Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval to a Proposed Rule Change, as Modified by Amendment No. 2, To Amend NYSE Rule 7.35C, 37367-37373 [2021-15039]
Download as PDF
<![CDATA[
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
by the Exchange or pricing offered by
the Exchange’s competitors.
Additionally, Market Makers may opt to
disfavor the Exchange’s pricing if they
believe that alternatives offer them
better value. Accordingly, the Exchange
does not believe that the proposed
change will impair the ability of Market
Makers or competing venues to
maintain their competitive standing in
the financial markets.
The Exchange believes that fees for
the proposed Purge Ports and
connectivity, in general, are constrained
by the robust competition for order flow
among exchanges and non-exchange
markets. Further, excessive fees for
connectivity, including Purge Port fees,
would serve to impair an exchange’s
ability to compete for order flow rather
than burdening competition. The
Exchange also does not believe the
proposed rule change would impact
intramarket competition as it would
apply to all Market Makers equally.
The Exchange also does not believe
that the proposed rule change will result
in any burden on inter-market
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
operates in a highly competitive
environment, and as discussed above,
its ability to price access and ports is
constrained by competition among
exchanges and third parties. There are
15 other U.S. options exchanges, which
the Exchange must consider in its
pricing discipline in order to compete
for market participants. In this
competitive environment, market
participants are free to choose which
competing exchange to use to satisfy
their business needs. As a result, the
Exchange believes this proposed rule
change permits fair competition among
national securities exchanges.
Accordingly, the Exchange does not
believe its proposed fee changes impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
khammond on DSKJM1Z7X2PROD with NOTICES
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,22 and Rule
22 15
19b–4(f)(2) 23 thereunder. At any time
within 60 days of the filing of the
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 to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2021–29 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–MIAX–2021–29. 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
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
17:11 Jul 14, 2021
23 17
Jkt 253001
PO 00000
CFR 240.19b–4(f)(2).
Frm 00094
Fmt 4703
Sfmt 4703
37367
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–MIAX–2021–29 and should
be submitted on or before August 5,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15034 Filed 7–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92374; File No. SR–NYSE–
2020–89]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Amendment No. 2 and Order
Granting Accelerated Approval to a
Proposed Rule Change, as Modified by
Amendment No. 2, To Amend NYSE
Rule 7.35C
July 9, 2021.
I. Introduction
On October 23, 2020, New York Stock
Exchange LLC (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to (1) provide the Exchange
authority to facilitate a Trading Halt
Auction if a security has not reopened
by 3:30 p.m. following a market-wide
circuit-breaker halt (‘‘MWCB Halt’’); (2)
widen the Auction Collar for an
Exchange-facilitated Trading Halt
Auction following an MWCB Halt; (3)
provide that certain DMM (designated
market maker) Interest will not be
canceled following an Exchangefacilitated Auction; and (4) change the
Auction Reference Price for Exchangefacilitated Core Open Auctions.3 The
proposed rule change was published for
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 By amendment of the proposed rule change, the
Exchange has removed several of these proposed
changes from the original proposal. See infra notes
7 and 10.
1 15
E:\FR\FM\15JYN1.SGM
15JYN1
37368
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
comment in the Federal Register on
November 12, 2020.4
On December 18, 2020, pursuant to
Section 19(b)(2) of the Act,5 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change, extending the
date for Commission action to February
10, 2020.6 On February 5, 2021, the
Exchange filed Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
change in its entirety.7 On February 10,
2021, the Commission published notice
of Amendment No. 1 and instituted
proceedings pursuant to Section
19(b)(2)(B) of the Act 8 to determine
whether to approve or disapprove the
proposed rule change, as modified by
Amendment No. 1.9 On March 17, 2021,
the Exchange filed Amendment No. 2 to
the proposed rule change, which
replaced and superseded the proposed
rule change, as modified by Amendment
No. 1, in its entirety.10 The Commission
has received no comment letters on the
proposal.
The Commission is publishing this
notice to solicit comments on
Amendment No. 2 to the proposed rule
change from interested persons, and is
approving the proposed rule change, as
modified by Amendment No. 2, on an
accelerated basis.
4 See Securities Exchange Act Release No. 90363
(Nov. 5, 2020), 85 FR 71964 (Nov. 12, 2020).
5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No. 90726
(Dec. 20, 2020), 85 FR 84431 (Dec. 28, 2020).
7 In Amendment No. 1, the Exchange removed
one of the proposed changes from the original
proposal. Specifically, the Exchange removed the
proposed change to adopt a new definition of
Auction Reference Price for exchange-facilitated
Core Open Auctions and to amend the temporary
rule related to such auctions set forth in
Commentary .04 to Rule 7.35C. This aspect of the
original proposal is now the subject of a separate
proposed rule change filed by the Exchange on
February 8, 2021 (SR–NYSE–2021–13).
8 15 U.S.C. 78s(b)(2)(B).
9 See Securities Exchange Act Release No. 91095
(Feb. 10, 2021), 86 FR 9978 (Feb. 17, 2020).
10 In Amendment No. 2, the Exchange removed
several more proposed changes from the original
proposal, as modified by Amendment No. 1.
Specifically, the Exchange removed the proposed
changes to make permanent the temporary rules
pertaining to: (i) Permitting the CEO to determine
that the Exchange will facilitate a Trading Halt
Auction in one or more securities following a
MWCB Halt if the security has not reopened by 3:30
p.m. Eastern Time, and (ii) establishing wider
Auction Collars for Trading Halt Auctions following
a MWCB Halt.
VerDate Sep<11>2014
17:11 Jul 14, 2021
Jkt 253001
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change, as Modified by Amendment
No. 2
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 7.35C (Exchange-Facilitated
Auctions) to provide that certain DMM
Interest 11 would not be cancelled
following an Exchange-facilitated
Auction.12
These proposed changes are currently
in place on a temporary basis, as
described in Commentary .03 to Rule
7.35C.
Background
To slow the spread of COVID–19
through social-distancing measures, on
March 18, 2020, the CEO of the
Exchange made a determination under
Rule 7.1(c)(3) that, beginning March 23,
2020, the Trading Floor facilities located
at 11 Wall Street in New York City
would close and the Exchange would
move, on a temporary basis, to fully
electronic trading.13 On May 14, 2020,
11 For purposes of Auctions, the term ‘‘DMM
Interest’’ is defined in Rule 7.35(a)(8) to mean all
buy and sell interest entered by a DMM unit in its
assigned securities and includes: ‘‘DMM Auction
Liquidity,’’ which is non-displayed buy and sell
interest that is designated for an Auction only (see
Rule 7.35(a)(8)(A)); ‘‘DMM Orders’’ which are
orders, as defined under Rule 7.31, entered by a
DMM unit (see Rule 7.35(a)(8)(B)); and ‘‘DMM
After-Auction Orders,’’ which are orders entered by
a DMM unit before either the Core Open Auction
or Trading Halt Auction that do not participate in
an Auction and are intended instead to maintain
price continuity with reasonable depth following an
Auction (see Rule 7.35(a)(8)(C)).
12 In this Amendment No. 2, the Exchange is
removing its proposed changes to (1) the Exchange
authority to facilitate a Trading Halt Auction if a
security has not reopened following a Level 1 or
Level 2 trading halt due to extraordinary market
volatility under Rule 7.12 (‘‘MWCB Halt’’) by 3:30
p.m.; and (2) widen the Auction Collar for an
Exchange-facilitated Trading Halt Auction
following a MWCB Halt, which are currently
temporary rules set forth in Commentaries .01 and
.02 to Rule 7.35C.
13 Pursuant to Rule 7.1(e), the CEO notified the
Board of Directors of the Exchange of this
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
the CEO of the Exchange made a
determination under Rule 7.1(c)(3) to
reopen the Trading Floor on a limited
basis on May 26, 2020 to a subset of
Floor brokers, subject to safety measures
designed to prevent the spread of
COVID–19.14 On June 15, 2020, the CEO
of the Exchange made a determination
under Rule 7.1(c)(3) to begin the second
phase of the Trading Floor reopening by
allowing DMMs to return on June 17,
2020, subject to safety measures
designed to prevent the spread of
COVID–19.15
Rule 7.35C sets forth the procedures
for Exchange-facilitated Auctions. The
first time the Exchange facilitated any
Auctions pursuant to Rule 7.35C was on
March 19, 2020, when two DMM firms
temporarily left the Trading Floor in
connection with implementing their
business continuity plans related to the
COVID–19 pandemic. Beginning on
March 23, 2020, when the Exchange
temporarily closed the Trading Floor,
the Exchange began facilitating
Auctions on behalf of all DMM firms.
