Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.37-E, 20541-20543 [2021-08050]
Download as PDF
<![CDATA[
Federal Register / Vol. 86, No. 74 / Tuesday, April 20, 2021 / Notices
III. Notice of Filing
The Commission will continue to use
Docket No. MT2019–1 to consider
matters raised by the Postal Service’s
Request. The Commission invites
comments on whether the Request
complies with applicable statutory and
regulatory requirements, including 39
U.S.C. 3641, 39 CFR part 3045, and
Order No. 5239. Comments are due by
May 14, 2021. The public portions of
filings in this docket can be accessed via
the Commission’s website (https://
www.prc.gov).
39 U.S.C. 505 requires the
Commission to designate an officer of
the Commission to represent the
interests of the general public in all
public proceedings (Public
Representative). The Commission
previously appointed Gregory Stanton
to serve as the Public Representative in
this proceeding. He remains appointed
to serve as the Public Representative.
IV. Ordering Paragraphs
It is ordered:
1. Pursuant to 39 U.S.C. 505, Gregory
Stanton remains appointed to serve as
the Public Representative in this
proceeding.
2. Comments are due by than May 14,
2021.
3. The Secretary shall arrange for
publication of this Order in the Federal
Register.
By the Commission.
Erica A. Barker,
Secretary.
BILLING CODE 7710–FW–P
Sunshine Act Meetings
1 p.m., April 19, 2021.
Meeting will be held by
teleconference.
PLACE:
Closed.
MATTERS TO BE CONSIDERED:
(1)
Litigation Matter.
CONTACT PERSON FOR MORE INFORMATION:
Stephanie Hillyard, Secretary to the
Board, Phone No. 312–751–4920.
Authority: 5 U.S.C. 552b.
[FR Doc. 2021–08277 Filed 4–16–21; 4:15 pm]
BILLING CODE 7905–01–P
17:10 Apr 19, 2021
April 14, 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 April 1,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.37–E to specify when the
Exchange may adjust its calculation of
the PBBO. 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 7.37–E to specify when the
Dated: April 16, 2021.
Stephanie Hillyard,
Secretary to the Board.
VerDate Sep<11>2014
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.37–E
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.
RAILROAD RETIREMENT BOARD
STATUS:
[Release No. 34–91564; File No. SR–
NYSEARCA–2021–21)
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2021–08031 Filed 4–19–21; 8:45 am]
TIME AND DATE:
SECURITIES AND EXCHANGE
COMMISSION
Jkt 253001
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
20541
Exchange may adjust its calculation of
the PBBO.4
Generally, the Exchange updates both
the PBBO and NBBO based on quote
updates received from data feeds from
Away Markets, which are disclosed in
Rule 7.37–E(d).5 In 2015, the Exchange
described in a rule filing that when it
routes interest to a protected quotation,
the Exchange adjusts the PBBO.6 The
Exchange proposes to amend its rules to
include that description in Rule 7.37–E
and provide additional specificity of
when it may adjust its calculation of the
PBBO.
As proposed, new paragraph (d)(2) of
Rule 7.37–E would provide:
The Exchange may adjust its
calculation of the PBBO based on
information about orders it sends to
Away Markets with protected
quotations, execution reports received
from those Away Markets, and certain
orders received by the Exchange.
This proposed rule text is consistent
with the Exchange’s disclosure in the
Datafeed Filing and adds specificity that
the Exchange may adjust its calculation
of the PBBO based on execution reports
received from Away Markets and certain
orders received by the Exchange.7
Proposed Rule 7.37–E(d)(2) is based
on MEMX LLC (‘‘MEMX’’) Rule 13.4(b)
with two non-substantive differences.8
First, the Exchange proposes to use the
term ‘‘PBBO,’’ which is the term used in
the Exchange’s rules for the best-priced
4 The term ‘‘PBBO’’ is defined in Rule 1.1 to mean
the Best Protected Bid and the Best Protected Offer,
which in turn mean the highest Protected Bid and
the lowest Protected Offer, which refer to
quotations in an NMS stock that is (i) displayed by
an Automated Trading Center; (ii) disseminated
pursuant to an effective national market system
plan; and (iii) an Automated Quotation that is the
best bid or best offer of a national securities
exchange or the best bid or best offer of a national
securities association. The term NBBO is defined to
mean the national best bid and offer. The Exchange
notes that the NBBO may differ from the PBBO
because the NBBO includes Manual Quotations,
which are defined as any quotation other than an
automated quotation. 17 CFR 242.600(b)(37).
