delay that is 350 microseconds of
latency that is added to specified order
processing. That rule further provides
that due to force majeure events and
acts of third parties, the Exchange does
not guarantee that the delay will always
be 350 microseconds. Finally, that Rule
provides that the Exchange will
periodically monitor such latency, and
will make adjustments to the latency as
reasonably necessary to achieve
consistency with the 350 microsecond
target as soon as commercially
practicable and that if the Exchange
determines to increase or decrease the
delay period, it will submit a rule filing
pursuant to Section 19 of the Act.
Rule 7.29E(b)(1) provides that the
Exchange will apply the Delay
Mechanism to:
(A) All inbound communications
from an ETP Holder to the NYSE
American Marketplace;
(B) all outbound communications to
an ETP Holder from the NYSE American
Marketplace;
(C) all outbound communications the
NYSE American Marketplace routes to
an Away Market;
(D) all inbound communications from
an Away Market about a routed order;
and
(E) all outbound communications
(e.g., bids, offers, and trades) to the
Exchange’s proprietary data feeds.
Rule 7.29E(b)(2) provides that the
Exchange will not apply the Delay
Mechanism to:
(A) All inbound communications
from data feeds;
(B) order processing and order
execution on the Exchange’s Book; and
(C) all outbound communications
(e.g., bids, offers, and trades) to the
single plan processors under Rules 601
and 602 of Regulation NMS.
In the Delay Mechanism Filing, the
Exchange noted that in conjunction
with implementing the Delay
Mechanism, the Exchange would no
longer offer ALO Orders or Day ISO
functionality.7 Accordingly, before
transitioning to Pillar, the Exchange
filed a separate proposed rule change to
eliminate ALO Orders and Day ISOs and
related functionality.8 To effect the
6 See Securities Exchange Act Release No. 79998
(February 9, 2017), 82 FR 10828 (February 15, 2017)
(SR–NYSEMKT–2017–05) (‘‘Delay Mechanism
Filing’’) and 80700 (May 16, 2017), 82 FR 23381
(May 22, 2017) (SR–NYSEMKT–2017–05)
(Approval Order).
7 See Delay Mechanism Filing, supra note 6.
8 See Securities Exchange Act Release No. 81115
(July 11, 2017), 82 FR 32745 (July 17, 2017) (SR–
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elimination of ALO Orders, the
Exchange made the following changes to
the rules that were approved in the
Pillar Filing:
• Deleted Rule 7.31E(e)(2) and its
subparagraphs, which described ALO
Orders, and replaced that section of the
Rule with the term ‘‘Reserved.’’
• Deleted Rule 7.31E(d)(2)(B), which
provided that Limit Non-Display Orders
may be designated with a Non-Display
Remove Modifier.
• Deleted the last sentence of Rule
7.31E(d)(3)(E) and Rules 7.31E(d)(3)(F)
and (G), which described MPL–ALO
Orders and related Non-Display Remove
Modifier functionality.
• Deleted Rule 7.31E(e)(1)(C), which
provided that an MKT Only Order may
be designated with a Non-Display
Remove Modifier.
• Amended Rule 7.31E(j)(1) to delete
the reference to ‘‘ALO Order.’’
• Amended Rules 7.46E(f)(5)(F)(ii)
and (iii) to delete references to ALO
Orders.
To effect the changes described in the
Delay Mechanism Filing to eliminate
Day ISO Orders, the Exchange made the
following changes to the rules that were
approved in the Pillar Filing:
• Deleted Rules 7.31E(e)(3)(C) and
(D), which described Day ISO and Day
ISO ALO Orders. The Exchange also
amended Rule 7.31E(e)(3) to provide
that an ISO must be designated IOC and
deleted the specific reference to ‘‘IOC
ISO’’ in Rule 7.31E(e)(3)(B).
• Amended Rules 7.11E(a)(5)(A) and
7.11E(a)(5)(A)(ii) to delete references to
‘‘Day ISO’’ and make related conforming
changes.
• Amended Rule 7.31E(a)(2)(C) to
delete the last two sentences, which
described how Limit Orders are repriced
upon arrival of a Day ISO.
• Amended Rule 7.35E(h)(3)(C) to
delete the last sentence, which
described how Day ISOs are processed
when transitioning to continuous
trading.
• Deleted current Rule
7.46E(f)(5)(F)(i)(a), which relates to Day
ISO Orders, and the designation of
subparagraph (b). The text of thenapproved Rule 7.46E(f)(5)(F)(i)(b)
became the last sentence of
7.46E(f)(5)(F)(i).
Proposed Amendments
In the Delay Mechanism Filing, the
Exchange noted that the Delay
Mechanism was designed to provide a
competitive trading model to those ETP
Holders and issuers that prefer to trade
or list on an exchange that offers an
intentional, symmetrical delay.
The Exchange has now been operating
with the Delay Mechanism for over two
years. However, we have not had any
issuers interested in listing because of
the Delay Mechanism. Additionally,
market participants have not increased
their trading volume on the Exchange as
a result of adding the Delay Mechanism.
For example, since introducing the
Delay Mechanism, market share on the
Exchange has not materially changed,
and some market quality measures have
declined. Specifically, when comparing
monthly statistics for Exchange-listed
securities for the first six months of
trading on the Exchange in 2017 (preDelay Mechanism) with trading on the
Exchange for the period July 2017
through September 2019 (post-Delay
Mechanism), the Exchange has observed
the following changes in market
performance.
