Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change of New Rules Providing for the Registration and Obligations of Non-DMM Market Makers, 15974-15978 [2021-06127]
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15974
Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Notices
By the Commission.
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. 2021–06137 Filed 3–24–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91377; File No. SR–NYSE–
2021–08]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change of
New Rules Providing for the
Registration and Obligations of NonDMM Market Makers
March 19, 2021.
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 March
12, 2021, New York Stock 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes new rules
providing for the registration and
obligations of Non-DMM Market
Makers. 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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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1. Purpose
The Exchange proposes rules
governing electronic, off-floor market
makers that would not be either
Designated Market Makers (‘‘DMMs’’) or
Supplemental Liquidity Providers
(‘‘SLPs’’) (‘‘Non-DMM Market Makers’’).
Non-DMM Market Makers would be a
new category of market participants on
the Exchange and would have
responsibilities different from those of
DMMs and SLPs. The proposed NonDMM Market Makers are not intended
to replace DMMs or SLPs on the
Exchange and would not assume any of
the responsibilities already assigned to
DMMs or SLPs pursuant to Exchange
Rules (for example, Non-DMM Market
Makers would not perform any trading
floor functions such as those assigned to
DMMs). Instead, for all securities that
trade on the Exchange, a member
organization may register as a NonDMM Market Maker and be subject to
obligations similar to those of Market
Makers on NYSE Arca, Inc. (‘‘NYSE
Arca’’) and NYSE American LLC
(‘‘NYSE American’’) to, among other
things, maintain continuous, two-sided
trading interest in the securities in
which they are registered as a NonDMM Market Maker (‘‘Two-Sided
Obligation’’) and adhere to certain
pricing obligations. The addition of
Non-DMM Market Makers is intended to
promote competition on the Exchange
by providing an opportunity for member
organizations to register as a Non-DMM
Market Maker and become eligible for
various benefits and economic
incentives available to registered market
makers. Non-DMM Market Makers
would be subject to obligations distinct
from those imposed on DMMs and SLPs
under Exchange rules but would
likewise contribute to displayed
liquidity on the Exchange and would
enhance the range and diversity of
market making activity on the Exchange,
thereby promoting competition and
market quality on the Exchange to the
benefit of all market participants.
The Exchange proposes the following
rules, based on NYSE Arca and NYSE
American rules of the same number
with non-substantive changes, to govern
the registration and obligations of NonDMM Market Makers on the NYSE:
• Proposed Rule 1.1(p) (definition of
Market Maker Authorized Trader);
• Proposed Rule 1.1(t) (definition of
Non-DMM Market Maker);
• Proposed Rule 7.20 (Registration of
Non-DMM Market Makers);
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• Proposed Rule 7.21 (Obligations of
Market Maker Authorized Traders);
• Proposed Rule 7.22 (Registration of
Non-DMM Market Makers in a
Security); and
• Proposed Rule 7.23 (Obligations of
Non-DMM Market Makers).
These proposed rules would be
applicable only to the proposed new
category of Non-DMM Market Makers.
They would not apply to DMMs or
SLPs, who would continue to be
governed by existing Exchange rules
applicable to those market participants.4
Proposed Rule Changes
Rule 1.1
Rule 1.1 sets forth definitions of terms
that are used throughout the Exchange
rules. The Exchange proposes to add the
following definitions to the rule:
• The Exchange proposes to amend
current Rule 1.1(p) to set forth the
definition of ‘‘Market Maker Authorized
Trader’’ or ‘‘MMAT.’’ A ‘‘Market Maker
Authorized Trade’’ or ‘‘MMAT’’ would
be defined as an Authorized Trader (as
defined in Rule 1.1(a)) who performs
market making activities pursuant to
Rule 7P on behalf of a Non-DMM
Market Maker. This proposed rule is
based on NYSE Arca Rule 1.1(aa) and
NYSE American Rule 1.1E(w).
• The Exchange proposes to amend
current Rule 1.1(t) to set forth the
definition of ‘‘Non-DMM Market
Maker.’’ A ‘‘Non-DMM Market Maker’’
would be defined as a member
organization that acts as a Non-DMM
Market Maker pursuant to Rule 7P.
Accordingly, for purposes of Exchange
rules, the term ‘‘Non-DMM Market
Maker’’ does not include DMMs or
SLPs. This proposed rule is based on
NYSE Arca Rule 1.1(z) and NYSE
American Rule 1.1E(v).
To accommodate the addition of these
definitions, the Exchange also proposes
to adjust the lettering in Rule 1.1.
Specifically, current Rule 1.1(p)
defining the term ‘‘Marketable’’ would
become Rule 1.1(q), current Rule 1.1(q)
defining ‘‘NBBO, Best Protected Bid,
Best Protected Offer, Protected Best Bid
and Offer (PBBO)’’ would become Rule
1.1(r), and so forth, with no changes to
the substance of the definitions.
Rule 7P, Section 2
The Exchange proposes to amend
Section 2 under Rule 7P, which is
currently designated as ‘‘Reserved,’’ and
rename it ‘‘Non-DMM Market Makers.’’
The Exchange proposes that the rules
set forth in this section would apply
only to the proposed new group of Non4 See,
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e.g., Rules 98, 103, 103B, 104, and 107B.
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DMM Market Makers and would not be
applicable to DMMs or SLPs.
Rule 7.20
The Exchange proposes to add Rule
7.20 and title it ‘‘Registration of NonDMM Market Makers.’’ Proposed Rule
7.20 would set forth the requirements
for member organizations to apply for
registration as Non-DMM Market
Makers. The Exchange proposes that its
Non-DMM Market Makers have the
same registration requirements as
Market Makers on NYSE Arca and
NYSE American. Accordingly, the
Exchange’s proposal is based on NYSE
Arca Rule 7.20–E and NYSE American
Rule 7.20E without substantive
differences. Consistent with the
requirements set forth in the NYSE Arca
and NYSE American rules, the
Exchange proposes to require member
organizations interested in acting as
Non-DMM Market Makers to submit an
application to the Exchange. Proposed
Rule 7.20 would also set forth the
criteria the Exchange may consider in
determining whether to approve or
disapprove a prospective Non-DMM
Market Maker’s application and specify
how a Non-DMM Market Maker’s
registration may be suspended,
terminated, or withdrawn.