5 The Exchange proposes non-substantive
amendments to Rule 7.37–E(d) to update the names
of the exchanges listed in the table by replacing the
term ‘‘Bats’’ with ‘‘Cboe,’’ adding reference to
‘‘BYX’’ for one of the Cboe exchanges, replacing the
term ‘‘NASDAQ’’ with ‘‘Nasdaq,’’ and adding the
word ‘‘The’’ before Nasdaq Stock Market LLC.
6 See Securities Exchange Act Release No. 74409
(March 2, 2015), 80 FR 12221 (March 6, 2015) (SR–
NYSEArca–2015–11) (Notice of filing and
immediate effectiveness of proposed rule change)
(‘‘Datafeed Filing’’).
7 The Exchange does not adjust its calculation of
the NBBO based on information about orders sent
to Away Markets, execution reports from Away
Markets, or certain orders received by the Exchange.
8 MEMX Rule 13.4(b) provides: ‘‘The Exchange
may adjust its calculation of the NBBO based on
information about orders sent to other venues with
protected quotations, execution reports received
from those venues, and certain orders received by
the Exchange.’’
E:\FR\FM\20APN1.SGM
20APN1
20542
Federal Register / Vol. 86, No. 74 / Tuesday, April 20, 2021 / Notices
protected quotations, instead of
‘‘NBBO.’’ Second, the Exchange
proposes to refer to ‘‘Away Markets,’’
which is a defined term in Rule 1.1,
instead of ‘‘other venues.’’
MEMX has not disclosed
circumstances when ‘‘certain orders
received by the Exchange’’ would result
in an adjustment to its calculation of the
PBBO, but the Exchange believes that
when MEMX receives an ISO with a Day
time in force (‘‘Day ISO’’), it adjusts its
calculation of the PBBO. The Exchange
proposes that it would also adjust its
calculation of the PBBO based on
receipt of a Day ISO, which is consistent
with how Nasdaq Stock Market LLC
(‘‘Nasdaq’’) 9 and Cboe BZX Exchange,
Inc. (‘‘BZX’’) 10 function.
Specifically, the Exchange proposes
that it would adjust its calculation of the
PBBO upon receipt of a Day ISO Order
that the Exchange displays. As
described in Rule 7.37–E(e)(3)(C), a Day
ISO is eligible for the exception to
locking or crossing a protected
quotation because the member
organization simultaneously routes an
ISO to execute against the full size of
any locked or crossed protection
quotations, i.e., the member
organization routes ISOs to trade with
contra-side protected quotations on
Away Markets that are priced equal to
or better than the arriving Day ISO on
the Exchange. Because receipt of a Day
ISO informs the Exchange that the
member organization has routed ISOs to
trade with Away Market contra-side
protected quotations priced equal to or
better than the Day ISO, upon receipt
and displaying of a Day ISO, the
9 See Nasdaq Rule 4703(j) (‘‘Upon receipt of an
ISO, the System will consider the stated price of the
ISO to be available for other Orders to be entered
at that price, unless the ISO is not itself accepted
at that price level (for example, a Post-Only Order
that has its price adjusted to avoid executing against
an Order on the Nasdaq Book) or the ISO is not
Displayed.’’) and Securities Exchange Act Release
No. 74558 (March 20, 2015) 80 FR 16050, 16068
(March 26, 2015) (SR–Nasdaq–2015–024) (Notice).