Pre-delay
mechanism
NYSE American’s Average Quoted Spread (bps) ..................................................................................................
NYSE American’s Average Quoted Shares at the BBO .........................................................................................
NYSE American’s Average Quoted Notional at the BBO .......................................................................................
NYSE American’s % of trading day quoting at the NBBO ......................................................................................
NYSE American’s Market Share .............................................................................................................................
Consolidated Average Daily Volume .......................................................................................................................
The Exchange believes that if market
participants were interested in trading
on an exchange with an intentional,
symmetrical delay, more order flow
would have been directed to the
Exchange. But it simply has not.
The Exchange therefore proposes to
eliminate the Delay Mechanism. To
effect this change, the Exchange
proposes to delete the definition of
‘‘Delay Mechanism’’ in Rule 1.1E(y) and
delete Rule 7.29E(b), which are the rules
that were added in the Delay
Mechanism Filing to establish the Delay
Mechanism.
The Exchange also proposes to reintroduce previously-approved order
types and modifiers that were deleted in
anticipation of launching the Delay
Mechanism, with specified differences
described below. Specifically, the
Exchange proposes to add back rules to
support ALO and related functionality,
as follows:
• Amend Rule 7.31E(e)(2) to delete
the term ‘‘Reserved’’ and add back the
rule text that describes ALO Orders, as
approved in the Pillar Filing. The
Exchange proposes a non-substantive
difference from the version of the rule
approved in the Pillar Filing to use the
term ‘‘Non-Routable Limit Order’’
instead of ‘‘MKT-Only Order.’’
• Amend Rule 7.31E(d)(2) to add back
sub-paragraph (B), as approved in the
Pillar Filing, which would provide that
Non-Displayed Limit Orders may be
designated with a Non-Display Remove
Modifier. The Exchange proposes a nonsubstantive difference from the version
of the rule approved in the Pillar Filing
to use the term ‘‘Non-Displayed Limit
Order’’ instead of ‘‘Limit Non-Display
Order.’’
NYSEMKT–2017–38) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change).
9 See Securities Exchange Act Release No. 85144
(September 21, 2017), 82 FR 45099 (September 27,
2017) (SR–NYSEAmer-2017–17) (Notice of Filing
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208.2
2,762
$13,342
71.3%
12.1%
123,906,053
Post-delay
mechanism
292.4
1,197
$9,549
68.4%
11.5%
113,831,729
• Amend Rule 7.31E(d)(3) relating to
MPL Orders to re-introduce MPL–ALO
Orders and the Non-Display Remove
Modifier. Since the Pillar Filing, Rule
7.31E(d)(3) has been amended, which
resulted in changes to sub-numbering.9
With respect to the Non-Display
Remove Modifier, the Exchange
proposes to re-introduce rule text
previously approved in the Pillar Filing
as Rule 7.31E(d)(3)(G) with a nonsubstantive difference that it would be
numbered Rule 7.31E(d)(3)(F). The
Exchange also proposes to re-introduce
a new last sentence to Rule
7.31E(d)(3)(D), which was previously
approved in the Pillar Filing as the last
sentence of Rule 7.31E(d)(3)(E).
With respect to MPL–ALO Orders, as
noted in the Pillar Filing, at that time,
Rule 7.31E(d)(3) was based on NYSE
Arca Rule 7.31–E(d)(3) without any
substantive differences. Since approval
and Immediate Effectiveness of Proposed Rule
Change) (‘‘Pillar ALO/Day ISO Filing’’).
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Federal Register / Vol. 84, No. 225 / Thursday, November 21, 2019 / Notices
of the Pillar Filing, NYSE Arca has
amended Rule 7.31–E(d)(3) relating to
MPL–ALO Orders.10 The Exchange
proposes that when re-introducing
MPL–ALO Orders on the Exchange,
Rule 7.31E(d)(3) would be amended to
add new sub-paragraph (E) to reflect the
changes described in the Arca MPL
Filing; the Exchange will not reintroduce the text that was approved in
the Pillar Filing as Rule 7.31E(d)(3)(F).
As proposed, Rule 7.31E(d)(3)(E)
would provide that an MPL Order may
be designated with an ALO Modifier,
which would be defined as an MPL–
ALO Order. The proposed rule would
further provide that an MPL–ALO Order
to buy (sell) will trade with resting
orders to sell (buy) with a working price
below (above) the midpoint of the PBBO
at the working price of the resting
orders, but will not trade with resting
orders to sell (buy) priced at the
midpoint of the PBBO unless such
resting order is designated with a NonDisplay Remove Modifier pursuant to
Rule 7.31E(d)(3)(F). Finally, the Rule
would provide that if an MPL–ALO
Order to buy (sell) cannot trade with a
same-priced resting order to sell (buy),
a subsequently arriving order to sell
(buy) eligible to trade at the midpoint
will trade ahead of a resting order to sell
(buy) that is not displayed at that price.
If such resting order to sell (buy) is
displayed, the MPL–ALO Order to buy
(sell) will not be eligible to trade at that
price. As noted above, this proposed
rule text is based on NYSE Arca Rule
7.31–E(d)(3)(E), NYSE National Rule
7.31(d)(3)(E), and NYSE Chicago Rule
7.31(d)(3)(E) without any differences.
• Amend Rule 7.31E(e)(1) to add back
sub-paragraph (C), as approved in the
Pillar Filing, which would provide that
a Non-Routable Limit Order may be
designated with a Non-Display Remove
Modifier. The Exchange proposes a nonsubstantive difference from the version
of the rule approved in the Pillar Filing
to use the term ‘‘Non-Routable Limit
Order’’ instead of ‘‘MKT-Only Order.’’