During the period of March 23, 2020
through June 16, 2020, among the DMM
firms, the percentage of Auctions that
were facilitated by the Exchange ranged
from 1% to 3.2% of the securities
assigned to each DMM. During this
period, the vast majority of Auctions
were facilitated electronically by DMMs
pursuant to Rules 7.35A and 7.35B.
In connection with both the marketwide volatility associated with the
COVID–19 pandemic in March 2020 and
the full and partial closing of the
Trading Floor facilities, the Exchange
added Commentary .03 to Rule 7.35C,16
which is in effect until the earlier of a
full reopening of the Trading Floor
facilities to DMMs or after the Exchange
closes on April 30, 2021.17
determination. The Exchange’s current rules
establish how the Exchange will function fullyelectronically. The CEO also closed the NYSE
American Options Trading Floor, which is located
at the same 11 Wall Street facilities, and the NYSE
Arca Options Trading Floor, which is located in
San Francisco, CA. See Press Release, dated March
18, 2020, available here: https://ir.theice.com/press/
press-releases/all-categories/2020/03-18-2020204202110.
14 See Securities Exchange Act Release No. 88933
(May 22, 2020), 85 FR 32059 (May 28, 2020) (SR–
NYSE–2020–47) (Notice of filing and immediate
effectiveness of proposed rule change).
15 See Securities Exchange Act Release No. 89086
(June 17, 2020) (SR–NYSE–2020–52) (Notice of
filing and immediate effectiveness of proposed rule
change).
16 See Securities Exchange Act Release No. 88413
88562 (April 3, 2020), 85 FR 20002 (April 9, 2020)
(SR–NYSE–2020–29) (amending Rule 7.35C to add
Commentary .03) (‘‘DMM Interest Filing’’).
17 See Securities Exchange Act Release No. 90795
(December 23, 2020), 85 FR 86608 (December 30,
2020) (SR–NYSE–2020–106) (Notice of filing and
immediate effectiveness of proposed rule change to
E:\FR\FM\15JYN1.SGM
15JYN1
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
The Exchange believes that
Commentary .03 to Rule 7.35C, which is
in effect on a temporary basis, has
supported the fair and orderly operation
of the Exchange during both the market
volatility associated with COVID–19
and the temporary period that the
Trading Floor facilities have been closed
either in full or in part due to COVID–
19. The Exchange further believes the
functionality that has been operating on
a temporary basis would continue to
support the fair and orderly operation of
the Exchange under any circumstances
where there may be either market-wide
volatility or the need for the Exchange
to facilitate one or more Auctions.
Accordingly, the Exchange proposes
that the changes to how DMM Interest
may participate in an Exchangefacilitated Auction be made permanent.
Proposed Rule Changes
As set forth in Rule 7.35C(a)(1), if the
Exchange facilitates an Auction, DMM
Interest would not be eligible to
participate in such Auction and
previously-entered DMM Interest would
be cancelled. When a DMM cannot
facilitate an Auction because the DMM
unit is experiencing a system issue that
prevents it from communicating with
Exchange systems, cancelling DMM
Interest following an Exchangefacilitated Auction would help ensure
that DMM Interest that may be at stale
prices does not participate in trading on
the Exchange. On the other hand, by
cancelling DMM Interest when the
DMM units’ systems are operating
normally, DMMs may be limited in their
ability to maintain price continuity with
reasonable depth, i.e., provide passive
liquidity at the Exchange best bid and
offer and at depth, immediately
following an Exchange-facilitated
Auction.
After a period of operating Exchangefacilitated Auctions, the Exchange
identified a way to provide DMMs with
a greater opportunity to provide passive
liquidity immediately following an
Auction, thereby dampening volatility,
while still limiting DMM risk. To effect
this change, the Exchange added
Commentary .03 to Rule 7.35C, which
provides that for the temporary period
that begins on April 6, 2020 and ends
on the earlier of a full reopening of the
37369
Trading Floor facilities to DMMs or after
the Exchange closes on December 31,
2020, if the Exchange facilitates an
Auction, DMM Interest (i) will not be
eligible to participate if such Auction
results in a trade, and will be eligible to
participate if such Auction results in a
quote, and (ii) will not be cancelled
unless the limit price of such DMM
Interest would be priced through the
Auction Price or Auction Collars, as
applicable, or such DMM Interest would
be marketable against other unexecuted
orders.18
The Exchange proposes to make
permanent the changes to how
Exchange-facilitated Auctions function,
as described in Commentary .03 to Rule
7.35C. By making this functionality
permanent, such rules would continue
to apply both during the continuation of
the current Trading Floor closure and if
the Exchange were to facilitate Auctions
any time after the Trading Floor fully
reopens.
To effect this change, the Exchange
proposes to amend 7.35C(a)(1) as
follows (new text underlined, deleted
text bracketed):
If the Exchange facilitates an Auction, DMM Interest will not be eligible to
participate [in]if such Auction results in a trade, and will be eligible to participate
if such Auction results in a quote[ and previously-entered DMM Interest will be
This proposed rule change would
make permanent the temporary
functionality set forth in paragraph
(a)(1) to Commentary .03.
With this change, DMM Interest
would not participate in any Exchangefacilitated Auctions that would result in
a trade. This is how DMM Interest
currently functions when the Exchange
facilitates an Auction pursuant to either
Rule 7.35C(a)(1) or Commentary .03 to
Rule 7.35C. Based on experience
operating pursuant to Commentary .03
to Rule 7.35C, the Exchange believes
that this functionality should continue
permanently when the Exchange
facilitates an Auction, including, for
example, when the Trading Floor is
open but the DMM is unable to facilitate
an Auction because of a systems or
technical issue.
More specifically, when a DMM
facilitates an Auction that results in a
trade, the DMM determines whether to
participate on the buy or sell side and,
based on that direction from the DMM,
DMM Orders that do not participate in
the Auction and that would lock or
cross other orders, which would include
other DMM Orders, will be cancelled.19
If the DMM has entered both buy and
sell interest in advance of the Auction
and the Exchange facilitates the
Auction, the DMM would not be able to
control whether the DMM’s buy or sell
interest would participate in a trade and
the Exchange would not have that
instruction from the DMM of which side
of the market that the DMM would
participate. As a result, there may be
crossing DMM Interest that could result
in a wash-sale trade that would not have
occurred if the DMM had facilitated the
Auction. Excluding DMM Interest from
participating in an Exchange-facilitated
Auction that results in a trade
eliminates the potential for a wash-sale
trade. In addition, the Exchange believes
it promotes fair and orderly Exchangefacilitated Auctions that result in a trade
to exclude DMM Interest from
participating in such Auctions, because
if a DMM’s buy or sell interest does not
reflect up-to-date prices, it could impact
pricing of the Auction.
By contrast, the Exchange believes
that the proposed change for DMM
extend the temporary period for Commentaries to
Rules 7.35, 7.35A, 7.35B, and 7.35C; and temporary
rule relief in Rule 36.30 to end on the earlier of a
full reopening of the Trading Floor facilities to
DMMs or after the Exchange closes on April 30,
2020). [The Commission notes that, after submitting
Amendment No. 2, the Exchange extended the
outside date for effectiveness of the temporary relief
from April 30, 2021 to August 31, 2021. See
Securities Exchange Act Release No. 91778 (May 5,
2021), 86 FR 25902 (May 11, 2021)].
18 See DMM Interest Filing, supra note 10.
19 See Rule 7.35A(h)(3)(C) (providing that after a
Core Open or Trading Halt Auction, better at-priced
DMM Orders that do not receive an allocation and
that lock or cross other unexecuted orders and buy
and sell better-priced DMM Orders will be
cancelled after the Auction Processing Period
concludes).
VerDate Sep<11>2014
17:11 Jul 14, 2021
Jkt 253001
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
E:\FR\FM\15JYN1.SGM
15JYN1
EN15JY21.105</GPH>
khammond on DSKJM1Z7X2PROD with NOTICES
cancelled].