10 See Securities Exchange Act Release No. 74074
(January 15, 2015), 80 FR 3679, 3680 (January 23,
2015) (SR–BATS–2015–04) (Notice of filing and
immediate effectiveness of proposed rule change to
clarify the use of certain data feeds) (‘‘The
Exchange’s [matching engine] will update the
NBBO upon receipt of a Day ISO. When a Day ISO
is posted on the BATS Book, the [matching engine]
uses the receipt of a Day ISO as evidence that the
protected quotes have been cleared, and the ME
does not check away markets for equal or betterpriced protected quotes. . . . . In determining
whether to route an order and to which venue(s) it
should be routed, the [routing engine] makes its
own calculation of the NBBO. . . . The [routing
engine] does not utilize Day ISO Feedback in
constructing the NBBO; however, because all orders
initially flow through the [matching engine], to the
extent Day ISO Feedback has updated the [matching
engine’s] calculation of the NBBO, all orders
processed by the [routing engine] do take Day ISO
Feedback into account.’’) (‘‘BZX Filing’’).
VerDate Sep<11>2014
17:10 Apr 19, 2021
Jkt 253001
Exchange proposes to adjust its
calculation of the PBBO to exclude any
contra-side protected quotations that are
priced equal to or better than the Day
ISO.
• For example, if the best protected
bid is 10.00, Exchange A is displaying
a protected offer at 10.05, and Exchange
B is displaying a protected offer at
10.09, the Exchange’s calculation of the
PBBO would be 10.00 × 10.05. If the
Exchange receives a Day ISO for 100
shares to buy priced at 10.05 that is
displayed on the Exchange at 10.05, the
Exchange would adjust its calculation of
the PBBO to be 10.05 × 10.09 and would
use this updated PBBO for execution,
routing, and re-pricing determinations.
If a Day ISO is displayed on the
Exchange at a price less aggressive than
its limit price (e.g., a Day ISO ALO that,
if displayed at its limit price, would
lock displayed interest on the
Exchange), the Day ISO still informs the
Exchange that the member organization
has routed ISOs to trade with contraside protected quotations on Away
Markets that are priced equal to or better
than the limit price of arriving Day ISO
on the Exchange. The Exchange would
therefore use the limit price of the Day
ISO ALO to determine how to adjust its
calculation of the contra-side Away
Market PBBO, provided that contra-side
displayed interest on the Exchange
equal to the limit price of the Day ISO
ALO would not be considered cleared.
The price at which the arriving Day ISO
ALO would be displayed would be the
price that informs the Exchange’s
calculation of the same-side PBBO.
For example, when the best protected
bid is 10.00 and Exchange A is
displaying a protected offer at 10.05 and
the Exchange’s best displayed offer is
10.07, the Exchange’s calculation of the
PBBO would be 10.00 × 10.05, then:
• If the Exchange receives ALO ‘‘1’’ to
buy at 10.06, it would be displayed at
10.04 and be assigned a working price
of 10.05, which is the PBO (displayed
on Exchange A),11 and the Exchange
would adjust the PBBO to be 10.04 ×
10.05.
• If next, the Exchange receives Day
ISO ALO ‘‘2’’ to buy at 10.07, the
Exchange would be permitted to display
that order at a price that crosses
Exchange A’s PBO because it is a Day
ISO. However, because it locks the
Exchange’s best displayed offer, due to
its ALO modifier, the Exchange would
display Day ISO ALO ‘‘2’’ at 10.06 and
it would have a working price of
10.06.12 In this scenario, the Exchange
11 See
Rule 7.31–E(e)(2)(B)(i).
Rule 7.31–E(e)(3)(D)(ii). Currently, the
Exchange would display such Day ISO ALO ‘‘2’’ at
12 See
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
proposes to adjust its calculation of the
PBBO to be 10.06 x 10.07 and use this
updated PBBO for execution, routing,
and re-pricing determinations,
including repricing the ALO ‘‘1’’ to buy
to both work and display at its limit
price of 10.06.
The Exchange believes that adjusting
the PBBO in this manner is consistent
with Regulation NMS because the
member organization that submitted the
Day ISO ALO to buy priced at 10.07 has
represented that it has sent ISOs to trade
with protected offers on other exchanges
priced at 10.07 or lower. The only
reason that such order would not be
displayed at 10.07 on the Exchange is
because it has an ALO modifier and
cannot trade with the Exchange’s
displayed offer of 10.07. However, there
is no restriction on that Day ISO ALO
being displayed at 10.06, which crosses
the Away Market PBO of 10.05. The
Exchange believes in this circumstance,
it is consistent with Regulation NMS for
the Exchange to consider that any Away
Market protected offers priced 10.07 or
below have been cleared and therefore
adjust its calculation of the contra-side
Away Market PBBO for purposes of
execution, routing, and repricing
determinations based on the limit price
of the Day ISO ALO.