• Amend Rule 7.31E(j)(1) to add back
the reference to ‘‘ALO Order,’’ as
approved in the Pillar Filing.
10 See Securities Exchange Act Release No. 82504
(January 16, 2018), 83 FR 3038 (January 22, 2018)
(SR–NYSEArca-2018–01) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change)
(‘‘Arca MPL Filing’’). The rules of the Exchange’s
affiliates—New York Stock Exchange LLC
(‘‘NYSE’’), NYSE National, Inc. (‘‘NYSE National’’),
and most recently approved, NYSE Chicago, Inc.
(‘‘NYSE Chicago’’)—that describe MPL–ALO Orders
and related Non-Display Remove Modifier are
similarly based on the NYSE Arca rule, as amended
in the Arca MPL Filing. See NYSE Rule
7.31(d)(3)(E) (except does not include reference to
a Non-Display Remove Modifier, which is not
currently available on NYSE); NYSE National Rule
7.31(d)(3)(E); and NYSE Chicago Rule 7.31(d)(3)(E).
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64361
Modifiers, and MPL–ALOs, the
Exchange will operate on a fullyautomated price-time priority trading
model that is substantially identical to
the trading models of its affiliated
exchanges NYSE Arca and NYSE
National. The Exchange is not proposing
to change its transaction fees for trading
on the Exchange. The Exchange
currently charges a flat fee for orders
that provide or remove liquidity,
provided that it does not charge for
orders that provide displayed
liquidity.13 This pricing model differs
from the pricing model on NYSE Arca,
which uses a maker-taker model, and
NYSE National, which uses a takermaker model.
*
*
*
*
*
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
Exchange anticipates that the
implementation date will be in
November 2019.
The Exchange also proposes to add
back rules to support Day ISO, as
follows:
• Amend Rule 7.31E(e)(3) to add back
subparagraphs (C) and (D), as approved
in the Pillar Filing, which describe Day
ISO and Day ISO ALO Orders. The
Exchange proposes non-substantive
differences from the version of the rule
approved in the Pillar Filing to use the
terms ‘‘Non-Routable Limit Order’’
instead of ‘‘MKT-Only Order’’ and
‘‘Non-Displayed Limit Order’’ instead of
‘‘Limit Non-Displayed Order.’’
• Amend Rule 7.31E(e)(3) to delete
the requirement that an ISO must be
designated IOC and amend Rule
7.31E(e)(3)(B) to add back the term ‘‘IOC
ISO,’’ both of which were approved in
the Pillar Filing.
• Amend Rules 7.11E(a)(5)(A) and
7.11E(a)(5)(A)(ii) to add back references
to ‘‘Day ISO’’ and make related
conforming changes, as approved in the
Pillar Filing.
• Amend Rule 7.31E(a)(2)(C) to add
back rule text describing when Limit
Orders would be repriced under this
provision. The Exchange proposes that
the text that would be added to this
Rule would be based on the rules of
NYSE Arca, NYSE, NYSE National, and
NYSE Chicago, which were amended/
adopted after the Pillar Filing, without
any differences.11 As proposed, the text
that would be added to this rule would
provide that if a Day ISO to buy (sell)
arrives before the PBO (PBB) is updated,
such re-priced Limit Order(s) to buy
(sell) would be repriced to the lower
(higher) of the display price of the Day
ISO or the original price of the Limit
Order(s).
• Amend Rule 7.35E(h)(3) to add back
the last sentence under subparagraph
(C) of that Rule that was approved in the
Pillar Filing, which describes how Day
ISOs are processed when transitioning
to continuous trading. The Exchange
proposes a non-substantive difference to
include this sentence under new
subparagraph (D) to Rule 7.35E(h)(3).12
At this time, the Exchange does not
propose to revert any of the other
changes made in the Pillar ALO/Day
ISO Filing. Specifically, the Exchange
does not propose any changes to Pegged
Orders and does not propose to amend
Rule 7.46 relating to the Tick Size Pilot,
which is no longer operative.
With the elimination of the Delay
Mechanism and re-introduction of ALO
Orders, Day ISO, Non-Display Remove
The proposed rule change is
consistent with Section 6(b) of the
Act,14 in general, and furthers the
objectives of Section 6(b)(5),15 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
eliminating the Delay Mechanism by
deleting Rules 1.1E(y) and 7.29E(b)
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system because the reasons for
establishing the Delay Mechanism no
longer exist. Specifically, the Delay
Mechanism was designed to provide a
competitive trading model for those ETP
Holders and issuers that prefer to trade
or list on an exchange that offers such
a delay.
Following two years of operating an
exchange with the Delay Mechanism,
the Exchange believes market
11 See, e.g., Securities Exchange Act Release No.
85265 (March 7, 2019), 84 FR 9175 (March 13,
2019) (SR–NYSEArca–2019–08). See also NYSE
Rule 7.31(a)(2)(C), NYSE National Rule
7.31(a)(2)(C), and NYSE Chicago Rule 7.31(a)(2)(C).
12 See NYSE Arca Rule 7.35–E(h)(3)(D).
13 See NYSE American Equities Fee Schedule,
available here: https://www.nyse.com/publicdocs/
nyse/markets/nyse-american/NYSE_America_
Equities_Price_List.pdf.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(5).