37370
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
Interest to participate in an Exchangefacilitated Auction that results in a
quote would promote fair and orderly
markets. This proposed change is
consistent with Commentary .03(a)(1) to
Rule 7.35C, but differs from current
Rule 7.35C(a)(1). A security opens on a
quote if there is no buy interest willing
to trade with sell interest at the same
price. The Exchange believes that under
such circumstances, including DMM
Interest in the Exchange’s quote would
assist the DMMs in meeting their
obligation to maintain a two-sided quote
as well as to maintain continuity and
depth in their assigned securities.20
Accordingly, the Exchange believes that
making this change permanent would
promote fair and orderly markets in
connection with Exchange-facilitated
Auctions that result in a quote.
The final element of the proposed
change to Rule 7.35C(a)(1) is that DMM
Interest would no longer be
automatically cancelled after an
Exchange-facilitated Auction. The
Exchange believes that this proposed
change would assist DMMs in meeting
their obligation, as required by Rule
104(f)(2), to provide passive liquidity in
order to maintain continuity with
reasonable depth in their assigned
securities immediately following a Core
Open Auction or Trading Halt Auction
that was facilitated by the Exchange. In
advance of an Auction, DMMs can enter
DMM Orders, which if not traded in an
Auction, would be part of the DMM
Interest on the Exchange Book after the
Auction. In addition, DMMs can enter
DMM After-Auction Orders, which do
not participate in Auctions and are
specifically designed to assist the DMMs
to maintain passive liquidity on the
Exchange immediately following an
Auction, which supports their ability to
maintain continuity with reasonable
depth immediately following an
Auction. If DMM Interest is not
automatically cancelled following an
Exchange-facilitated Auction, the DMM
would be better able to timely meet
these obligations by ensuring that
passive liquidity remains on the
Exchange Book immediately following
an Auction.
The Exchange believes that there
remain circumstances when DMM
Interest should be cancelled following
an Exchange-facilitated Auction. As
proposed, the Exchange would cancel
unexecuted DMM Interest under the
same circumstances that unexecuted
orders of other member organizations
would be cancelled following such
Auctions.
To effect this change, the Exchange
proposes to amend Rule 7.35C(g)(1),
which currently describes which
unexecuted orders would be cancelled if
a security opens or reopens on a trade
via an Exchange-facilitated Auction, and
Rule 7.35C(g)(2), which currently
describes which unexecuted orders
would be cancelled if a security opens
or reopens on a quote that is above
(below) the upper (lower) Auction
Collar via an Exchange-facilitated
Auction. The Exchange proposes that
these two subparagraphs would be
replaced with the following text to
incorporate that under the same
circumstances, DMM Interest would
similarly be cancelled (proposed new
text underlined):
( 1) If a security opens or reopens on a trade, Market Orders (including sell short
Market Orders during a Short Sale Period) and Limit Orders, including DMM
Interest, with a limit price that is better-priced than the Auction Price and were
not executed in the applicable Auction will be cancelled.
(2) If a security opens or reopens on a quote that is above (below) the upper
(lower) Auction Collar, Market Orders (including sell short Market Orders during
a Short Sale Period) and Limit Orders, including DMM Interest, with a limit price
that is better-priced than the upper (lower) Auction Collar will be cancelled before
These proposed rule changes would
make permanent the temporary
functionality set forth in paragraphs
(b)(1) and (2) to Commentary .03.
The Exchange further believes that if
previously-entered DMM Interest would
be marketable against either other DMM
Interest or contra-side unexecuted
orders, such DMM Interest should be
cancelled. For example, if for a security,
the Auction Reference Price is $10.00,
20 See
the lower Auction Collar is $9.00 and
the upper Auction Collar is $11.00, and
the orders on the Exchange Book in
advance of the Auction are as follows:
• Order 1—Buy DMM Order 1000
shares at $10.05
• Order 2—Sell DMM Order 1000
shares at $10.00
• Order 3—Buy DMM Order 1000
shares at $10.02
• Order 4—Sell Limit Order at
$10.03,
the orders in this example would be
processed as follows in an Exchangefacilitated Auction:
• Order 1 would be cancelled
(because DMM Interest would not be
eligible to participate in an Auction
trade, and here, Order 1 is marketable
with Orders 2 and 4)
Rule 104(f)(2).
VerDate Sep<11>2014
17:11 Jul 14, 2021
Jkt 253001
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
E:\FR\FM\15JYN1.SGM
15JYN1
EN15JY21.106</GPH>
khammond on DSKJM1Z7X2PROD with NOTICES
such quote is published.
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
• Order 2 would be cancelled
(because DMM Interest would not be
eligible to participate in an Auction
trade, and here Order 2 is marketable
with Order 3), and
• Order 3 would not be cancelled
because it is no longer marketable with
any other interest, i.e., it no longer locks
or crosses the price of any other contraside interest in the Exchange Book.
Order 3 would therefore be included in
the opening quote.
This Exchange-facilitated Auction
would result in the following quote:
$10.02 (Order 3¥DMM Order) × $10.03
(Order 4¥Limit Order).
To effect this change, the Exchange
proposes new subparagraph (g)(3) to
Rule 7.35C to specify the additional
circumstances when DMM Interest
would be cancelled, as follows:
khammond on DSKJM1Z7X2PROD with NOTICES
The Exchange will cancel DMM Interest
that is marketable against contra-side
unexecuted orders. If the contra-side
unexecuted order against which such DMM
Interest is marketable is DMM Interest, the
DMM Interest with the earlier working time
will be canceled.
This proposed rule change would
make permanent the temporary
functionality set forth in paragraph
(b)(3) to Commentary .03.
The Exchange believes that these
proposed rule changes would promote
fair and orderly markets whenever the
Exchange facilitates an Auction under
Rule 7.35C—under any circumstance—
by supporting DMMs in maintaining
continuity with reasonable depth in
their assigned securities immediately
following an Exchange-facilitated Core
Open Auction or Trading Halt Auction
that was facilitated by the Exchange.
The Exchange proposes that, with
these proposed changes to Rules
7.35C(a)(1) and (g), Commentary .03 to
Rule 7.35C would be deleted in its
entirety.
In further support of making the
functionality set forth in Commentary
.03 to Rule 7.35C permanent, the
Exchange notes that after the Exchange
implemented that Commentary, the
Exchange observed improved
performance relating to Exchangefacilitated Auctions.
• For the period March 23, 2020 to
April 3, 2020, 4.9% of all Core Open
Auctions were facilitated by the
Exchange. For the period April 6, 2020
through June 16, 2020, the Exchange
facilitated only 2% of all Core Open
Auctions. In addition, the percentage of
Exchange-facilitated Core Open
Auctions that were bound by an
Auction Collar decreased from 1.3%
from the pre-April 6, 2020 period, to
0.58% in the April 6, 2020–June 16,
2020 period.
VerDate Sep<11>2014
17:11 Jul 14, 2021
Jkt 253001
• In addition, the Exchange observed
that after April 6, 2020, Exchange-listed
securities experienced reduced
volatility in the first half hour of
trading. The Exchange uses a quotebased metric to measure volatility in
securities,21 and based on that metric,
volatility in Exchange-listed securities
between the period of April 6, 2020 and
June 16, 2020 was 28.4% lower than the
same measure between March 23, 2020
and April 3, 2020. In addition, the
Exchange further observed that between
these two periods, the difference
between the Core Open Auction Price
and the subsequent five-minute VWAP
dropped by 31.3%.
For DMM firms that have already
returned staff to the Trading Floor, this
proposed change has limited
application because the Exchange has
not facilitated any Auctions on behalf of
those firms since June 16, 2020. In
addition, the Exchange anticipates that
once the Trading Floor facilities open in
full to DMMs, and all DMM firms have
staffing on the Trading Floor, the need
for Exchange-facilitated Auctions would
be obviated, and the Exchange will
revert to pre-pandemic rates of
Exchange-facilitated Auctions, which
were none. Accordingly, the proposed
changes to Rule 7.35C will likely have
limited application and would be
available as a business continuity
functionality should DMMs be unable to
facilitate an Auction in one or more
securities, for any reason.