The Exchange notes two nonsubstantive differences from the NYSE
Arca rules relating to the references to
the Exchange’s disciplinary rules. First,
in proposed Rule 7.20(c), the Exchange
proposes to refer to the process
described in the NYSE Rule 9500 Series
instead of NYSE Arca Rule 10.14.
Second, in proposed Rule 7.20(e), the
Exchange proposes to refer to the
process set forth in the NYSE Rule 9200
Series instead of NYSE Arca Rule 10.0
and the NYSE Arca Rule 10.9000 Series.
Rule 7.21
The Exchange proposes to add Rule
7.21 and title it ‘‘Obligations of Market
Maker Authorized Traders.’’ Proposed
Rule 7.21 would provide that Market
Maker Authorized Traders (‘‘MMATs’’)
are permitted to enter orders only for
the account of the Non-DMM Market
Maker for which they are registered. In
addition, the proposed rule would
specify the registration requirements for
MMATs and the procedures for
suspension and withdrawal of
registration of MMATs, both of which
the Exchange proposes to base on the
NYSE Arca and NYSE American rules
pertaining to the obligations of MMATs.
Specifically, the proposed rule would
provide that a Non-DMM Market Maker
must submit an application to the
Exchange to register an associated
person as an MMAT. An MMAT must
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meet certain requirements, and a NonDMM Market Maker must ensure that its
MMATs are qualified to perform market
making activities. Proposed Rule 7.21
also provides that the Exchange may
suspend or withdraw an MMAT’s
registration. Accordingly, this proposed
rule is based on NYSE Arca Rule 7.21–
E and NYSE American Rule 7.21E
without any substantive differences.
Rule 7.22
The Exchange proposes to add Rule
7.22 and title it ‘‘Registration of NonDMM Market Makers in a Security.’’
Proposed Rule 7.22 would set forth the
process for Non-DMM Market Makers to
become registered in a security and the
factors the Exchange may consider in
approving such registration. The
Exchange proposes that the registration
of Non-DMM Market Makers follow the
same process as is in place for Market
Makers on NYSE Arca and NYSE
American. Specifically, Non-DMM
Market Makers may submit a request to
the Exchange to be registered in a
security, and the Exchange will evaluate
whether to approve such registration,
taking into consideration factors
including the Non-DMM Market
Maker’s financial resources, experience
in making markets, operational
capability, and the character of the
market for the security. Non-DMM
Market Makers will generally be
permitted to register in securities in
which a DMM and/or SLP is also
registered, subject to the Exchange’s
evaluation of the character of the market
for a given security.5
Also consistent with the rules of
NYSE Arca and NYSE American, the
proposed rule would also describe both
termination of a Non-DMM Market
Maker’s registration in a security by the
Exchange and voluntary termination by
a Non-DMM Market Maker.
Accordingly, the Exchange’s proposal is
based on NYSE American Rule 7.20E
without substantive differences and is
also substantially based on NYSE Arca
Rule 7.22–E with certain exceptions.
The Exchange does not propose to
adopt NYSE Arca Rule 7.22–E(c) or
7.22–E(d), which pertain to DMMs,
because the Exchange has a separate set
of rules governing DMMs. The Exchange
also proposes to adopt a version of the
rule with the non-substantive difference
of replacing references to NYSE Arca
Equities Rule 10 and 10.13 with
5 Orders entered by Non-DMM Market Makers
will be allocated in accordance with Rules 7.36 and
7.37 and be treated as a Book Participant. NonDMM Market Makers will not be eligible to
participate in the allocation process as a DMM
Participant.
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references to the NYSE Rule 9200 and
Rule 9500 Series, respectively.
Rule 7.23
The Exchange proposes to add Rule
7.23 and title it ‘‘Obligations of NonDMM Market Makers.’’ Proposed Rule
7.23 would set forth the obligation of
Non-DMM Market Makers to engage in
a course of dealings for their own
account to assist in the maintenance,
insofar as reasonably practicable, of fair
and orderly markets on the Exchange.
The proposed rule would delineate the
specific responsibilities and duties of
Non-DMM Market Makers, including
the Two-Sided Obligation applicable to
securities in which the Non-DMM
Market Maker is registered and the
requirement that the interest satisfying
the Two-Sided Obligation be not more
than the Designated Percentage (as
defined in Proposed Rule 7.23) away
from the National Best Bid or Offer
(‘‘NBBO’’). Proposed Rule 7.23 also
provides that Non-DMM Market Makers
will be subject to certain minimum
capital requirements and sets forth the
circumstances under which a Non-DMM
Market Maker could be subject to
disciplinary action or suspension or
revocation of registration by the
Exchange for failure to comply with the
course of dealings obligations set forth
in this proposed rule.
Specifically, with respect to the TwoSided Obligation, proposed Rule
7.23(a)(1)(A) provides that Non-DMM
Market Makers would be required to
maintain displayed interest identified as
interest meeting the Two-Sided
Obligation on a continuous basis during
Core Trading Hours for those securities
in which the Non-DMM Market Maker
is registered. Proposed Rule
7.23(a)(1)(B) provides that interest
satisfying a Non-DMM Market Maker’s
Two-Sided Obligation must not be more
than the Designated Percentage away
from the then current NBBO, or if there
is no NBBO, not more than the
Designated Percentage away from the
last reported sale for that security. With
respect to minimum capital
requirements, proposed Rule 7.23(a)(2)
provides that Non-DMM Market Makers
would be required to maintain adequate
minimum capital in accordance with
Rule 15c3–1 under the Act.
As proposed, Non-DMM Market
Makers would occupy a role distinct
from DMMs and SLPs and, accordingly,
would be subject to different
obligations. For example, Non-DMM
Market Makers would differ from DMMs
in that they would be subject to pricing
obligations and financial requirements
less stringent than those set forth in
Rules 103, 103B, and 104 for DMMs.