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2. Statutory Basis
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Federal Register / Vol. 84, No. 225 / Thursday, November 21, 2019 / Notices
participants are not interested in this
trading model. The Exchange believes
that if market participants were
interested in trading on an exchange
with an intentional, symmetrical delay,
more order flow would have been
directed to the Exchange. But it simply
has not. Accordingly, the Exchange
believes that decommissioning the
Delay Mechanism would be consistent
with the protection of investors and the
public interest, as they have not chosen
to use this trading model.
In addition, comparison of numerous
market quality metrics for Exchangelisted securities between the Pre-Delay
Mechanism and Post-Delay Mechanism
periods indicate that the Delay
Mechanism resulted in a degradation of
the Exchange’s displayed liquidity.
Eliminating the Delay Mechanism is
expected to reverse this trend.
The Exchange believes that the
proposed re-introduction of ALO
Orders, Day ISO, Non-Display Remove
Modifiers, and MPL–ALO Orders would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system because
the Exchange is proposing rules that
either have already been approved in
the Pillar Filing, or are based on the
rules of NYSE Arca, NYSE, NYSE
National, and NYSE Chicago.
Accordingly, the Exchange is not
proposing new or novel order types, but
rather, will make available on the
Exchange order types and modifiers that
are already available on affiliated
exchanges.
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
Exchange anticipated that the Delay
Mechanism would provide a
competitive trading model for those ETP
Holders and issuers that prefer to trade
or list on an exchange that offers an
intentional, symmetrical delay.
Following two years of operating an
exchange with the Delay Mechanism,
the Exchange believes that market
participants are not interested in this
trading model. Accordingly, the
Exchange does not believe that
eliminating the Delay Mechanism
would impose any burden on
competition.
The Exchange further believes that reintroducing ALO Orders, Day ISO, NonDisplay Remove Modifiers, and MPL–
ALO Orders would promote
competition by offering ETP Holders
greater choice among the Exchange and
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its affiliated exchanges that offer similar
trading functionality. With the
decommissioning of the Delay
Mechanism and re-introduction of order
types and modifiers, the Exchange does
not propose to change its transaction fee
model, and therefore would be
differentiated from NYSE Arca and
NYSE National because it charges a flat
fee for all orders, regardless of whether
an order provides or removes liquidity
(except for orders that provide
displayed liquidity, which are not
charged at all). Accordingly, the
Exchange believes that the proposed
rule change would promote competition
by providing greater optionality to ETP
Holders that are interested in using the
re-introduced order types on an
exchange that offers a flat-fee pricing
model.
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) of the Act 16 and Rule 19b–
4(f)(6) thereunder.17 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.18
A proposed rule change filed under
Rule 19b–4(f)(6) 19 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),20 the
Commission may designate a shorter
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
18 In addition, Rule 19b–4(f)(6) requires the
Exchange to give the Commission written notice of
the Exchange’s intent to file the proposed rule
change, along with a brief description and text of
the proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6)(iii).
17 17
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange has represented
that the existing delay mechanism has
not attracted new issuers or additional
trading volume to the Exchange, and
that re-introducing previously approved
order types would allow the Exchange
to have similar trading functionality
with other exchanges. The Commission
believes that waiver of the 30-day
operative delay period is consistent
with the protection of investors and the
public interest and hereby waives the
30-day operative delay and designates
the proposed rule change operative
upon filing.21
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) 22 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2019–48 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEAMER–2019–48. This
file number should be included on the
subject line if email is used. To help the
21 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
22 15 U.S.C. 78s(b)(2)(B).
E:\FR\FM\21NON1.SGM
21NON1
Federal Register / Vol. 84, No. 225 / Thursday, November 21, 2019 / Notices
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEAMER–2019–48 and
should be submitted on or before
December 12, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–25207 Filed 11–20–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87551; File No. SR–NYSE–
2019–58]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List To Offer New Credits and
Rebates
November 15, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 1, 2019, New York Stock
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
16:41 Nov 20, 2019
Jkt 250001
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to offer (1) new tiered credits
for member organizations providing
additional liquidity in Non-Displayed
Limit Orders across Tapes A, B and C,
and (2) new incremental credits and
rebates applicable to certain Designated
Market Makers transactions. The
Exchange proposes to implement the fee
change effective November 1, 2019. 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Price List to offer (1) new tiered credits
for member organizations providing
additional liquidity in Non-Displayed
Limit Orders across Tapes A, B and C,
and (2) new incremental credits and
rebates applicable to certain Designated
Market Makers (‘‘DMM’’) transactions.
The proposed change responds to the
current competitive environment by
offering additional incentives to
member organizations to provide
additional liquidity in Non-Displayed
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
64363
Limit Orders 4 and to existing DMMs to
increase their quoting at the National
Best Bid or Offer (‘‘NBBO’’) in their
assigned More Active Securities and
Less Active Securities.5
The Exchange proposes to implement
the fee change effective November 1,
2019.
Competitive Environment
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 6
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 7 Indeed, equity
trading is currently dispersed across 13
exchanges,8 31 alternative trading
systems,9 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange has more than 19%
market share (whether including or
excluding auction volume).10 Therefore,
no exchange possesses significant
pricing power in the execution of equity
4 ‘‘Non-Displayed Limit Orders’’ in Rule
7.31(d)(2) were previously known as ‘‘Non-Display
Reserve orders.’’ The Exchange proposes to use the
new term and replace two outdated references to
‘‘Non-Display Reserve orders’’ on the first page of
the Price List. The Exchange also proposes to
capitalize the word ‘‘order’’ following MPL
throughout.