There are no technology changes
associated with this proposed rule
change and the Exchange would be able
to implement it immediately upon
approval of this proposed rule change.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,22 in general, and furthers the
objectives of Section 6(b)(5) of the Act,23
in particular, in that it is designed to
prevent fraudulent and manipulative
21 As described in an Exchange blog post, this
metric is calculated using second-to-second ‘‘quote
returns,’’ which is calculated by averaging the
midpoints of all NBBO updates for a security within
each second of the day from 9:35 a.m. to 4:00 p.m.,
and then calculating the percentage rate of return
of these average quote midpoints from one second
to the next. The variance of returns are then
calculated in aggregated time periods (e.g., 5-minute
buckets) and annualized from seconds to 6.5 hour
trading days to 252 trading days in the years.
Finally, the Exchange takes the square root of the
annualized variance in the aggregated periods,
which creates the Exchange’s quote volatility
metric. See NYSE Data Insights, Introducing Quote
Volatility (QV)—a new metric to measure price
volatility, available here: https://www.nyse.com/
data-insights/introducing-quote-volatility-qv-a-newmetric-to-measure-price-volatility.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
37371
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange believes that
Commentary .03 to Rule 7.35C, which is
currently in effect on a temporary basis,
has supported the fair and orderly
operation of the Exchange during both
the market volatility associated with
COVID–19 and the temporary period
that the Trading Floor facilities have
been closed either in full or in part due
to COVID–19. The Exchange further
believes the functionality that has been
operating on a temporary basis would
continue to support the fair and orderly
operation of the Exchange under any
circumstances where there may be
either market-wide volatility or the need
for the Exchange to facilitate one or
more Auctions.
As noted above, beginning March 19,
2020, the Exchange began facilitating
auctions as provided for under Rule
7.35C for the first time, and then,
beginning March 23, 2020, when the
Trading Floor was temporarily closed to
reduce the spread of COVID–19, began
facilitating Auctions on behalf of all
DMM firms. Based on that experience,
the Exchange added Commentary .03 to
Rule 7.35C, which is in effect only for
a temporary period while the Trading
Floor is closed. The Exchange believes
that it would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system to make the changes described in
Commentary .03 to Rule 7.35C
permanent because it would allow
DMMs to maintain continuity with
reasonable depth in their assigned
securities immediately following an
Exchange-facilitated Auction.
As described above, the Exchange is
proposing that DMM Interest would
continue not to participate in an
Exchange-facilitated Auction that
results in a trade. As noted above, under
both the current Rule and temporary
Commentary .03, DMM Interest does not
participate in an Exchange-facilitated
Auction that results in a trade in part to
prevent wash-trade sales of previouslyentered DMM buy and sell interest and
therefore reduces DMM units’ risk. It
also protects the fair and orderly
operation of such Auctions because
such DMM Interest may be at stale
prices, and therefore could impact
pricing of the Auction in a manner that
does not reflect up-to-date trading
interest. For this reason, the Exchange
believes it would continue to promote
E:\FR\FM\15JYN1.SGM
15JYN1
khammond on DSKJM1Z7X2PROD with NOTICES
37372
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
fair and orderly Auctions for DMM
Interest not to participate in an
Exchange-facilitated Auction that
results in a trade.
By contrast, the Exchange believes
that the proposed change that DMM
Interest would be included in an
Exchange-facilitated Auction that
results in a quote would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would promote fair and orderly
resumption of trading by allowing DMM
Interest to be considered as part of the
opening quote. A security only opens on
a quote when there are no buy and sell
orders that can be crossed at a single
price. Accordingly, when a security
opens on a quote, the DMM has an
immediate obligation to maintain a twosided quote and to provide continuity
and depth. Including DMM interest in
an Exchange-facilitated Auction that
results in a quote would assist DMMs in
meeting those obligations.
The Exchange believes it would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system not to
automatically cancel DMM Interest
following an Exchange-facilitated
Auction because it would provide
DMMs with the opportunity to provide
passive liquidity immediately following
an Exchange-facilitated Auction,
thereby reducing volatility while still
limiting DMM risk. Similarly, the
Exchange believes that because DMM
Interest would not be participating in an
Exchange-facilitated Auction that
results in a trade, it would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system to cancel
DMM Interest that would be marketable
against unexecuted orders because, if
not cancelled, such interest could trade
at a price that would not be consistent
with the Auction Price or opening or
reopening quote determined in the
Exchange-facilitated Auction. The
proposed changes would also remove
impediments to and perfect the
mechanism of a free and open market
because DMM Interest that, following an
Exchange-facilitated Auction, would be
priced through the Auction Price or
Auction Collars, as applicable, would be
cancelled in the same manner that other
unexecuted orders would be cancelled.
The Exchange further believes that the
proposed changes to Rules 7.35C(a) and
(g) would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system because the Exchange observed
improved performance following
Exchange-facilitated Auctions after the
VerDate Sep<11>2014
17:11 Jul 14, 2021
Jkt 253001
Exchange implemented Commentary .03
to Rule 7.35C. Accordingly, should
circumstances ever arise again that
would require the Exchange to facilitate
any Auctions, which, based on prepandemic experience, would likely be
rare, the Exchange believes that these
proposed changes would improve the
performance of Exchange-facilitated
Auctions by enabling better engagement
by the DMMs in both the Auction and
the immediate after-market while still
limiting DMM risk.
III. Discussion and Commission
Findings
After careful review, the Commission
is approving the proposed rule change,
as modified by Amendment No. 2, for
the reasons discussed below.24 The
Commission finds that the proposed
rule change, as modified, is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange, including Section 6(b)(5) of
the Act, which requires that the rules of
an exchange be designed, among other
things, 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,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.25
The Exchange proposes to make
permanent certain provisions of its rules
that have been temporarily in effect
during the course of the COVID–19
pandemic, as the Exchange has operated
with fully and partially closed floor
trading facilities. The Exchange
proposes that, when it facilitates an
auction because a DMM is unable to
connect to Exchange systems, DMM
Interest will not be able to participate in
the auction if that auction results in a
trade, but will be able to participate if
the auction results in a quote (i.e., if no
buy interest in the auction is willing to
trade with sell interest at the same
price). This aspect of the proposal is
consistent with Section 6(b)(5) of the
Act because (1) in the case of an
Exchange-facilitated auction that results
in a trade, the rule is reasonably
designed to prevent wash-sale trades
between DMM Interest on opposite
sides of the market and to prevent DMM
Interest that does not reflect up-to-date
prices from affecting the price of the
24 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
25 17 U.S.C. 78f(b)(5).
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
auction; and (2) in the case of an
Exchange-facilitated auction that results
in a quote, to allow DMM Interest to
populate the Exchange’s order book
after the auction, assisting DMMs in
meeting their obligations to maintain a
two-sided quote and continuity and
depth in their assigned securities.
The Exchange also proposes that
DMM Interest would no longer be
automatically canceled after an
Exchange-facilitated opening or
reopening auction. Under the proposal,
the Exchange would cancel DMM
Interest after an auction under the same
circumstances in which it cancels
unexecuted limit orders of other
member organizations, namely (1) in the
case of an Exchange-facilitated auction
that opens or reopens on a trade, when
the interest is better-priced than the
auction price, and (2) in the case of an
Exchange-facilitated auction that opens
or reopens on a quote, when the interest
is priced better than the Auction Collar
under the Exchange’s rules. Other DMM
Interest, however, including DMM
After-Auction Orders, would not be
canceled and would be incorporated
into the Exchange’s order book
immediately upon the commencement
of continuous trading following the
auction. This aspect of the proposal is
consistent with Section 6(b)(5) of the
Act because the proposed rule is
reasonably designed to permit DMMs to
provide passive liquidity in continuous
trading immediately following an
auction and thereby meet their
obligations to maintain price continuity
with reasonable depth.
For these reasons, the Commission
finds that this proposed rule change is
consistent with the requirements of the
Act and in particular Section 6(b)(5)
because it is reasonably 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, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
IV. Solicitation of Comments on
Amendment No. 2
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 2 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
E:\FR\FM\15JYN1.SGM
15JYN1
Federal Register / Vol. 86, No. 133 / Thursday, July 15, 2021 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2020–89 on the subject line.
khammond on DSKJM1Z7X2PROD with NOTICES
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–2020–89. 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 this
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2020–89 and should
be submitted on or before August 5,
2021.