The Exchange believes that the
proposed amendments to Rule 7.37–E(d)
would promote clarity and transparency
in the Exchange’s rules regarding
circumstances when the Exchange may
adjust its calculation of the PBBO. The
Exchange does not believe this proposed
rule change is novel. Rather, the
Exchange believes that other equity
exchanges that accept Day ISOs
similarly adjust their calculation of the
best protected bid and best protected
offer for purposes of making execution,
routing, and repricing determinations
based on the receipt of Day ISOs, as
described above. The Exchange
anticipates that it will implement the
technology change to how it calculates
the PBBO in May 2021.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act,13 in general, and furthers the
objectives of Sections 6(b)(5) of the
Act,14 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, to
10.06 and would adjust its calculation of the sameside PBBO and reprice same-side resting orders to
the Day ISO price, but would not adjust its
calculation of the contra-side PBBO for purposes of
routing and execution determinations of new
orders.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
E:\FR\FM\20APN1.SGM
20APN1
Federal Register / Vol. 86, No. 74 / Tuesday, April 20, 2021 / Notices
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to, and perfect the
mechanisms of, a free and open market
and a national market system and, in
general, to protect investors and the
public interest and because it is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Exchange believes that the
proposed rule change would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
is designed to promote clarity and
transparency in Exchange rules of when
the Exchange may adjust its calculation
of the PBBO. The Exchange believes that
adjusting its calculation of the PBBO
based on receipt of a Day ISO is
consistent with Regulation NMS
because the member organization that
entered such Day ISO has also sent ISOs
to Away Markets to trade with contraside protected quotations priced equal
to or better than the Day ISO. For the
same reasons that displaying a Day ISO
at a price that locks or crosses the PBBO
is consistent with Regulation NMS, the
Exchange believes that adjusting its
calculation of the PBBO based on
receipt and display of a Day ISO for
purposes of making execution, routing,
and repricing determinations for other
orders is also consistent with Regulation
NMS. The Exchange further notes that
the proposed rule text is not novel and
is based on MEMX Rule 13.4(b) and is
consistent with Nasdaq rules and the
BZX Filing.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
PBBO, including MEMX, Nasdaq, and
BZX.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 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.
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) 18 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
In accordance with Section 6(b)(8) of
the Act,15 the Exchange believes that the
proposed rule change would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule changes are designed to
promote transparency and clarity in
Exchange rules regarding when the
Exchange may adjust its calculation of
the PBBO. The Exchange believes that
the proposed rule change would
promote competition because the
Exchange proposes to adjust its
calculation of the PBBO under similar
circumstances that other equity
exchanges adjust their calculation of the
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–NYSEARCA–2021–21. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEARCA–2021–21, and
should be submitted on or before May
11, 2021.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
Electronic Comments
BILLING CODE 8011–01–P
[FR Doc. 2021–08050 Filed 4–19–21; 8:45 am]
• 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–
NYSEARCA–2021–21 on the subject
line.
16 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
18 15 U.S.C. 78s(b)(2)(B).
17 17
15 15
U.S.C. 78f(b)(8).
VerDate Sep<11>2014
17:10 Apr 19, 2021
Jkt 253001
20543
PO 00000
Frm 00068
Fmt 4703
Sfmt 9990
19 17
E:\FR\FM\20APN1.SGM
CFR 200.30–3(a)(12).