5 ‘‘More Active Securities’’ are securities with an
average daily consolidated volume (‘‘Security
CADV’’) in the previous month equal to or greater
than 1,000,000 shares per month. ‘‘Less Active
Securities’’ are securities that have a Security CADV
of less than 1,000,000 shares per month in the
previous month.
6 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS’’).
7 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
8 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/ . See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
9 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
10 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
E:\FR\FM\21NON1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 225 (Thursday, November 21, 2019)]
[Notices]
[Pages 64359-64363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25207]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87550; File No. SR-NYSEAMER-2019-48]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Exchange Rules 1.1E and 7.29E To Eliminate the Delay Mechanism and
Amend Exchange Rule 7.31E and Related Exchange Rules To Re-Introduce
Previously-Approved Order Types and Modifiers
November 15, 2019.
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 4, 2019, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rules 1.1E and 7.29E to eliminate
the Delay Mechanism and amend Rule 7.31E and related rules to re-
introduce previously-approved order types and modifiers. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to decommission its Delay Mechanism and re-
introduce orders and modifiers that were eliminated in connection with
launching the Delay Mechanism. To effect these changes, the Exchange
proposes to amend Rules 1.1E and 7.29E to eliminate the Delay Mechanism
and amend Rule 7.31E and related rules to re-introduce previously-
approved order types and modifiers.
Background
In 2017, the Exchange transitioned to trading on the Pillar trading
platform. In advance of that transition, the Exchange amended its rules
to transition from a Floor-based point-of-sale trading model to a fully
automated price-time priority allocation model.\4\ In the Pillar
Filing, the Exchange added Rule 7.31E, which describes the order types
and modifiers that would be available on the Exchange once it
transitioned to Pillar, and which was based on NYSE Arca, Inc. (``NYSE
Arca'') Rule 7.31-E. Among the orders and modifiers that were approved
in the Pillar Filing were ALO Orders, Intermarket Sweep Orders
designated Day (``Day ISO''), Non-Display Remove Modifiers, and MPL-ALO
Orders.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos. 79993 (February 9,
2017), 82 FR 10814 (February 15, 2017) (SR-NYSEMKT-2017-01)
(``Pillar Filing'') and 80590 (May 4, 2017), 82 FR 21843 (May 10,
2017) (SR-NYSEMKT-2017-01) (Approval Order). The Exchange separately
filed to establish the rules governing market makers on the
Exchange. See Securities Exchange Act Release No. 80577 (May 2,
2017), 82 FR 21446 (May 8, 2017) (SR-NYSEMKT-2017-04) (Approval
Order).
\5\ See Pillar Filing, id. (Rules 7.31E(e)(2), 7.31E(e)(3)(D),
7.31E(e)(2)(B)(iv)(b), 7.31E(3)(F), 7.31E(d)(3)(G)).
---------------------------------------------------------------------------
In connection with the transition to the Pillar trading platform,
the Exchange introduced the Delay Mechanism, which was approved in a
separate proposed rule change.\6\ Rule 1.1E(y) defines the Delay
Mechanism to mean a delay that is 350 microseconds of latency that is
added to specified order processing. That rule further provides that
due to force majeure events and acts of third parties, the Exchange
does not guarantee that the delay will always be 350 microseconds.
Finally, that Rule provides that the Exchange will periodically monitor
such latency, and will make adjustments to the latency as reasonably
necessary to achieve consistency with the 350 microsecond target as
soon as commercially practicable and that if the Exchange determines to
increase or decrease the delay period, it will submit a rule filing
pursuant to Section 19 of the Act.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 79998 (February 9,
2017), 82 FR 10828 (February 15, 2017) (SR-NYSEMKT-2017-05) (``Delay
Mechanism Filing'') and 80700 (May 16, 2017), 82 FR 23381 (May 22,
2017) (SR-NYSEMKT-2017-05) (Approval Order).
---------------------------------------------------------------------------
Rule 7.29E(b)(1) provides that the Exchange will apply the Delay
Mechanism to:
(A) All inbound communications from an ETP Holder to the NYSE
American Marketplace;
(B) all outbound communications to an ETP Holder from the NYSE
American Marketplace;
(C) all outbound communications the NYSE American Marketplace
routes to an Away Market;
(D) all inbound communications from an Away Market about a routed
order; and
(E) all outbound communications (e.g., bids, offers, and trades) to
the Exchange's proprietary data feeds.
Rule 7.29E(b)(2) provides that the Exchange will not apply the
Delay Mechanism to:
(A) All inbound communications from data feeds;
(B) order processing and order execution on the Exchange's Book;
and
(C) all outbound communications (e.g., bids, offers, and trades) to
the single plan processors under Rules 601 and 602 of Regulation NMS.
In the Delay Mechanism Filing, the Exchange noted that in
conjunction with implementing the Delay Mechanism, the Exchange would
no longer offer ALO Orders or Day ISO functionality.\7\ Accordingly,
before transitioning to Pillar, the Exchange filed a separate proposed
rule change to eliminate ALO Orders and Day ISOs and related
functionality.\8\ To effect the
[[Page 64360]]
elimination of ALO Orders, the Exchange made the following changes to
the rules that were approved in the Pillar Filing:
---------------------------------------------------------------------------
\7\ See Delay Mechanism Filing, supra note 6.
\8\ See Securities Exchange Act Release No. 81115 (July 11,
2017), 82 FR 32745 (July 17, 2017) (SR-NYSEMKT-2017-38) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change).