V. Accelerated Approval of the
Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of Amendment No. 2 in the
Federal Register. In Amendment No. 2,
the Exchange removed from the original
proposal the proposed changes to its
permanent rules to: (i) Permit the CEO
to determine that the Exchange will
facilitate a Trading Halt Auction in one
or more securities following a MWCB
Halt if the security has not reopened by
3:30 p.m. Eastern Time, and (ii)
establish wider Auction Collars for
VerDate Sep<11>2014
20:16 Jul 14, 2021
Jkt 253001
Trading Halt Auctions following a
MWCB Halt.26
The Commission finds that
Amendment No. 2 is consistent with the
Act in that is designed, among other
things, to prevent fraudulent and
manipulative acts and practices and to
promote just and equitable principles of
trade. Accordingly, the Commission
finds good cause, pursuant to Section
19(b)(2) of the Act,27 to approve the
proposed rule change, as modified by
Amendment No. 2, on an accelerated
basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
proposed rule change SR–NYSE–2020–
89, as modified by Amendment No. 2,
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15039 Filed 7–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92360; File No. SR–
EMERALD–2021–22]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Fees for Purge
Ports
July 9, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 1,
2021, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
PO 00000
26 See
supra note 10.
U.S.C. 78s(b)(2).
28 15 U.S.C. 78s(b)(2).
29 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
27 15
Frm 00100
Fmt 4703
Sfmt 4703
37373
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the Exchange’s Fee Schedule
(the ‘‘Fee Schedule’’) to amend the fees
for Purge Ports.3
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/emerald, at MIAX’s principal
office, 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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange currently provides
Market Makers 4 the option to purchase
Purge Ports to assist in their quoting
activity. Purge Ports provide Market
Makers with the ability to send quote
purge messages to the Exchange
System.5 Purge Ports are not capable of
sending or receiving any other type of
messages or information. The use of
Purge Ports is completely optional and
no rule or regulation requires that a
Market Maker utilize them.
The Exchange proposes to amend the
monthly fee for Purge Ports under
Section 5(d)(ii) of the Fee Schedule.
Unlike other options exchanges that
provide purge port functionality and
charge fees on a per port basis,6 the
3 See
Fee Schedule, Section 5(d)(ii).
term ‘‘Market Makers’’ refers to Lead Market
Makers (‘‘LMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), and Registered Market Makers
(‘‘RMMs’’) collectively. See Exchange Rule 100.
5 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
6 See Cboe BXZ Exchange, Inc. (‘‘BZX’’) Options
Fee Schedule, Options Logical Port Fees, Purge
Ports ($750 per purge port per month); Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) Options Fee Schedule,
Options Logical Port Fees, Purge Ports ($750 per
purge port per month); Cboe Exchange, Inc.
(‘‘Cboe’’) Fee Schedule ($850 per purge port per
4 The
Continued
E:\FR\FM\15JYN1.SGM
15JYN1
]]>Agencies
[Federal Register Volume 86, Number 133 (Thursday, July 15, 2021)]
[Notices]
[Pages 37367-37373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15039]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92374; File No. SR-NYSE-2020-89]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 2 and Order Granting Accelerated
Approval to a Proposed Rule Change, as Modified by Amendment No. 2, To
Amend NYSE Rule 7.35C
July 9, 2021.
I. Introduction
On October 23, 2020, New York Stock Exchange LLC (``Exchange'')
filed with the Securities and Exchange Commission (``Commission'')
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
(1) provide the Exchange authority to facilitate a Trading Halt Auction
if a security has not reopened by 3:30 p.m. following a market-wide
circuit-breaker halt (``MWCB Halt''); (2) widen the Auction Collar for
an Exchange-facilitated Trading Halt Auction following an MWCB Halt;
(3) provide that certain DMM (designated market maker) Interest will
not be canceled following an Exchange-facilitated Auction; and (4)
change the Auction Reference Price for Exchange-facilitated Core Open
Auctions.\3\ The proposed rule change was published for
[[Page 37368]]
comment in the Federal Register on November 12, 2020.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ By amendment of the proposed rule change, the Exchange has
removed several of these proposed changes from the original
proposal. See infra notes 7 and 10.
\4\ See Securities Exchange Act Release No. 90363 (Nov. 5,
2020), 85 FR 71964 (Nov. 12, 2020).
---------------------------------------------------------------------------
On December 18, 2020, pursuant to Section 19(b)(2) of the Act,\5\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change, extending the date for Commission action to February 10,
2020.\6\ On February 5, 2021, the Exchange filed Amendment No. 1 to the
proposed rule change, which replaced and superseded the proposed rule
change in its entirety.\7\ On February 10, 2021, the Commission
published notice of Amendment No. 1 and instituted proceedings pursuant
to Section 19(b)(2)(B) of the Act \8\ to determine whether to approve
or disapprove the proposed rule change, as modified by Amendment No.
1.\9\ On March 17, 2021, the Exchange filed Amendment No. 2 to the
proposed rule change, which replaced and superseded the proposed rule
change, as modified by Amendment No. 1, in its entirety.\10\ The
Commission has received no comment letters on the proposal.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 90726 (Dec. 20,
2020), 85 FR 84431 (Dec. 28, 2020).
\7\ In Amendment No. 1, the Exchange removed one of the proposed
changes from the original proposal. Specifically, the Exchange
removed the proposed change to adopt a new definition of Auction
Reference Price for exchange-facilitated Core Open Auctions and to
amend the temporary rule related to such auctions set forth in
Commentary .04 to Rule 7.35C. This aspect of the original proposal
is now the subject of a separate proposed rule change filed by the
Exchange on February 8, 2021 (SR-NYSE-2021-13).
\8\ 15 U.S.C. 78s(b)(2)(B).
\9\ See Securities Exchange Act Release No. 91095 (Feb. 10,
2021), 86 FR 9978 (Feb. 17, 2020).
\10\ In Amendment No. 2, the Exchange removed several more
proposed changes from the original proposal, as modified by
Amendment No. 1. Specifically, the Exchange removed the proposed
changes to make permanent the temporary rules pertaining to: (i)
Permitting the CEO to determine that the Exchange will facilitate a
Trading Halt Auction in one or more securities following a MWCB Halt
if the security has not reopened by 3:30 p.m. Eastern Time, and (ii)
establishing wider Auction Collars for Trading Halt Auctions
following a MWCB Halt.
---------------------------------------------------------------------------
The Commission is publishing this notice to solicit comments on
Amendment No. 2 to the proposed rule change from interested persons,
and is approving the proposed rule change, as modified by Amendment No.
2, on an accelerated basis.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment
No. 2
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 7.35C (Exchange-Facilitated
Auctions) to provide that certain DMM Interest \11\ would not be
cancelled following an Exchange-facilitated Auction.\12\
---------------------------------------------------------------------------
\11\ For purposes of Auctions, the term ``DMM Interest'' is
defined in Rule 7.35(a)(8) to mean all buy and sell interest entered
by a DMM unit in its assigned securities and includes: ``DMM Auction
Liquidity,'' which is non-displayed buy and sell interest that is
designated for an Auction only (see Rule 7.35(a)(8)(A)); ``DMM
Orders'' which are orders, as defined under Rule 7.31, entered by a
DMM unit (see Rule 7.35(a)(8)(B)); and ``DMM After-Auction Orders,''
which are orders entered by a DMM unit before either the Core Open
Auction or Trading Halt Auction that do not participate in an
Auction and are intended instead to maintain price continuity with
reasonable depth following an Auction (see Rule 7.35(a)(8)(C)).
\12\ In this Amendment No. 2, the Exchange is removing its
proposed changes to (1) the Exchange authority to facilitate a
Trading Halt Auction if a security has not reopened following a
Level 1 or Level 2 trading halt due to extraordinary market
volatility under Rule 7.12 (``MWCB Halt'') by 3:30 p.m.; and (2)
widen the Auction Collar for an Exchange-facilitated Trading Halt
Auction following a MWCB Halt, which are currently temporary rules
set forth in Commentaries .01 and .02 to Rule 7.35C.
---------------------------------------------------------------------------
These proposed changes are currently in place on a temporary basis,
as described in Commentary .03 to Rule 7.35C.