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Whereas Non-DMM Market Makers
would be required to maintain a TwoSided Obligation as outlined above,
DMMs must maintain a bid or offer at
the NBBO for a certain percentage of the
trading day for the securities in which
they are registered, as specified in Rule
104(a)(1)(A). In addition, in order to
participate in the allocation process for
a specified security, DMMs must meet
various quoting requirements set forth
in Rule 103B.II, such as requirements to
maintain a bid or offer at the NBBO for
a specified percentage of time during a
calendar month. With respect to
financial requirements, whereas NonDMM Market Makers are required to
adhere to Rule 15c3–1 of the Act, Rule
103 Supplementary Material .20 sets
forth additional requirements pertaining
to a DMM’s Net Liquid Assets,
including minimum Net Liquid Assets
and specifications relating to the portion
of a DMM’s Net Liquid Assets that may
be derived from Excess Net Capital.
Non-DMM Market Makers would also
be different from SLPs because, among
other reasons, they would not be subject
to the heightened quoting requirements
or monthly volume requirements
applicable to SLPs pursuant to Rule
107B. For example, SLPs are required to
maintain a bid or an offer at the NBBO
in each of their assigned securities
averaging at least 10% of the trading day
as specified in Rules 107B(a) and (g).
SLPs are also required, as described in
Rules 107B(a) and (h), to add liquidity
at a certain average daily volume in
their assigned securities on a monthly
basis.
Proposed Rule 7.23 is consistent with
the obligations and processes for Market
Makers set forth in the rules of NYSE
Arca and NYSE American, and
accordingly, is based on NYSE Arca
Rule 7.23–E and NYSE American Rule
7.23E without any substantive
differences.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934,6 in
general, and furthers the objectives of
Section 6(b)(5),7 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
6 15
7 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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public interest. The Exchange believes
that the proposed rules would remove
impediments to and perfect the
mechanism of a free and open market
because they propose rules governing
Non-DMM Market Makers that are based
on the rules governing Market Makers
on the Exchange’s affiliated markets,
NYSE Arca and NYSE American. The
proposed rule change would therefore
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by
promoting continuity across affiliated
exchanges, enabling market makers on
the Exchange’s affiliated markets to also
become Non-DMM Market Makers on
the Exchange by meeting the same
registration requirements and by
agreeing to be subject to the same
obligations. The proposed rule change
also removes impediments to and
perfects the mechanism of a free and
open market and a national market
system by providing the Exchange’s
member organizations with the
opportunity to access the benefits
available to registered market makers
(such as certain exemptions under
Regulation SHO),8 without committing
to the more stringent quoting or volume
requirements that apply to DMMs and
SLPs. The Exchange also believes that
providing for a Non-DMM Market Maker
role on the NYSE would allow member
organizations that are market makers on
other exchanges to leverage their
existing market-making strategies on the
Exchange, and provide all member
organizations who choose to register as
Non-DMM Market Makers with
enhanced opportunities to qualify for
various existing credits set forth in the
Exchange’s Price List through increased
quoting and liquidity-providing
activity.9 The proposed rules are also
intended to serve investor protection
and public interest goals by providing
for a new category of market participant
that will contribute to displayed
liquidity, price discovery, and market
quality on the Exchange. The proposed
Non-DMM Market Makers are not
intended to supplant the existing DMM
or SLP market participants or their roles
on the Exchange and would represent
an additional source of displayed
liquidity on the Exchange and enhance
the range and diversity of market
making activity on the Exchange,
thereby promoting competition and
8 See, e.g., 17 CFR 242.203(b)(2)(iii) and 17 CFR
242.204(a)(3).
9 To the extent Non-DMM Market Makers would
be eligible for pricing relating to their role as NonDMM Market Makers (similar to pricing currently
set forth in the Exchange’s Price List with respect
to DMMs and SLPs), the Exchange would address
such pricing in a separate proposed rule change.
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market quality on the Exchange to the
benefit of all market participants.
Specifically, the Exchange believes
that the proposed definitions of NonDMM Market Maker and Market Maker
Authorized Trader in Rule 1.1 would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by clearly
setting forth the definitions of NonDMM Market Maker and Market Maker
Authorized Trader as those terms would
be used in the additional rules proposed
by the Exchange, particularly since the
proposed definitions are based on rules
of the Exchange’s affiliates that have
been approved by the Commission and
would promote consistency across
affiliated exchanges. The Exchange
believes that defining the term ‘‘NonDMM Market Maker’’ to mean a member
organization that is not a DMM or SLP
would also promote transparency and
clarity in Exchange rules that the
capitalized term of ‘‘Non-DMM Market
Maker’’ would not also mean DMMs or
SLPs.
The Exchange also believes that
proposed Rules 7.20 and 7.21, which
provide for the registration of Non-DMM
Market Makers and Market Maker
Authorized Traders, would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
they clearly set forth the requirements
and process for a member organization
to register as a Non-DMM Market Maker
or Market Maker Authorized Trader on
the Exchange. The proposed rule change
would also promote just and equitable
principles of trade by implementing the
same registration process and
requirements, for the same category of
market participants, as on affiliated
exchanges, which requirements have
already been approved by the
Commission. Proposed Rules 7.20 and
7.21 would also protect investors and
the public interest by ensuring that NonDMM Market Makers and Market Maker
Authorized Traders are subject to
uniform, objective requirements relating
to their ability to contribute to the
maintenance of fair and orderly markets
on the Exchange and that their
registration may be suspended or
withdrawn should they fail to meet
those requirements.
The Exchange believes that proposed
Rule 7.22, providing for the registration
of a Non-DMM Market Maker in a
security, would similarly remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would specify the requirements and
process for Non-DMM Market Makers to
register to trade a specific security on
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the Exchange. Proposed Rule 7.22 sets
forth a process based on the rules of
NYSE Arca and NYSE American
governing the registration of a NonDMM Market Maker in a security, and
therefore would promote just and
equitable principles of trade by
specifying requirements that are based
on the approved rules of other
exchanges. The Exchange further
believes that proposed Rule 7.22 would
serve investor protection and public
interest goals by enumerating the factors
that the Exchange may consider in
approving a Non-DMM Market Maker’s
request to register in a security, which
take into account the Non-DMM Market
Maker’s ability to meet its obligations
and promote market quality on the
Exchange.