---------------------------------------------------------------------------
Deleted Rule 7.31E(e)(2) and its subparagraphs, which
described ALO Orders, and replaced that section of the Rule with the
term ``Reserved.''
Deleted Rule 7.31E(d)(2)(B), which provided that Limit
Non-Display Orders may be designated with a Non-Display Remove
Modifier.
Deleted the last sentence of Rule 7.31E(d)(3)(E) and Rules
7.31E(d)(3)(F) and (G), which described MPL-ALO Orders and related Non-
Display Remove Modifier functionality.
Deleted Rule 7.31E(e)(1)(C), which provided that an MKT
Only Order may be designated with a Non-Display Remove Modifier.
Amended Rule 7.31E(j)(1) to delete the reference to ``ALO
Order.''
Amended Rules 7.46E(f)(5)(F)(ii) and (iii) to delete
references to ALO Orders.
To effect the changes described in the Delay Mechanism Filing to
eliminate Day ISO Orders, the Exchange made the following changes to
the rules that were approved in the Pillar Filing:
Deleted Rules 7.31E(e)(3)(C) and (D), which described Day
ISO and Day ISO ALO Orders. The Exchange also amended Rule 7.31E(e)(3)
to provide that an ISO must be designated IOC and deleted the specific
reference to ``IOC ISO'' in Rule 7.31E(e)(3)(B).
Amended Rules 7.11E(a)(5)(A) and 7.11E(a)(5)(A)(ii) to
delete references to ``Day ISO'' and make related conforming changes.
Amended Rule 7.31E(a)(2)(C) to delete the last two
sentences, which described how Limit Orders are repriced upon arrival
of a Day ISO.
Amended Rule 7.35E(h)(3)(C) to delete the last sentence,
which described how Day ISOs are processed when transitioning to
continuous trading.
Deleted current Rule 7.46E(f)(5)(F)(i)(a), which relates
to Day ISO Orders, and the designation of subparagraph (b). The text of
then-approved Rule 7.46E(f)(5)(F)(i)(b) became the last sentence of
7.46E(f)(5)(F)(i).
Proposed Amendments
In the Delay Mechanism Filing, the Exchange noted that the Delay
Mechanism was designed to provide a competitive trading model to those
ETP Holders and issuers that prefer to trade or list on an exchange
that offers an intentional, symmetrical delay.
The Exchange has now been operating with the Delay Mechanism for
over two years. However, we have not had any issuers interested in
listing because of the Delay Mechanism. Additionally, market
participants have not increased their trading volume on the Exchange as
a result of adding the Delay Mechanism. For example, since introducing
the Delay Mechanism, market share on the Exchange has not materially
changed, and some market quality measures have declined. Specifically,
when comparing monthly statistics for Exchange-listed securities for
the first six months of trading on the Exchange in 2017 (pre-Delay
Mechanism) with trading on the Exchange for the period July 2017
through September 2019 (post-Delay Mechanism), the Exchange has
observed the following changes in market performance.
------------------------------------------------------------------------
Pre-delay Post-delay
mechanism mechanism
------------------------------------------------------------------------
NYSE American's Average Quoted Spread 208.2 292.4
(bps)..................................
NYSE American's Average Quoted Shares at 2,762 1,197
the BBO................................
NYSE American's Average Quoted Notional $13,342 $9,549
at the BBO.............................
NYSE American's % of trading day quoting 71.3% 68.4%
at the NBBO............................
NYSE American's Market Share............ 12.1% 11.5%
Consolidated Average Daily Volume....... 123,906,053 113,831,729
------------------------------------------------------------------------
The Exchange believes that if market participants were interested
in trading on an exchange with an intentional, symmetrical delay, more
order flow would have been directed to the Exchange. But it simply has
not.
The Exchange therefore proposes to eliminate the Delay Mechanism.
To effect this change, the Exchange proposes to delete the definition
of ``Delay Mechanism'' in Rule 1.1E(y) and delete Rule 7.29E(b), which
are the rules that were added in the Delay Mechanism Filing to
establish the Delay Mechanism.
The Exchange also proposes to re-introduce previously-approved
order types and modifiers that were deleted in anticipation of
launching the Delay Mechanism, with specified differences described
below. Specifically, the Exchange proposes to add back rules to support
ALO and related functionality, as follows:
Amend Rule 7.31E(e)(2) to delete the term ``Reserved'' and
add back the rule text that describes ALO Orders, as approved in the
Pillar Filing. The Exchange proposes a non-substantive difference from
the version of the rule approved in the Pillar Filing to use the term
``Non-Routable Limit Order'' instead of ``MKT-Only Order.''
Amend Rule 7.31E(d)(2) to add back sub-paragraph (B), as
approved in the Pillar Filing, which would provide that Non-Displayed
Limit Orders may be designated with a Non-Display Remove Modifier. The
Exchange proposes a non-substantive difference from the version of the
rule approved in the Pillar Filing to use the term ``Non-Displayed
Limit Order'' instead of ``Limit Non-Display Order.''
Amend Rule 7.31E(d)(3) relating to MPL Orders to re-
introduce MPL-ALO Orders and the Non-Display Remove Modifier. Since the
Pillar Filing, Rule 7.31E(d)(3) has been amended, which resulted in
changes to sub-numbering.\9\ With respect to the Non-Display Remove
Modifier, the Exchange proposes to re-introduce rule text previously
approved in the Pillar Filing as Rule 7.31E(d)(3)(G) with a non-
substantive difference that it would be numbered Rule 7.31E(d)(3)(F).