Background
To slow the spread of COVID-19 through social-distancing measures,
on March 18, 2020, the CEO of the Exchange made a determination under
Rule 7.1(c)(3) that, beginning March 23, 2020, the Trading Floor
facilities located at 11 Wall Street in New York City would close and
the Exchange would move, on a temporary basis, to fully electronic
trading.\13\ On May 14, 2020, the CEO of the Exchange made a
determination under Rule 7.1(c)(3) to reopen the Trading Floor on a
limited basis on May 26, 2020 to a subset of Floor brokers, subject to
safety measures designed to prevent the spread of COVID-19.\14\ On June
15, 2020, the CEO of the Exchange made a determination under Rule
7.1(c)(3) to begin the second phase of the Trading Floor reopening by
allowing DMMs to return on June 17, 2020, subject to safety measures
designed to prevent the spread of COVID-19.\15\
---------------------------------------------------------------------------
\13\ Pursuant to Rule 7.1(e), the CEO notified the Board of
Directors of the Exchange of this determination. The Exchange's
current rules establish how the Exchange will function fully-
electronically. The CEO also closed the NYSE American Options
Trading Floor, which is located at the same 11 Wall Street
facilities, and the NYSE Arca Options Trading Floor, which is
located in San Francisco, CA. See Press Release, dated March 18,
2020, available here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
\14\ See Securities Exchange Act Release No. 88933 (May 22,
2020), 85 FR 32059 (May 28, 2020) (SR-NYSE-2020-47) (Notice of
filing and immediate effectiveness of proposed rule change).
\15\ See Securities Exchange Act Release No. 89086 (June 17,
2020) (SR-NYSE-2020-52) (Notice of filing and immediate
effectiveness of proposed rule change).
---------------------------------------------------------------------------
Rule 7.35C sets forth the procedures for Exchange-facilitated
Auctions. The first time the Exchange facilitated any Auctions pursuant
to Rule 7.35C was on March 19, 2020, when two DMM firms temporarily
left the Trading Floor in connection with implementing their business
continuity plans related to the COVID-19 pandemic. Beginning on March
23, 2020, when the Exchange temporarily closed the Trading Floor, the
Exchange began facilitating Auctions on behalf of all DMM firms. During
the period of March 23, 2020 through June 16, 2020, among the DMM
firms, the percentage of Auctions that were facilitated by the Exchange
ranged from 1% to 3.2% of the securities assigned to each DMM. During
this period, the vast majority of Auctions were facilitated
electronically by DMMs pursuant to Rules 7.35A and 7.35B.
In connection with both the market-wide volatility associated with
the COVID-19 pandemic in March 2020 and the full and partial closing of
the Trading Floor facilities, the Exchange added Commentary .03 to Rule
7.35C,\16\ which is in effect until the earlier of a full reopening of
the Trading Floor facilities to DMMs or after the Exchange closes on
April 30, 2021.\17\
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 88413 88562 (April
3, 2020), 85 FR 20002 (April 9, 2020) (SR-NYSE-2020-29) (amending
Rule 7.35C to add Commentary .03) (``DMM Interest Filing'').
\17\ See Securities Exchange Act Release No. 90795 (December 23,
2020), 85 FR 86608 (December 30, 2020) (SR-NYSE-2020-106) (Notice of
filing and immediate effectiveness of proposed rule change to extend
the temporary period for Commentaries to Rules 7.35, 7.35A, 7.35B,
and 7.35C; and temporary rule relief in Rule 36.30 to end on the
earlier of a full reopening of the Trading Floor facilities to DMMs
or after the Exchange closes on April 30, 2020). [The Commission
notes that, after submitting Amendment No. 2, the Exchange extended
the outside date for effectiveness of the temporary relief from
April 30, 2021 to August 31, 2021. See Securities Exchange Act
Release No. 91778 (May 5, 2021), 86 FR 25902 (May 11, 2021)].
---------------------------------------------------------------------------
[[Page 37369]]
The Exchange believes that Commentary .03 to Rule 7.35C, which is
in effect on a temporary basis, has supported the fair and orderly
operation of the Exchange during both the market volatility associated
with COVID-19 and the temporary period that the Trading Floor
facilities have been closed either in full or in part due to COVID-19.
The Exchange further believes the functionality that has been operating
on a temporary basis would continue to support the fair and orderly
operation of the Exchange under any circumstances where there may be
either market-wide volatility or the need for the Exchange to
facilitate one or more Auctions. Accordingly, the Exchange proposes
that the changes to how DMM Interest may participate in an Exchange-
facilitated Auction be made permanent.
Proposed Rule Changes
As set forth in Rule 7.35C(a)(1), if the Exchange facilitates an
Auction, DMM Interest would not be eligible to participate in such
Auction and previously-entered DMM Interest would be cancelled. When a
DMM cannot facilitate an Auction because the DMM unit is experiencing a
system issue that prevents it from communicating with Exchange systems,
cancelling DMM Interest following an Exchange-facilitated Auction would
help ensure that DMM Interest that may be at stale prices does not
participate in trading on the Exchange. On the other hand, by
cancelling DMM Interest when the DMM units' systems are operating
normally, DMMs may be limited in their ability to maintain price
continuity with reasonable depth, i.e., provide passive liquidity at
the Exchange best bid and offer and at depth, immediately following an
Exchange-facilitated Auction.
After a period of operating Exchange-facilitated Auctions, the
Exchange identified a way to provide DMMs with a greater opportunity to
provide passive liquidity immediately following an Auction, thereby
dampening volatility, while still limiting DMM risk. To effect this
change, the Exchange added Commentary .03 to Rule 7.35C, which provides
that for the temporary period that begins on April 6, 2020 and ends on
the earlier of a full reopening of the Trading Floor facilities to DMMs
or after the Exchange closes on December 31, 2020, if the Exchange
facilitates an Auction, DMM Interest (i) will not be eligible to
participate if such Auction results in a trade, and will be eligible to
participate if such Auction results in a quote, and (ii) will not be
cancelled unless the limit price of such DMM Interest would be priced
through the Auction Price or Auction Collars, as applicable, or such
DMM Interest would be marketable against other unexecuted orders.\18\
---------------------------------------------------------------------------
\18\ See DMM Interest Filing, supra note 10.
---------------------------------------------------------------------------
The Exchange proposes to make permanent the changes to how
Exchange-facilitated Auctions function, as described in Commentary .03
to Rule 7.35C. By making this functionality permanent, such rules would
continue to apply both during the continuation of the current Trading
Floor closure and if the Exchange were to facilitate Auctions any time
after the Trading Floor fully reopens.
To effect this change, the Exchange proposes to amend 7.35C(a)(1)
as follows (new text underlined, deleted text bracketed):
[GRAPHIC] [TIFF OMITTED] TN15JY21.105
This proposed rule change would make permanent the temporary
functionality set forth in paragraph (a)(1) to Commentary .03.
With this change, DMM Interest would not participate in any
Exchange-facilitated Auctions that would result in a trade. This is how
DMM Interest currently functions when the Exchange facilitates an
Auction pursuant to either Rule 7.35C(a)(1) or Commentary .03 to Rule
7.35C. Based on experience operating pursuant to Commentary .03 to Rule
7.35C, the Exchange believes that this functionality should continue
permanently when the Exchange facilitates an Auction, including, for
example, when the Trading Floor is open but the DMM is unable to
facilitate an Auction because of a systems or technical issue.
More specifically, when a DMM facilitates an Auction that results
in a trade, the DMM determines whether to participate on the buy or
sell side and, based on that direction from the DMM, DMM Orders that do
not participate in the Auction and that would lock or cross other
orders, which would include other DMM Orders, will be cancelled.\19\ If
the DMM has entered both buy and sell interest in advance of the
Auction and the Exchange facilitates the Auction, the DMM would not be
able to control whether the DMM's buy or sell interest would
participate in a trade and the Exchange would not have that instruction
from the DMM of which side of the market that the DMM would
participate. As a result, there may be crossing DMM Interest that could
result in a wash-sale trade that would not have occurred if the DMM had
facilitated the Auction. Excluding DMM Interest from participating in
an Exchange-facilitated Auction that results in a trade eliminates the
potential for a wash-sale trade. In addition, the Exchange believes it
promotes fair and orderly Exchange-facilitated Auctions that result in
a trade to exclude DMM Interest from participating in such Auctions,
because if a DMM's buy or sell interest does not reflect up-to-date
prices, it could impact pricing of the Auction.