The Exchange believes that proposed
Rule 7.23, setting forth the obligations
and duties of Non-DMM Market Makers,
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system because it would establish rules
governing trading on the Exchange that
are consistent with the rules currently
in place on NYSE Arca and NYSE
American regarding the duties and
obligations of Market Makers on those
exchanges, which have been previously
approved by the Commission. As a
result, the proposal promotes uniformity
and consistency among affiliated
exchanges’ rules pertaining to market
makers who are not DMMs or SLPs. For
similar reasons, the Exchange believes
that proposed Rule 7.23 is also designed
to prevent fraudulent and manipulative
acts and practices and to promote just
and equitable principles of trade by
establishing regulatory requirements for
Non-DMM Market Makers that would
enhance the quality of its market and
support investor protection and public
interest goals. Specifically, proposed
Rule 7.23 specifies the obligations of a
Non-DMM Market Maker to, among
other things, maintain a Two-Sided
Obligation and meet certain pricing
specifications, thereby promoting
additional displayed liquidity and
facilitating price discovery on the
Exchange. The proposed rule change
would also remove impediments to and
perfect the mechanism of a free and
open market and a national market
system by providing a new opportunity
for member organizations to leverage
their trading activity and access the
benefits and economic incentives
available to registered market makers by
meeting obligations less stringent than
those required of DMMs and SLPs, and
in turn enhancing competition on the
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Exchange for the benefit of all market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change sets forth rules
governing Non-DMM Market Makers on
the Exchange and is based on NYSE
Arca and NYSE American rules that
have been approved by the Commission.
The Exchange believes that the
proposed rules would promote
competition because they would
provide for obligations relating to NonDMM Market Makers that are based on
established rules, thereby reducing any
potential barriers to entry for market
makers registered on other exchanges to
be approved as a Non-DMM Market
Maker on the Exchange. The Exchange
further believes that the proposed rules
would not impose any burden on
competition that is not necessary or
appropriate because they are designed
to provide its members with consistency
across affiliated exchanges, thereby
enabling the Exchange to compete with
unaffiliated exchange competitors that
similarly operate multiple exchanges on
the same trading platforms. The
Exchange also believes that the
proposed rule change would promote
competition by providing member
organizations that are registered as
market makers on other exchanges with
the opportunity to similarly register as
a Non-DMM Market Maker on the
Exchange without being subject to the
more stringent quoting or volume
requirements associated with being a
DMM or SLP. By registering as a NonDMM Market Maker on the Exchange,
such member organizations may be able
to deploy their existing market-making
strategies on the Exchange and may
more easily qualify for credits offered by
the Exchange based on the increased
quoting and liquidity-providing activity
required of them as Non-DMM Market
Makers. The Exchange therefore
believes that the proposed rule change
would promote competition by
encouraging additional displayed
liquidity, facilitating price discovery,
and increasing the range and diversity
of market making activity on the
Exchange. Finally, the Exchange does
not believe that the proposed rules
would impose any burden on intramarket competition because adding a
new market participant of ‘‘Non-DMM
Market Maker’’ would allow all member
organizations an opportunity to access
the benefits available to registered
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15977
market makers, subject to the same
requirements and obligations as market
makers on other exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2021–08 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2021–08. 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
E:\FR\FM\25MRN1.SGM
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15978
Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Notices
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2021–08, and
should be submitted on or before April
15, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021–06127 Filed 3–24–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Proprietary Market Data Fee
Schedule and the NYSE Arca Options
Proprietary Market Data Fee Schedule
March 19, 2021.
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 March
10, 2021, NYSE Arca, Inc. (‘‘NYSE
Arca’’ 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.
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
17:52 Mar 24, 2021
Jkt 253001
Equities’’) 7—and the Cboe U.S Options
markets—Cboe Exchange, Inc. (‘‘Cboe
Options’’),8 Cboe C2 Exchange, Inc. (‘‘C2
Options’’),9 the options platform of Cboe
BZX Exchange, Inc. (‘‘BZX Options’’),10
the options platform of Cboe EDGX
Exchange, Inc. (‘‘EDGX Options’’)
(collectively, the ‘‘Cboe Exchanges’’).11
In addition, the Exchange and the
Exchange’s affiliates, New York Stock
Exchange LLC (‘‘NYSE’’), NYSE
American LLC (‘‘NYSE American’’),
NYSE Chicago, Inc. (‘‘NYSE Chicago’’)
and NYSE National, Inc. (‘‘NYSE
National’’) as well as other equities and
options markets 12 already have in place
a similar billing dispute provision for
transaction fees.
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.
Background
The Exchange proposes to amend the
Market Data Fee Schedules to adopt a
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–91371; File No. SR–
NYSEArca–2021–19]
10 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Equities Proprietary Market
Data Fee Schedule and the NYSE Arca
Options Proprietary Market Data Fee
Schedule (together, ‘‘Market Data Fee
Schedules’’) to adopt a billing dispute
practice substantially similar to the
practice adopted by another group of
exchanges for their transaction and
market data fees. 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. Purpose
The Exchange proposes to amend the
Market Data Fee Schedules to adopt a
billing dispute practice similar to the
practice adopted by another group of
exchanges for their transaction and
market data fees. As discussed below,
the proposed provision would be
substantially similar to provision in the
fee schedules of the Cboe U.S. Equities
markets—Cboe BZX Exchange, Inc.
(‘‘BZX Equities’’),4 Cboe BYX Exchange,
Inc. (‘‘BYX Equities’’),5 Cboe EDGA
Exchange, Inc. (‘‘EDGA Equities’’),6
Cboe EDGX Exchange, Inc. (‘‘EDGX
4 See BZX Equities Fee Schedule, available at,
https://markets.cboe.com/us/equities/membership/
fee_schedule/bzx/. See also Securities Exchange Act
Release No. 90897 (January 11, 2021), 86 FR 4161
(January 15, 2021) (SR–CboeBZX–2020–094).
5 See BYX Equities Fee Schedule, available at,
https://markets.cboe.com/us/equities/membership/
fee_schedule/byx/. See also Securities Exchange
Act Release No. 90899 (January 11, 2021), 86 FR
4156 (January 15, 2021) (SR–CboeBYX–2020–034).