20APN1
]]>Agencies
[Federal Register Volume 86, Number 74 (Tuesday, April 20, 2021)]
[Notices]
[Pages 20541-20543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08050]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91564; File No. SR-NYSEARCA-2021-21)
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.37-
E
April 14, 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 April 1, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.37-E to specify when the
Exchange may adjust its calculation of the PBBO. The proposed rule
change is available on the Exchange's website at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.37-E to specify when the
Exchange may adjust its calculation of the PBBO.\4\
---------------------------------------------------------------------------
\4\ The term ``PBBO'' is defined in Rule 1.1 to mean the Best
Protected Bid and the Best Protected Offer, which in turn mean the
highest Protected Bid and the lowest Protected Offer, which refer to
quotations in an NMS stock that is (i) displayed by an Automated
Trading Center; (ii) disseminated pursuant to an effective national
market system plan; and (iii) an Automated Quotation that is the
best bid or best offer of a national securities exchange or the best
bid or best offer of a national securities association. The term
NBBO is defined to mean the national best bid and offer. The
Exchange notes that the NBBO may differ from the PBBO because the
NBBO includes Manual Quotations, which are defined as any quotation
other than an automated quotation. 17 CFR 242.600(b)(37).
---------------------------------------------------------------------------
Generally, the Exchange updates both the PBBO and NBBO based on
quote updates received from data feeds from Away Markets, which are
disclosed in Rule 7.37-E(d).\5\ In 2015, the Exchange described in a
rule filing that when it routes interest to a protected quotation, the
Exchange adjusts the PBBO.\6\ The Exchange proposes to amend its rules
to include that description in Rule 7.37-E and provide additional
specificity of when it may adjust its calculation of the PBBO.
---------------------------------------------------------------------------
\5\ The Exchange proposes non-substantive amendments to Rule
7.37-E(d) to update the names of the exchanges listed in the table
by replacing the term ``Bats'' with ``Cboe,'' adding reference to
``BYX'' for one of the Cboe exchanges, replacing the term ``NASDAQ''
with ``Nasdaq,'' and adding the word ``The'' before Nasdaq Stock
Market LLC.
\6\ See Securities Exchange Act Release No. 74409 (March 2,
2015), 80 FR 12221 (March 6, 2015) (SR-NYSEArca-2015-11) (Notice of
filing and immediate effectiveness of proposed rule change)
(``Datafeed Filing'').
---------------------------------------------------------------------------
As proposed, new paragraph (d)(2) of Rule 7.37-E would provide:
The Exchange may adjust its calculation of the PBBO based on
information about orders it sends to Away Markets with protected
quotations, execution reports received from those Away Markets, and
certain orders received by the Exchange.
This proposed rule text is consistent with the Exchange's
disclosure in the Datafeed Filing and adds specificity that the
Exchange may adjust its calculation of the PBBO based on execution
reports received from Away Markets and certain orders received by the
Exchange.\7\
---------------------------------------------------------------------------
\7\ The Exchange does not adjust its calculation of the NBBO
based on information about orders sent to Away Markets, execution
reports from Away Markets, or certain orders received by the
Exchange.
---------------------------------------------------------------------------
Proposed Rule 7.37-E(d)(2) is based on MEMX LLC (``MEMX'') Rule
13.4(b) with two non-substantive differences.\8\ First, the Exchange
proposes to use the term ``PBBO,'' which is the term used in the
Exchange's rules for the best-priced
[[Page 20542]]
protected quotations, instead of ``NBBO.'' Second, the Exchange
proposes to refer to ``Away Markets,'' which is a defined term in Rule
1.1, instead of ``other venues.''
---------------------------------------------------------------------------
\8\ MEMX Rule 13.4(b) provides: ``The Exchange may adjust its
calculation of the NBBO based on information about orders sent to
other venues with protected quotations, execution reports received
from those venues, and certain orders received by the Exchange.''
---------------------------------------------------------------------------
MEMX has not disclosed circumstances when ``certain orders received
by the Exchange'' would result in an adjustment to its calculation of
the PBBO, but the Exchange believes that when MEMX receives an ISO with
a Day time in force (``Day ISO''), it adjusts its calculation of the
PBBO. The Exchange proposes that it would also adjust its calculation
of the PBBO based on receipt of a Day ISO, which is consistent with how
Nasdaq Stock Market LLC (``Nasdaq'') \9\ and Cboe BZX Exchange, Inc.
(``BZX'') \10\ function.