The Exchange also proposes to re-introduce a new last sentence to Rule
7.31E(d)(3)(D), which was previously approved in the Pillar Filing as
the last sentence of Rule 7.31E(d)(3)(E).
With respect to MPL-ALO Orders, as noted in the Pillar Filing, at
that time, Rule 7.31E(d)(3) was based on NYSE Arca Rule 7.31-E(d)(3)
without any substantive differences. Since approval
[[Page 64361]]
of the Pillar Filing, NYSE Arca has amended Rule 7.31-E(d)(3) relating
to MPL-ALO Orders.\10\ The Exchange proposes that when re-introducing
MPL-ALO Orders on the Exchange, Rule 7.31E(d)(3) would be amended to
add new sub-paragraph (E) to reflect the changes described in the Arca
MPL Filing; the Exchange will not re-introduce the text that was
approved in the Pillar Filing as Rule 7.31E(d)(3)(F).
As proposed, Rule 7.31E(d)(3)(E) would provide that an MPL Order
may be designated with an ALO Modifier, which would be defined as an
MPL-ALO Order. The proposed rule would further provide that an MPL-ALO
Order to buy (sell) will trade with resting orders to sell (buy) with a
working price below (above) the midpoint of the PBBO at the working
price of the resting orders, but will not trade with resting orders to
sell (buy) priced at the midpoint of the PBBO unless such resting order
is designated with a Non-Display Remove Modifier pursuant to Rule
7.31E(d)(3)(F). Finally, the Rule would provide that if an MPL-ALO
Order to buy (sell) cannot trade with a same-priced resting order to
sell (buy), a subsequently arriving order to sell (buy) eligible to
trade at the midpoint will trade ahead of a resting order to sell (buy)
that is not displayed at that price. If such resting order to sell
(buy) is displayed, the MPL-ALO Order to buy (sell) will not be
eligible to trade at that price. As noted above, this proposed rule
text is based on NYSE Arca Rule 7.31-E(d)(3)(E), NYSE National Rule
7.31(d)(3)(E), and NYSE Chicago Rule 7.31(d)(3)(E) without any
differences.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 85144 (September 21,
2017), 82 FR 45099 (September 27, 2017) (SR-NYSEAmer-2017-17)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change) (``Pillar ALO/Day ISO Filing'').
\10\ See Securities Exchange Act Release No. 82504 (January 16,
2018), 83 FR 3038 (January 22, 2018) (SR-NYSEArca-2018-01) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change)
(``Arca MPL Filing''). The rules of the Exchange's affiliates--New
York Stock Exchange LLC (``NYSE''), NYSE National, Inc. (``NYSE
National''), and most recently approved, NYSE Chicago, Inc. (``NYSE
Chicago'')--that describe MPL-ALO Orders and related Non-Display
Remove Modifier are similarly based on the NYSE Arca rule, as
amended in the Arca MPL Filing. See NYSE Rule 7.31(d)(3)(E) (except
does not include reference to a Non-Display Remove Modifier, which
is not currently available on NYSE); NYSE National Rule
7.31(d)(3)(E); and NYSE Chicago Rule 7.31(d)(3)(E).
---------------------------------------------------------------------------
Amend Rule 7.31E(e)(1) to add back sub-paragraph (C), as
approved in the Pillar Filing, which would provide that a Non-Routable
Limit Order may be designated with a Non-Display Remove Modifier. The
Exchange proposes a non-substantive difference from the version of the
rule approved in the Pillar Filing to use the term ``Non-Routable Limit
Order'' instead of ``MKT-Only Order.''
Amend Rule 7.31E(j)(1) to add back the reference to ``ALO
Order,'' as approved in the Pillar Filing.
The Exchange also proposes to add back rules to support Day ISO, as
follows:
Amend Rule 7.31E(e)(3) to add back subparagraphs (C) and
(D), as approved in the Pillar Filing, which describe Day ISO and Day
ISO ALO Orders. The Exchange proposes non-substantive differences from
the version of the rule approved in the Pillar Filing to use the terms
``Non-Routable Limit Order'' instead of ``MKT-Only Order'' and ``Non-
Displayed Limit Order'' instead of ``Limit Non-Displayed Order.''
Amend Rule 7.31E(e)(3) to delete the requirement that an
ISO must be designated IOC and amend Rule 7.31E(e)(3)(B) to add back
the term ``IOC ISO,'' both of which were approved in the Pillar Filing.
Amend Rules 7.11E(a)(5)(A) and 7.11E(a)(5)(A)(ii) to add
back references to ``Day ISO'' and make related conforming changes, as
approved in the Pillar Filing.
Amend Rule 7.31E(a)(2)(C) to add back rule text describing
when Limit Orders would be repriced under this provision. The Exchange
proposes that the text that would be added to this Rule would be based
on the rules of NYSE Arca, NYSE, NYSE National, and NYSE Chicago, which
were amended/adopted after the Pillar Filing, without any
differences.\11\ As proposed, the text that would be added to this rule
would provide that if a Day ISO to buy (sell) arrives before the PBO
(PBB) is updated, such re-priced Limit Order(s) to buy (sell) would be
repriced to the lower (higher) of the display price of the Day ISO or
the original price of the Limit Order(s).