6 See EDGA Equities Fee Schedule, available at,
https://markets.cboe.com/us/equities/membership/
fee_schedule/edga/. See also Securities Exchange
Act Release No. 90900 (January 11, 2021), 86 FR
4149 (January 15, 2021) (SR–CboeEDGA–2020–032).
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
7 See EDGX Equities Fee Schedule, available at,
https://markets.cboe.com/us/equities/membership/
fee_schedule/edgx/. See also Securities Exchange
Act Release No. 90901 (January 11, 2021), 86 FR
4137 (January 15, 2021) (SR–CboeEDGX–2020–064).
8 See Cboe Options Fee Schedule, footnote 7,
available at, https://cdn.cboe.com/resources/
membership/Cboe_FeeSchedule.pdf. See also
Securities Exchange Act Release No. 91053
(February 3, 2021), 86 FR 8814 (February 9, 2021)
(SR–Cboe–2021–010).
9 See C2 Options Fee Schedule, available at,
https://markets.cboe.com/us/options/membership/
fee_schedule/ctwo/. See also Securities Exchange
Act Release No. 91049 (February 3, 2021), 86 FR
8824 (February 9, 2021) (SR–C2–2021–002).
10 See BZX Options Fee Schedule, available at,
https://markets.cboe.com/us/options/membership/
fee_schedule/bzx/. See also Securities Exchange Act
Release No. 90897 (January 11, 2021), 86 FR 4161
(January 15, 2021) (SR–CboeBZX–2020–094).
11 See EDGX Options Fee Schedule, available at,
https://markets.cboe.com/us/options/membership/
fee_schedule/edgx/. See also Securities Exchange
Act Release No. 90901 (January 11, 2021), 86 FR
4137 (January 15, 2021) (SR–CboeEDGX–2020–064).
12 See NASDAQ Equity Rules, Equity 7 (Pricing
Schedule), Section 70(b) (all fee disputes must be
submitted no later than 60 days after receipt of
billing invoice, in writing and accompanied by
supporting documentation); NASDAQ Options
Rules, Options 7 (Pricing Schedule), Section 7(a)–
(b) (same); NASDAQ BX Equity Rules, Equity 7
(Pricing Schedule), Section 111(b) (Collection of
Exchange Fees and Other Claims and Billing Policy)
(same); NASDAQ BX Options Rules, Options 7
(Pricing Schedule), Section 7(a)–(b) (BX Options
Fee Disputes) (same); NASDAQ PHLX Equity Rules,
Equity 7 (Pricing Schedule), Section 1(a) (same);
NASDAQ PHLX Options Rules, Options 7 (Pricing
Schedule), Section 1(a) (same); NASDAQ ISE
Options Rules, Options 7 (Pricing Schedule),
Section 1(b) (same); NASDAQ GEMX Options
Rules, Options 7 (Pricing Schedule), Section 1(b)
(same); NASDAQ MRX Options Rules, Options 7
(Pricing Schedule), Section 1(b) (same); MIAX
Options Fee Schedule, available at https://
www.miaxoptions.com/sites/default/files/fee_
schedule-files/MIAX_Options_Fee_Schedule_01_
13_21.pdf (same); MIAX Pearl Fee Schedule,
available at https://www.miaxoptions.com/sites/
default/files/fee_schedule-files/MIAX_PEARL_
Options_Fee_Schedule_03012021.pdf (same); and
MIAX Emerald Fee Schedule, available at https://
www.miaxoptions.com/sites/default/files/fee_
schedule-files/MIAX_Emerald_Fee_Schedule_02_
22_21.pdf (same).
E:\FR\FM\25MRN1.SGM
25MRN1
]]>Agencies
[Federal Register Volume 86, Number 56 (Thursday, March 25, 2021)]
[Notices]
[Pages 15974-15978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06127]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91377; File No. SR-NYSE-2021-08]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change of New Rules Providing for the
Registration and Obligations of Non-DMM Market Makers
March 19, 2021.
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 March 12, 2021, New York Stock 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.
---------------------------------------------------------------------------
\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 new rules providing for the registration and
obligations of Non-DMM Market Makers. 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 rules governing electronic, off-floor market
makers that would not be either Designated Market Makers (``DMMs'') or
Supplemental Liquidity Providers (``SLPs'') (``Non-DMM Market
Makers''). Non-DMM Market Makers would be a new category of market
participants on the Exchange and would have responsibilities different
from those of DMMs and SLPs. The proposed Non-DMM Market Makers are not
intended to replace DMMs or SLPs on the Exchange and would not assume
any of the responsibilities already assigned to DMMs or SLPs pursuant
to Exchange Rules (for example, Non-DMM Market Makers would not perform
any trading floor functions such as those assigned to DMMs). Instead,
for all securities that trade on the Exchange, a member organization
may register as a Non-DMM Market Maker and be subject to obligations
similar to those of Market Makers on NYSE Arca, Inc. (``NYSE Arca'')
and NYSE American LLC (``NYSE American'') to, among other things,
maintain continuous, two-sided trading interest in the securities in
which they are registered as a Non-DMM Market Maker (``Two-Sided
Obligation'') and adhere to certain pricing obligations. The addition
of Non-DMM Market Makers is intended to promote competition on the
Exchange by providing an opportunity for member organizations to
register as a Non-DMM Market Maker and become eligible for various
benefits and economic incentives available to registered market makers.
Non-DMM Market Makers would be subject to obligations distinct from
those imposed on DMMs and SLPs under Exchange rules but would likewise
contribute to displayed liquidity on the Exchange and would enhance the
range and diversity of market making activity on the Exchange, thereby
promoting competition and market quality on the Exchange to the benefit
of all market participants.
The Exchange proposes the following rules, based on NYSE Arca and
NYSE American rules of the same number with non-substantive changes, to
govern the registration and obligations of Non-DMM Market Makers on the
NYSE:
Proposed Rule 1.1(p) (definition of Market Maker
Authorized Trader);
Proposed Rule 1.1(t) (definition of Non-DMM Market Maker);
Proposed Rule 7.20 (Registration of Non-DMM Market
Makers);
Proposed Rule 7.21 (Obligations of Market Maker Authorized
Traders);
Proposed Rule 7.22 (Registration of Non-DMM Market Makers
in a Security); and
Proposed Rule 7.23 (Obligations of Non-DMM Market Makers).