---------------------------------------------------------------------------
\9\ See Nasdaq Rule 4703(j) (``Upon receipt of an ISO, the
System will consider the stated price of the ISO to be available for
other Orders to be entered at that price, unless the ISO is not
itself accepted at that price level (for example, a Post-Only Order
that has its price adjusted to avoid executing against an Order on
the Nasdaq Book) or the ISO is not Displayed.'') and Securities
Exchange Act Release No. 74558 (March 20, 2015) 80 FR 16050, 16068
(March 26, 2015) (SR-Nasdaq-2015-024) (Notice).
\10\ See Securities Exchange Act Release No. 74074 (January 15,
2015), 80 FR 3679, 3680 (January 23, 2015) (SR-BATS-2015-04) (Notice
of filing and immediate effectiveness of proposed rule change to
clarify the use of certain data feeds) (``The Exchange's [matching
engine] will update the NBBO upon receipt of a Day ISO. When a Day
ISO is posted on the BATS Book, the [matching engine] uses the
receipt of a Day ISO as evidence that the protected quotes have been
cleared, and the ME does not check away markets for equal or better-
priced protected quotes. . . . . In determining whether to route an
order and to which venue(s) it should be routed, the [routing
engine] makes its own calculation of the NBBO. . . . The [routing
engine] does not utilize Day ISO Feedback in constructing the NBBO;
however, because all orders initially flow through the [matching
engine], to the extent Day ISO Feedback has updated the [matching
engine's] calculation of the NBBO, all orders processed by the
[routing engine] do take Day ISO Feedback into account.'') (``BZX
Filing'').
---------------------------------------------------------------------------
Specifically, the Exchange proposes that it would adjust its
calculation of the PBBO upon receipt of a Day ISO Order that the
Exchange displays. As described in Rule 7.37-E(e)(3)(C), a Day ISO is
eligible for the exception to locking or crossing a protected quotation
because the member organization simultaneously routes an ISO to execute
against the full size of any locked or crossed protection quotations,
i.e., the member organization routes ISOs to trade with contra-side
protected quotations on Away Markets that are priced equal to or better
than the arriving Day ISO on the Exchange. Because receipt of a Day ISO
informs the Exchange that the member organization has routed ISOs to
trade with Away Market contra-side protected quotations priced equal to
or better than the Day ISO, upon receipt and displaying of a Day ISO,
the Exchange proposes to adjust its calculation of the PBBO to exclude
any contra-side protected quotations that are priced equal to or better
than the Day ISO.
For example, if the best protected bid is 10.00, Exchange
A is displaying a protected offer at 10.05, and Exchange B is
displaying a protected offer at 10.09, the Exchange's calculation of
the PBBO would be 10.00 x 10.05. If the Exchange receives a Day ISO for
100 shares to buy priced at 10.05 that is displayed on the Exchange at
10.05, the Exchange would adjust its calculation of the PBBO to be
10.05 x 10.09 and would use this updated PBBO for execution, routing,
and re-pricing determinations.
If a Day ISO is displayed on the Exchange at a price less aggressive
than its limit price (e.g., a Day ISO ALO that, if displayed at its
limit price, would lock displayed interest on the Exchange), the Day
ISO still informs the Exchange that the member organization has routed
ISOs to trade with contra-side protected quotations on Away Markets
that are priced equal to or better than the limit price of arriving Day
ISO on the Exchange. The Exchange would therefore use the limit price
of the Day ISO ALO to determine how to adjust its calculation of the
contra-side Away Market PBBO, provided that contra-side displayed
interest on the Exchange equal to the limit price of the Day ISO ALO
would not be considered cleared. The price at which the arriving Day
ISO ALO would be displayed would be the price that informs the
Exchange's calculation of the same-side PBBO.
For example, when the best protected bid is 10.00 and Exchange A is
displaying a protected offer at 10.05 and the Exchange's best displayed
offer is 10.07, the Exchange's calculation of the PBBO would be 10.00 x
10.05, then:
If the Exchange receives ALO ``1'' to buy at 10.06, it
would be displayed at 10.04 and be assigned a working price of 10.05,
which is the PBO (displayed on Exchange A),\11\ and the Exchange would
adjust the PBBO to be 10.04 x 10.05.
---------------------------------------------------------------------------
\11\ See Rule 7.31-E(e)(2)(B)(i).