---------------------------------------------------------------------------
\19\ See Rule 7.35A(h)(3)(C) (providing that after a Core Open
or Trading Halt Auction, better at-priced DMM Orders that do not
receive an allocation and that lock or cross other unexecuted orders
and buy and sell better-priced DMM Orders will be cancelled after
the Auction Processing Period concludes).
---------------------------------------------------------------------------
By contrast, the Exchange believes that the proposed change for DMM
[[Page 37370]]
Interest to participate in an Exchange-facilitated Auction that results
in a quote would promote fair and orderly markets. This proposed change
is consistent with Commentary .03(a)(1) to Rule 7.35C, but differs from
current Rule 7.35C(a)(1). A security opens on a quote if there is no
buy interest willing to trade with sell interest at the same price. The
Exchange believes that under such circumstances, including DMM Interest
in the Exchange's quote would assist the DMMs in meeting their
obligation to maintain a two-sided quote as well as to maintain
continuity and depth in their assigned securities.\20\ Accordingly, the
Exchange believes that making this change permanent would promote fair
and orderly markets in connection with Exchange-facilitated Auctions
that result in a quote.
---------------------------------------------------------------------------
\20\ See Rule 104(f)(2).
---------------------------------------------------------------------------
The final element of the proposed change to Rule 7.35C(a)(1) is
that DMM Interest would no longer be automatically cancelled after an
Exchange-facilitated Auction. The Exchange believes that this proposed
change would assist DMMs in meeting their obligation, as required by
Rule 104(f)(2), to provide passive liquidity in order to maintain
continuity with reasonable depth in their assigned securities
immediately following a Core Open Auction or Trading Halt Auction that
was facilitated by the Exchange. In advance of an Auction, DMMs can
enter DMM Orders, which if not traded in an Auction, would be part of
the DMM Interest on the Exchange Book after the Auction. In addition,
DMMs can enter DMM After-Auction Orders, which do not participate in
Auctions and are specifically designed to assist the DMMs to maintain
passive liquidity on the Exchange immediately following an Auction,
which supports their ability to maintain continuity with reasonable
depth immediately following an Auction. If DMM Interest is not
automatically cancelled following an Exchange-facilitated Auction, the
DMM would be better able to timely meet these obligations by ensuring
that passive liquidity remains on the Exchange Book immediately
following an Auction.
The Exchange believes that there remain circumstances when DMM
Interest should be cancelled following an Exchange-facilitated Auction.
As proposed, the Exchange would cancel unexecuted DMM Interest under
the same circumstances that unexecuted orders of other member
organizations would be cancelled following such Auctions.
To effect this change, the Exchange proposes to amend Rule
7.35C(g)(1), which currently describes which unexecuted orders would be
cancelled if a security opens or reopens on a trade via an Exchange-
facilitated Auction, and Rule 7.35C(g)(2), which currently describes
which unexecuted orders would be cancelled if a security opens or
reopens on a quote that is above (below) the upper (lower) Auction
Collar via an Exchange-facilitated Auction. The Exchange proposes that
these two subparagraphs would be replaced with the following text to
incorporate that under the same circumstances, DMM Interest would
similarly be cancelled (proposed new text underlined):
[GRAPHIC] [TIFF OMITTED] TN15JY21.106
These proposed rule changes would make permanent the temporary
functionality set forth in paragraphs (b)(1) and (2) to Commentary .03.
The Exchange further believes that if previously-entered DMM
Interest would be marketable against either other DMM Interest or
contra-side unexecuted orders, such DMM Interest should be cancelled.
For example, if for a security, the Auction Reference Price is $10.00,
the lower Auction Collar is $9.00 and the upper Auction Collar is
$11.00, and the orders on the Exchange Book in advance of the Auction
are as follows:
Order 1--Buy DMM Order 1000 shares at $10.05
Order 2--Sell DMM Order 1000 shares at $10.00
Order 3--Buy DMM Order 1000 shares at $10.02
Order 4--Sell Limit Order at $10.03,
the orders in this example would be processed as follows in an
Exchange-facilitated Auction:
Order 1 would be cancelled (because DMM Interest would not
be eligible to participate in an Auction trade, and here, Order 1 is
marketable with Orders 2 and 4)
[[Page 37371]]
Order 2 would be cancelled (because DMM Interest would not
be eligible to participate in an Auction trade, and here Order 2 is
marketable with Order 3), and
Order 3 would not be cancelled because it is no longer
marketable with any other interest, i.e., it no longer locks or crosses
the price of any other contra-side interest in the Exchange Book. Order
3 would therefore be included in the opening quote.
This Exchange-facilitated Auction would result in the following
quote: $10.02 (Order 3-DMM Order) x $10.03 (Order 4-Limit Order).
To effect this change, the Exchange proposes new subparagraph
(g)(3) to Rule 7.35C to specify the additional circumstances when DMM
Interest would be cancelled, as follows:
The Exchange will cancel DMM Interest that is marketable against
contra-side unexecuted orders. If the contra-side unexecuted order
against which such DMM Interest is marketable is DMM Interest, the
DMM Interest with the earlier working time will be canceled.
This proposed rule change would make permanent the temporary
functionality set forth in paragraph (b)(3) to Commentary .03.
The Exchange believes that these proposed rule changes would
promote fair and orderly markets whenever the Exchange facilitates an
Auction under Rule 7.35C--under any circumstance--by supporting DMMs in
maintaining continuity with reasonable depth in their assigned
securities immediately following an Exchange-facilitated Core Open
Auction or Trading Halt Auction that was facilitated by the Exchange.
The Exchange proposes that, with these proposed changes to Rules
7.35C(a)(1) and (g), Commentary .03 to Rule 7.35C would be deleted in
its entirety.
In further support of making the functionality set forth in
Commentary .03 to Rule 7.35C permanent, the Exchange notes that after
the Exchange implemented that Commentary, the Exchange observed
improved performance relating to Exchange-facilitated Auctions.
For the period March 23, 2020 to April 3, 2020, 4.9% of
all Core Open Auctions were facilitated by the Exchange. For the period
April 6, 2020 through June 16, 2020, the Exchange facilitated only 2%
of all Core Open Auctions. In addition, the percentage of Exchange-
facilitated Core Open Auctions that were bound by an Auction Collar
decreased from 1.3% from the pre-April 6, 2020 period, to 0.58% in the
April 6, 2020-June 16, 2020 period.
In addition, the Exchange observed that after April 6,
2020, Exchange-listed securities experienced reduced volatility in the
first half hour of trading. The Exchange uses a quote-based metric to
measure volatility in securities,\21\ and based on that metric,
volatility in Exchange-listed securities between the period of April 6,
2020 and June 16, 2020 was 28.4% lower than the same measure between
March 23, 2020 and April 3, 2020. In addition, the Exchange further
observed that between these two periods, the difference between the
Core Open Auction Price and the subsequent five-minute VWAP dropped by
31.3%.
---------------------------------------------------------------------------
\21\ As described in an Exchange blog post, this metric is
calculated using second-to-second ``quote returns,'' which is
calculated by averaging the midpoints of all NBBO updates for a
security within each second of the day from 9:35 a.m. to 4:00 p.m.,
and then calculating the percentage rate of return of these average
quote midpoints from one second to the next. The variance of returns
are then calculated in aggregated time periods (e.g., 5-minute
buckets) and annualized from seconds to 6.5 hour trading days to 252
trading days in the years. Finally, the Exchange takes the square
root of the annualized variance in the aggregated periods, which
creates the Exchange's quote volatility metric. See NYSE Data
Insights, Introducing Quote Volatility (QV)--a new metric to measure
price volatility, available here: https://www.nyse.com/data-insights/introducing-quote-volatility-qv-a-new-metric-to-measure-price-volatility.
---------------------------------------------------------------------------
For DMM firms that have already returned staff to the Trading
Floor, this proposed change has limited application because the
Exchange has not facilitated any Auctions on behalf of those firms
since June 16, 2020. In addition, the Exchange anticipates that once
the Trading Floor facilities open in full to DMMs, and all DMM firms
have staffing on the Trading Floor, the need for Exchange-facilitated
Auctions would be obviated, and the Exchange will revert to pre-
pandemic rates of Exchange-facilitated Auctions, which were none.