These proposed rules would be applicable only to the proposed new
category of Non-DMM Market Makers. They would not apply to DMMs or
SLPs, who would continue to be governed by existing Exchange rules
applicable to those market participants.\4\
---------------------------------------------------------------------------
\4\ See, e.g., Rules 98, 103, 103B, 104, and 107B.
---------------------------------------------------------------------------
Proposed Rule Changes
Rule 1.1
Rule 1.1 sets forth definitions of terms that are used throughout
the Exchange rules. The Exchange proposes to add the following
definitions to the rule:
The Exchange proposes to amend current Rule 1.1(p) to set
forth the definition of ``Market Maker Authorized Trader'' or ``MMAT.''
A ``Market Maker Authorized Trade'' or ``MMAT'' would be defined as an
Authorized Trader (as defined in Rule 1.1(a)) who performs market
making activities pursuant to Rule 7P on behalf of a Non-DMM Market
Maker. This proposed rule is based on NYSE Arca Rule 1.1(aa) and NYSE
American Rule 1.1E(w).
The Exchange proposes to amend current Rule 1.1(t) to set
forth the definition of ``Non-DMM Market Maker.'' A ``Non-DMM Market
Maker'' would be defined as a member organization that acts as a Non-
DMM Market Maker pursuant to Rule 7P. Accordingly, for purposes of
Exchange rules, the term ``Non-DMM Market Maker'' does not include DMMs
or SLPs. This proposed rule is based on NYSE Arca Rule 1.1(z) and NYSE
American Rule 1.1E(v).
To accommodate the addition of these definitions, the Exchange also
proposes to adjust the lettering in Rule 1.1. Specifically, current
Rule 1.1(p) defining the term ``Marketable'' would become Rule 1.1(q),
current Rule 1.1(q) defining ``NBBO, Best Protected Bid, Best Protected
Offer, Protected Best Bid and Offer (PBBO)'' would become Rule 1.1(r),
and so forth, with no changes to the substance of the definitions.
Rule 7P, Section 2
The Exchange proposes to amend Section 2 under Rule 7P, which is
currently designated as ``Reserved,'' and rename it ``Non-DMM Market
Makers.'' The Exchange proposes that the rules set forth in this
section would apply only to the proposed new group of Non-
[[Page 15975]]
DMM Market Makers and would not be applicable to DMMs or SLPs.
Rule 7.20
The Exchange proposes to add Rule 7.20 and title it ``Registration
of Non-DMM Market Makers.'' Proposed Rule 7.20 would set forth the
requirements for member organizations to apply for registration as Non-
DMM Market Makers. The Exchange proposes that its Non-DMM Market Makers
have the same registration requirements as Market Makers on NYSE Arca
and NYSE American. Accordingly, the Exchange's proposal is based on
NYSE Arca Rule 7.20-E and NYSE American Rule 7.20E without substantive
differences. Consistent with the requirements set forth in the NYSE
Arca and NYSE American rules, the Exchange proposes to require member
organizations interested in acting as Non-DMM Market Makers to submit
an application to the Exchange. Proposed Rule 7.20 would also set forth
the criteria the Exchange may consider in determining whether to
approve or disapprove a prospective Non-DMM Market Maker's application
and specify how a Non-DMM Market Maker's registration may be suspended,
terminated, or withdrawn.
The Exchange notes two non-substantive differences from the NYSE
Arca rules relating to the references to the Exchange's disciplinary
rules. First, in proposed Rule 7.20(c), the Exchange proposes to refer
to the process described in the NYSE Rule 9500 Series instead of NYSE
Arca Rule 10.14. Second, in proposed Rule 7.20(e), the Exchange
proposes to refer to the process set forth in the NYSE Rule 9200 Series
instead of NYSE Arca Rule 10.0 and the NYSE Arca Rule 10.9000 Series.
Rule 7.21
The Exchange proposes to add Rule 7.21 and title it ``Obligations
of Market Maker Authorized Traders.'' Proposed Rule 7.21 would provide
that Market Maker Authorized Traders (``MMATs'') are permitted to enter
orders only for the account of the Non-DMM Market Maker for which they
are registered. In addition, the proposed rule would specify the
registration requirements for MMATs and the procedures for suspension
and withdrawal of registration of MMATs, both of which the Exchange
proposes to base on the NYSE Arca and NYSE American rules pertaining to
the obligations of MMATs. Specifically, the proposed rule would provide
that a Non-DMM Market Maker must submit an application to the Exchange
to register an associated person as an MMAT. An MMAT must meet certain
requirements, and a Non-DMM Market Maker must ensure that its MMATs are
qualified to perform market making activities. Proposed Rule 7.21 also
provides that the Exchange may suspend or withdraw an MMAT's
registration. Accordingly, this proposed rule is based on NYSE Arca
Rule 7.21-E and NYSE American Rule 7.21E without any substantive
differences.
Rule 7.22
The Exchange proposes to add Rule 7.22 and title it ``Registration
of Non-DMM Market Makers in a Security.'' Proposed Rule 7.22 would set
forth the process for Non-DMM Market Makers to become registered in a
security and the factors the Exchange may consider in approving such
registration. The Exchange proposes that the registration of Non-DMM
Market Makers follow the same process as is in place for Market Makers
on NYSE Arca and NYSE American. Specifically, Non-DMM Market Makers may
submit a request to the Exchange to be registered in a security, and
the Exchange will evaluate whether to approve such registration, taking
into consideration factors including the Non-DMM Market Maker's
financial resources, experience in making markets, operational
capability, and the character of the market for the security. Non-DMM
Market Makers will generally be permitted to register in securities in
which a DMM and/or SLP is also registered, subject to the Exchange's
evaluation of the character of the market for a given security.\5\
---------------------------------------------------------------------------
\5\ Orders entered by Non-DMM Market Makers will be allocated in
accordance with Rules 7.36 and 7.37 and be treated as a Book
Participant. Non-DMM Market Makers will not be eligible to
participate in the allocation process as a DMM Participant.