---------------------------------------------------------------------------
If next, the Exchange receives Day ISO ALO ``2'' to buy at
10.07, the Exchange would be permitted to display that order at a price
that crosses Exchange A's PBO because it is a Day ISO. However, because
it locks the Exchange's best displayed offer, due to its ALO modifier,
the Exchange would display Day ISO ALO ``2'' at 10.06 and it would have
a working price of 10.06.\12\ In this scenario, the Exchange proposes
to adjust its calculation of the PBBO to be 10.06 x 10.07 and use this
updated PBBO for execution, routing, and re-pricing determinations,
including repricing the ALO ``1'' to buy to both work and display at
its limit price of 10.06.
---------------------------------------------------------------------------
\12\ See Rule 7.31-E(e)(3)(D)(ii). Currently, the Exchange would
display such Day ISO ALO ``2'' at 10.06 and would adjust its
calculation of the same-side PBBO and reprice same-side resting
orders to the Day ISO price, but would not adjust its calculation of
the contra-side PBBO for purposes of routing and execution
determinations of new orders.
---------------------------------------------------------------------------
The Exchange believes that adjusting the PBBO in this manner is
consistent with Regulation NMS because the member organization that
submitted the Day ISO ALO to buy priced at 10.07 has represented that
it has sent ISOs to trade with protected offers on other exchanges
priced at 10.07 or lower. The only reason that such order would not be
displayed at 10.07 on the Exchange is because it has an ALO modifier
and cannot trade with the Exchange's displayed offer of 10.07. However,
there is no restriction on that Day ISO ALO being displayed at 10.06,
which crosses the Away Market PBO of 10.05. The Exchange believes in
this circumstance, it is consistent with Regulation NMS for the
Exchange to consider that any Away Market protected offers priced 10.07
or below have been cleared and therefore adjust its calculation of the
contra-side Away Market PBBO for purposes of execution, routing, and
repricing determinations based on the limit price of the Day ISO ALO.
The Exchange believes that the proposed amendments to Rule 7.37-
E(d) would promote clarity and transparency in the Exchange's rules
regarding circumstances when the Exchange may adjust its calculation of
the PBBO. The Exchange does not believe this proposed rule change is
novel. Rather, the Exchange believes that other equity exchanges that
accept Day ISOs similarly adjust their calculation of the best
protected bid and best protected offer for purposes of making
execution, routing, and repricing determinations based on the receipt
of Day ISOs, as described above. The Exchange anticipates that it will
implement the technology change to how it calculates the PBBO in May
2021.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of
Sections 6(b)(5) of the Act,\14\ in particular, because it is designed
to prevent fraudulent and manipulative acts and practices, to
[[Page 20543]]
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to, and perfect the
mechanisms of, a free and open market and a national market system and,
in general, to protect investors and the public interest and because it
is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it is designed to promote clarity and
transparency in Exchange rules of when the Exchange may adjust its
calculation of the PBBO. The Exchange believes that adjusting its
calculation of the PBBO based on receipt of a Day ISO is consistent
with Regulation NMS because the member organization that entered such
Day ISO has also sent ISOs to Away Markets to trade with contra-side
protected quotations priced equal to or better than the Day ISO. For
the same reasons that displaying a Day ISO at a price that locks or
crosses the PBBO is consistent with Regulation NMS, the Exchange
believes that adjusting its calculation of the PBBO based on receipt
and display of a Day ISO for purposes of making execution, routing, and
repricing determinations for other orders is also consistent with
Regulation NMS. The Exchange further notes that the proposed rule text
is not novel and is based on MEMX Rule 13.4(b) and is consistent with
Nasdaq rules and the BZX Filing.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\15\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed rule changes are designed to promote
transparency and clarity in Exchange rules regarding when the Exchange
may adjust its calculation of the PBBO. The Exchange believes that the
proposed rule change would promote competition because the Exchange
proposes to adjust its calculation of the PBBO under similar
circumstances that other equity exchanges adjust their calculation of
the PBBO, including MEMX, Nasdaq, and BZX.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-NYSEARCA-2021-21 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-NYSEARCA-2021-21. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2021-21, and should be
submitted on or before May 11, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08050 Filed 4-19-21; 8:45 am]
BILLING CODE 8011-01-P