---------------------------------------------------------------------------
\11\ See, e.g., Securities Exchange Act Release No. 85265 (March
7, 2019), 84 FR 9175 (March 13, 2019) (SR-NYSEArca-2019-08). See
also NYSE Rule 7.31(a)(2)(C), NYSE National Rule 7.31(a)(2)(C), and
NYSE Chicago Rule 7.31(a)(2)(C).
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Amend Rule 7.35E(h)(3) to add back the last sentence under
subparagraph (C) of that Rule that was approved in the Pillar Filing,
which describes how Day ISOs are processed when transitioning to
continuous trading. The Exchange proposes a non-substantive difference
to include this sentence under new subparagraph (D) to Rule
7.35E(h)(3).\12\
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\12\ See NYSE Arca Rule 7.35-E(h)(3)(D).
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At this time, the Exchange does not propose to revert any of the
other changes made in the Pillar ALO/Day ISO Filing. Specifically, the
Exchange does not propose any changes to Pegged Orders and does not
propose to amend Rule 7.46 relating to the Tick Size Pilot, which is no
longer operative.
With the elimination of the Delay Mechanism and re-introduction of
ALO Orders, Day ISO, Non-Display Remove Modifiers, and MPL-ALOs, the
Exchange will operate on a fully-automated price-time priority trading
model that is substantially identical to the trading models of its
affiliated exchanges NYSE Arca and NYSE National. The Exchange is not
proposing to change its transaction fees for trading on the Exchange.
The Exchange currently charges a flat fee for orders that provide or
remove liquidity, provided that it does not charge for orders that
provide displayed liquidity.\13\ This pricing model differs from the
pricing model on NYSE Arca, which uses a maker-taker model, and NYSE
National, which uses a taker-maker model.
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\13\ See NYSE American Equities Fee Schedule, available here:
https://www.nyse.com/publicdocs/nyse/markets/nyse-american/NYSE_America_Equities_Price_List.pdf.
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* * * * *
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 Exchange anticipates that
the implementation date will be in November 2019.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\14\ in general, and furthers the objectives of Section
6(b)(5),\15\ 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.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that eliminating the Delay Mechanism by
deleting Rules 1.1E(y) and 7.29E(b) would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because the reasons for establishing the Delay Mechanism no
longer exist. Specifically, the Delay Mechanism was designed to provide
a competitive trading model for those ETP Holders and issuers that
prefer to trade or list on an exchange that offers such a delay.
Following two years of operating an exchange with the Delay
Mechanism, the Exchange believes market
[[Page 64362]]
participants are not interested in this trading model. The Exchange
believes that if market participants were interested in trading on an
exchange with an intentional, symmetrical delay, more order flow would
have been directed to the Exchange. But it simply has not. Accordingly,
the Exchange believes that decommissioning the Delay Mechanism would be
consistent with the protection of investors and the public interest, as
they have not chosen to use this trading model.
In addition, comparison of numerous market quality metrics for
Exchange-listed securities between the Pre-Delay Mechanism and Post-
Delay Mechanism periods indicate that the Delay Mechanism resulted in a
degradation of the Exchange's displayed liquidity. Eliminating the
Delay Mechanism is expected to reverse this trend.
The Exchange believes that the proposed re-introduction of ALO
Orders, Day ISO, Non-Display Remove Modifiers, and MPL-ALO Orders would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because the Exchange is proposing
rules that either have already been approved in the Pillar Filing, or
are based on the rules of NYSE Arca, NYSE, NYSE National, and NYSE
Chicago. Accordingly, the Exchange is not proposing new or novel order
types, but rather, will make available on the Exchange order types and
modifiers that are already available on affiliated exchanges.
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 Exchange anticipated
that the Delay Mechanism would provide a competitive trading model for
those ETP Holders and issuers that prefer to trade or list on an
exchange that offers an intentional, symmetrical delay. Following two
years of operating an exchange with the Delay Mechanism, the Exchange
believes that market participants are not interested in this trading
model. Accordingly, the Exchange does not believe that eliminating the
Delay Mechanism would impose any burden on competition.
The Exchange further believes that re-introducing ALO Orders, Day
ISO, Non-Display Remove Modifiers, and MPL-ALO Orders would promote
competition by offering ETP Holders greater choice among the Exchange
and its affiliated exchanges that offer similar trading functionality.
With the decommissioning of the Delay Mechanism and re-introduction of
order types and modifiers, the Exchange does not propose to change its
transaction fee model, and therefore would be differentiated from NYSE
Arca and NYSE National because it charges a flat fee for all orders,
regardless of whether an order provides or removes liquidity (except
for orders that provide displayed liquidity, which are not charged at
all). Accordingly, the Exchange believes that the proposed rule change
would promote competition by providing greater optionality to ETP
Holders that are interested in using the re-introduced order types on
an exchange that offers a flat-fee pricing model.
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) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ In addition, Rule 19b-4(f)(6) requires the Exchange to give
the Commission written notice of the Exchange's intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Exchange has satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange has
represented that the existing delay mechanism has not attracted new
issuers or additional trading volume to the Exchange, and that re-
introducing previously approved order types would allow the Exchange to
have similar trading functionality with other exchanges. The Commission
believes that waiver of the 30-day operative delay period is consistent
with the protection of investors and the public interest and hereby
waives the 30-day operative delay and designates the proposed rule
change operative upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2019-48 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2019-48. This
file number should be included on the subject line if email is used. To
help the
[[Page 64363]]
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2019-48 and should be submitted
on or before December 12, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25207 Filed 11-20-19; 8:45 am]
BILLING CODE 8011-01-P