---------------------------------------------------------------------------
Also consistent with the rules of NYSE Arca and NYSE American, the
proposed rule would also describe both termination of a Non-DMM Market
Maker's registration in a security by the Exchange and voluntary
termination by a Non-DMM Market Maker. Accordingly, the Exchange's
proposal is based on NYSE American Rule 7.20E without substantive
differences and is also substantially based on NYSE Arca Rule 7.22-E
with certain exceptions.
The Exchange does not propose to adopt NYSE Arca Rule 7.22-E(c) or
7.22-E(d), which pertain to DMMs, because the Exchange has a separate
set of rules governing DMMs. The Exchange also proposes to adopt a
version of the rule with the non-substantive difference of replacing
references to NYSE Arca Equities Rule 10 and 10.13 with references to
the NYSE Rule 9200 and Rule 9500 Series, respectively.
Rule 7.23
The Exchange proposes to add Rule 7.23 and title it ``Obligations
of Non-DMM Market Makers.'' Proposed Rule 7.23 would set forth the
obligation of Non-DMM Market Makers to engage in a course of dealings
for their own account to assist in the maintenance, insofar as
reasonably practicable, of fair and orderly markets on the Exchange.
The proposed rule would delineate the specific responsibilities and
duties of Non-DMM Market Makers, including the Two-Sided Obligation
applicable to securities in which the Non-DMM Market Maker is
registered and the requirement that the interest satisfying the Two-
Sided Obligation be not more than the Designated Percentage (as defined
in Proposed Rule 7.23) away from the National Best Bid or Offer
(``NBBO''). Proposed Rule 7.23 also provides that Non-DMM Market Makers
will be subject to certain minimum capital requirements and sets forth
the circumstances under which a Non-DMM Market Maker could be subject
to disciplinary action or suspension or revocation of registration by
the Exchange for failure to comply with the course of dealings
obligations set forth in this proposed rule.
Specifically, with respect to the Two-Sided Obligation, proposed
Rule 7.23(a)(1)(A) provides that Non-DMM Market Makers would be
required to maintain displayed interest identified as interest meeting
the Two-Sided Obligation on a continuous basis during Core Trading
Hours for those securities in which the Non-DMM Market Maker is
registered. Proposed Rule 7.23(a)(1)(B) provides that interest
satisfying a Non-DMM Market Maker's Two-Sided Obligation must not be
more than the Designated Percentage away from the then current NBBO, or
if there is no NBBO, not more than the Designated Percentage away from
the last reported sale for that security. With respect to minimum
capital requirements, proposed Rule 7.23(a)(2) provides that Non-DMM
Market Makers would be required to maintain adequate minimum capital in
accordance with Rule 15c3-1 under the Act.
As proposed, Non-DMM Market Makers would occupy a role distinct
from DMMs and SLPs and, accordingly, would be subject to different
obligations. For example, Non-DMM Market Makers would differ from DMMs
in that they would be subject to pricing obligations and financial
requirements less stringent than those set forth in Rules 103, 103B,
and 104 for DMMs.
[[Page 15976]]
Whereas Non-DMM Market Makers would be required to maintain a Two-Sided
Obligation as outlined above, DMMs must maintain a bid or offer at the
NBBO for a certain percentage of the trading day for the securities in
which they are registered, as specified in Rule 104(a)(1)(A). In
addition, in order to participate in the allocation process for a
specified security, DMMs must meet various quoting requirements set
forth in Rule 103B.II, such as requirements to maintain a bid or offer
at the NBBO for a specified percentage of time during a calendar month.
With respect to financial requirements, whereas Non-DMM Market Makers
are required to adhere to Rule 15c3-1 of the Act, Rule 103
Supplementary Material .20 sets forth additional requirements
pertaining to a DMM's Net Liquid Assets, including minimum Net Liquid
Assets and specifications relating to the portion of a DMM's Net Liquid
Assets that may be derived from Excess Net Capital.
Non-DMM Market Makers would also be different from SLPs because,
among other reasons, they would not be subject to the heightened
quoting requirements or monthly volume requirements applicable to SLPs
pursuant to Rule 107B. For example, SLPs are required to maintain a bid
or an offer at the NBBO in each of their assigned securities averaging
at least 10% of the trading day as specified in Rules 107B(a) and (g).
SLPs are also required, as described in Rules 107B(a) and (h), to add
liquidity at a certain average daily volume in their assigned
securities on a monthly basis.
Proposed Rule 7.23 is consistent with the obligations and processes
for Market Makers set forth in the rules of NYSE Arca and NYSE
American, and accordingly, is based on NYSE Arca Rule 7.23-E and NYSE
American Rule 7.23E without any substantive differences.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934,\6\ in general, and furthers the
objectives of Section 6(b)(5),\7\ 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
the proposed rules would remove impediments to and perfect the
mechanism of a free and open market because they propose rules
governing Non-DMM Market Makers that are based on the rules governing
Market Makers on the Exchange's affiliated markets, NYSE Arca and NYSE
American. The proposed rule change would therefore remove impediments
to and perfect the mechanism of a free and open market and a national
market system by promoting continuity across affiliated exchanges,
enabling market makers on the Exchange's affiliated markets to also
become Non-DMM Market Makers on the Exchange by meeting the same
registration requirements and by agreeing to be subject to the same
obligations. The proposed rule change also removes impediments to and
perfects the mechanism of a free and open market and a national market
system by providing the Exchange's member organizations with the
opportunity to access the benefits available to registered market
makers (such as certain exemptions under Regulation SHO),\8\ without
committing to the more stringent quoting or volume requirements that
apply to DMMs and SLPs. The Exchange also believes that providing for a
Non-DMM Market Maker role on the NYSE would allow member organizations
that are market makers on other exchanges to leverage their existing
market-making strategies on the Exchange, and provide all member
organizations who choose to register as Non-DMM Market Makers with
enhanced opportunities to qualify for various existing credits set
forth in the Exchange's Price List through increased quoting and
liquidity-providing activity.\9\ The proposed rules are also intended
to serve investor protection and public interest goals by providing for
a new category of market participant that will contribute to displayed
liquidity, price discovery, and market quality on the Exchange. The
proposed Non-DMM Market Makers are not intended to supplant the
existing DMM or SLP market participants or their roles on the Exchange
and would represent an additional source of displayed liquidity on the
Exchange and enhance the range and diversity of market making activity
on the Exchange, thereby promoting competition and market quality on
the Exchange to the benefit of all market participants.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ See, e.g., 17 CFR 242.203(b)(2)(iii) and 17 CFR
242.204(a)(3).