Accordingly, the proposed changes to Rule 7.35C will likely have
limited application and would be available as a business continuity
functionality should DMMs be unable to facilitate an Auction in one or
more securities, for any reason.
There are no technology changes associated with this proposed rule
change and the Exchange would be able to implement it immediately upon
approval of this proposed rule change.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\22\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\23\ in particular, in that 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that Commentary .03 to Rule 7.35C, which is
currently in effect on a temporary basis, has supported the fair and
orderly operation of the Exchange during both the market volatility
associated with COVID-19 and the temporary period that the Trading
Floor facilities have been closed either in full or in part due to
COVID-19. The Exchange further believes the functionality that has been
operating on a temporary basis would continue to support the fair and
orderly operation of the Exchange under any circumstances where there
may be either market-wide volatility or the need for the Exchange to
facilitate one or more Auctions.
As noted above, beginning March 19, 2020, the Exchange began
facilitating auctions as provided for under Rule 7.35C for the first
time, and then, beginning March 23, 2020, when the Trading Floor was
temporarily closed to reduce the spread of COVID-19, began facilitating
Auctions on behalf of all DMM firms. Based on that experience, the
Exchange added Commentary .03 to Rule 7.35C, which is in effect only
for a temporary period while the Trading Floor is closed. The Exchange
believes that it would remove impediments to and perfect the mechanism
of a free and open market and a national market system to make the
changes described in Commentary .03 to Rule 7.35C permanent because it
would allow DMMs to maintain continuity with reasonable depth in their
assigned securities immediately following an Exchange-facilitated
Auction.
As described above, the Exchange is proposing that DMM Interest
would continue not to participate in an Exchange-facilitated Auction
that results in a trade. As noted above, under both the current Rule
and temporary Commentary .03, DMM Interest does not participate in an
Exchange-facilitated Auction that results in a trade in part to prevent
wash-trade sales of previously-entered DMM buy and sell interest and
therefore reduces DMM units' risk. It also protects the fair and
orderly operation of such Auctions because such DMM Interest may be at
stale prices, and therefore could impact pricing of the Auction in a
manner that does not reflect up-to-date trading interest. For this
reason, the Exchange believes it would continue to promote
[[Page 37372]]
fair and orderly Auctions for DMM Interest not to participate in an
Exchange-facilitated Auction that results in a trade.
By contrast, the Exchange believes that the proposed change that
DMM Interest would be included in an Exchange-facilitated Auction that
results in a quote would remove impediments to and perfect the
mechanism of a free and open market and a national market system
because it would promote fair and orderly resumption of trading by
allowing DMM Interest to be considered as part of the opening quote. A
security only opens on a quote when there are no buy and sell orders
that can be crossed at a single price. Accordingly, when a security
opens on a quote, the DMM has an immediate obligation to maintain a
two-sided quote and to provide continuity and depth. Including DMM
interest in an Exchange-facilitated Auction that results in a quote
would assist DMMs in meeting those obligations.
The Exchange believes it would remove impediments to and perfect
the mechanism of a free and open market and a national market system
not to automatically cancel DMM Interest following an Exchange-
facilitated Auction because it would provide DMMs with the opportunity
to provide passive liquidity immediately following an Exchange-
facilitated Auction, thereby reducing volatility while still limiting
DMM risk. Similarly, the Exchange believes that because DMM Interest
would not be participating in an Exchange-facilitated Auction that
results in a trade, it would remove impediments to and perfect the
mechanism of a free and open market and a national market system to
cancel DMM Interest that would be marketable against unexecuted orders
because, if not cancelled, such interest could trade at a price that
would not be consistent with the Auction Price or opening or reopening
quote determined in the Exchange-facilitated Auction. The proposed
changes would also remove impediments to and perfect the mechanism of a
free and open market because DMM Interest that, following an Exchange-
facilitated Auction, would be priced through the Auction Price or
Auction Collars, as applicable, would be cancelled in the same manner
that other unexecuted orders would be cancelled.
The Exchange further believes that the proposed changes to Rules
7.35C(a) and (g) would remove impediments to and perfect the mechanism
of a free and open market and a national market system because the
Exchange observed improved performance following Exchange-facilitated
Auctions after the Exchange implemented Commentary .03 to Rule 7.35C.
Accordingly, should circumstances ever arise again that would require
the Exchange to facilitate any Auctions, which, based on pre-pandemic
experience, would likely be rare, the Exchange believes that these
proposed changes would improve the performance of Exchange-facilitated
Auctions by enabling better engagement by the DMMs in both the Auction
and the immediate after-market while still limiting DMM risk.
III. Discussion and Commission Findings
After careful review, the Commission is approving the proposed rule
change, as modified by Amendment No. 2, for the reasons discussed
below.\24\ The Commission finds that the proposed rule change, as
modified, is consistent with the requirements of the Act and the rules
and regulations thereunder applicable to a national securities
exchange, including Section 6(b)(5) of the Act, which requires that the
rules of an exchange be designed, among other things, 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.\25\
---------------------------------------------------------------------------
\24\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\25\ 17 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to make permanent certain provisions of its
rules that have been temporarily in effect during the course of the
COVID-19 pandemic, as the Exchange has operated with fully and
partially closed floor trading facilities. The Exchange proposes that,
when it facilitates an auction because a DMM is unable to connect to
Exchange systems, DMM Interest will not be able to participate in the
auction if that auction results in a trade, but will be able to
participate if the auction results in a quote (i.e., if no buy interest
in the auction is willing to trade with sell interest at the same
price). This aspect of the proposal is consistent with Section 6(b)(5)
of the Act because (1) in the case of an Exchange-facilitated auction
that results in a trade, the rule is reasonably designed to prevent
wash-sale trades between DMM Interest on opposite sides of the market
and to prevent DMM Interest that does not reflect up-to-date prices
from affecting the price of the auction; and (2) in the case of an
Exchange-facilitated auction that results in a quote, to allow DMM
Interest to populate the Exchange's order book after the auction,
assisting DMMs in meeting their obligations to maintain a two-sided
quote and continuity and depth in their assigned securities.
The Exchange also proposes that DMM Interest would no longer be
automatically canceled after an Exchange-facilitated opening or
reopening auction. Under the proposal, the Exchange would cancel DMM
Interest after an auction under the same circumstances in which it
cancels unexecuted limit orders of other member organizations, namely
(1) in the case of an Exchange-facilitated auction that opens or
reopens on a trade, when the interest is better-priced than the auction
price, and (2) in the case of an Exchange-facilitated auction that
opens or reopens on a quote, when the interest is priced better than
the Auction Collar under the Exchange's rules. Other DMM Interest,
however, including DMM After-Auction Orders, would not be canceled and
would be incorporated into the Exchange's order book immediately upon
the commencement of continuous trading following the auction. This
aspect of the proposal is consistent with Section 6(b)(5) of the Act
because the proposed rule is reasonably designed to permit DMMs to
provide passive liquidity in continuous trading immediately following
an auction and thereby meet their obligations to maintain price
continuity with reasonable depth.
For these reasons, the Commission finds that this proposed rule
change is consistent with the requirements of the Act and in particular
Section 6(b)(5) because it is reasonably 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
IV. Solicitation of Comments on Amendment No. 2
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 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
[[Page 37373]]
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-89 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-2020-89. 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 this filing will also be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are cautioned that we do not redact or
edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NYSE-2020-89
and should be submitted on or before August 5, 2021.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of Amendment No. 2 in the Federal
Register. In Amendment No. 2, the Exchange removed from the original
proposal the proposed changes to its permanent rules to: (i) Permit the
CEO to determine that the Exchange will facilitate a Trading Halt
Auction in one or more securities following a MWCB Halt if the security
has not reopened by 3:30 p.m. Eastern Time, and (ii) establish wider
Auction Collars for Trading Halt Auctions following a MWCB Halt.\26\
---------------------------------------------------------------------------
\26\ See supra note 10.
---------------------------------------------------------------------------
The Commission finds that Amendment No. 2 is consistent with the
Act in that is designed, among other things, to prevent fraudulent and
manipulative acts and practices and to promote just and equitable
principles of trade. Accordingly, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Act,\27\ to approve the proposed
rule change, as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\28\ that the proposed rule change SR-NYSE-2020-89, as modified by
Amendment No. 2, be, and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15039 Filed 7-14-21; 8:45 am]
BILLING CODE 8011-01-P