\9\ To the extent Non-DMM Market Makers would be eligible for
pricing relating to their role as Non-DMM Market Makers (similar to
pricing currently set forth in the Exchange's Price List with
respect to DMMs and SLPs), the Exchange would address such pricing
in a separate proposed rule change.
---------------------------------------------------------------------------
Specifically, the Exchange believes that the proposed definitions
of Non-DMM Market Maker and Market Maker Authorized Trader in Rule 1.1
would remove impediments to and perfect the mechanism of a free and
open market and a national market system by clearly setting forth the
definitions of Non-DMM Market Maker and Market Maker Authorized Trader
as those terms would be used in the additional rules proposed by the
Exchange, particularly since the proposed definitions are based on
rules of the Exchange's affiliates that have been approved by the
Commission and would promote consistency across affiliated exchanges.
The Exchange believes that defining the term ``Non-DMM Market Maker''
to mean a member organization that is not a DMM or SLP would also
promote transparency and clarity in Exchange rules that the capitalized
term of ``Non-DMM Market Maker'' would not also mean DMMs or SLPs.
The Exchange also believes that proposed Rules 7.20 and 7.21, which
provide for the registration of Non-DMM Market Makers and Market Maker
Authorized Traders, would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because they clearly set forth the requirements and process for a
member organization to register as a Non-DMM Market Maker or Market
Maker Authorized Trader on the Exchange. The proposed rule change would
also promote just and equitable principles of trade by implementing the
same registration process and requirements, for the same category of
market participants, as on affiliated exchanges, which requirements
have already been approved by the Commission. Proposed Rules 7.20 and
7.21 would also protect investors and the public interest by ensuring
that Non-DMM Market Makers and Market Maker Authorized Traders are
subject to uniform, objective requirements relating to their ability to
contribute to the maintenance of fair and orderly markets on the
Exchange and that their registration may be suspended or withdrawn
should they fail to meet those requirements.
The Exchange believes that proposed Rule 7.22, providing for the
registration of a Non-DMM Market Maker in a security, would similarly
remove impediments to and perfect the mechanism of a free and open
market and a national market system because it would specify the
requirements and process for Non-DMM Market Makers to register to trade
a specific security on
[[Page 15977]]
the Exchange. Proposed Rule 7.22 sets forth a process based on the
rules of NYSE Arca and NYSE American governing the registration of a
Non-DMM Market Maker in a security, and therefore would promote just
and equitable principles of trade by specifying requirements that are
based on the approved rules of other exchanges. The Exchange further
believes that proposed Rule 7.22 would serve investor protection and
public interest goals by enumerating the factors that the Exchange may
consider in approving a Non-DMM Market Maker's request to register in a
security, which take into account the Non-DMM Market Maker's ability to
meet its obligations and promote market quality on the Exchange.
The Exchange believes that proposed Rule 7.23, setting forth the
obligations and duties of Non-DMM Market Makers, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would establish rules governing
trading on the Exchange that are consistent with the rules currently in
place on NYSE Arca and NYSE American regarding the duties and
obligations of Market Makers on those exchanges, which have been
previously approved by the Commission. As a result, the proposal
promotes uniformity and consistency among affiliated exchanges' rules
pertaining to market makers who are not DMMs or SLPs. For similar
reasons, the Exchange believes that proposed Rule 7.23 is also designed
to prevent fraudulent and manipulative acts and practices and to
promote just and equitable principles of trade by establishing
regulatory requirements for Non-DMM Market Makers that would enhance
the quality of its market and support investor protection and public
interest goals. Specifically, proposed Rule 7.23 specifies the
obligations of a Non-DMM Market Maker to, among other things, maintain
a Two-Sided Obligation and meet certain pricing specifications, thereby
promoting additional displayed liquidity and facilitating price
discovery on the Exchange. The proposed rule change would also remove
impediments to and perfect the mechanism of a free and open market and
a national market system by providing a new opportunity for member
organizations to leverage their trading activity and access the
benefits and economic incentives available to registered market makers
by meeting obligations less stringent than those required of DMMs and
SLPs, and in turn enhancing competition on the Exchange for the benefit
of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change
sets forth rules governing Non-DMM Market Makers on the Exchange and is
based on NYSE Arca and NYSE American rules that have been approved by
the Commission. The Exchange believes that the proposed rules would
promote competition because they would provide for obligations relating
to Non-DMM Market Makers that are based on established rules, thereby
reducing any potential barriers to entry for market makers registered
on other exchanges to be approved as a Non-DMM Market Maker on the
Exchange. The Exchange further believes that the proposed rules would
not impose any burden on competition that is not necessary or
appropriate because they are designed to provide its members with
consistency across affiliated exchanges, thereby enabling the Exchange
to compete with unaffiliated exchange competitors that similarly
operate multiple exchanges on the same trading platforms. The Exchange
also believes that the proposed rule change would promote competition
by providing member organizations that are registered as market makers
on other exchanges with the opportunity to similarly register as a Non-
DMM Market Maker on the Exchange without being subject to the more
stringent quoting or volume requirements associated with being a DMM or
SLP. By registering as a Non-DMM Market Maker on the Exchange, such
member organizations may be able to deploy their existing market-making
strategies on the Exchange and may more easily qualify for credits
offered by the Exchange based on the increased quoting and liquidity-
providing activity required of them as Non-DMM Market Makers. The
Exchange therefore believes that the proposed rule change would promote
competition by encouraging additional displayed liquidity, facilitating
price discovery, and increasing the range and diversity of market
making activity on the Exchange. Finally, the Exchange does not believe
that the proposed rules would impose any burden on intra-market
competition because adding a new market participant of ``Non-DMM Market
Maker'' would allow all member organizations an opportunity to access
the benefits available to registered market makers, subject to the same
requirements and obligations as market makers on other exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2021-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2021-08. 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
[[Page 15978]]
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSE-2021-08, and should be submitted on or before April 15, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-06127 Filed 3-24-21; 8:45 am]
BILLING CODE 8011-01-P
