Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31(i)(2), 5389-5392 [2023-01628]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 88, No. 18 / Friday, January 27, 2023 / Notices approximately 15 hours updating their existing websites, resulting in a total one-time burden of 45 hours (3 respondent clearing agencies × 15 hours per website update) or 15 hours annualized over three years. Respondent SROs will also have to provide training to staff members using the Electronic Form 19b–4 Filing System (‘‘EFFS’’) to submit SecurityBased Swap Submissions, Advance Notices, and/or proposed rule changes electronically. The Commission estimates that two anticipated national securities exchanges and one anticipated clearing agency will spend approximately 60 hours training all staff members who will use EFFS to submit Security-Based Swap Submissions, Advance Notices, and/or proposed rule changes electronically, or 20 hours annualized over three years. The Commission also estimates that these newly-registered and anticipated SROs will have a one-time burden of 390 hours to draft and implement internal policies and procedures for using EFFS to make these submissions, or 130 hours annualized over three years. The Commission estimates that each of the 46 respondents will spend 10 hours each year training new compliance staff members and updating the training of existing compliance staff members to use EFFS, for a total annual burden of 460 hours (46 respondent SROs × 10 hours). In connection with Security-Based Swap Submissions, counterparties may apply for a stay from a mandatory clearing requirement under Rule 3Ca–1. The Commission estimates that each clearing agency will submit five applications for stays from a clearing requirement per year and it will take approximately 18 hours to retrieve, review, and submit each application. Thus, the total annual reporting burden for the Rule 3Ca–1 stay of clearing requirement would be 270 hours (3 respondent clearing agencies × 5 stay of clearing applications per year × 18 hours to retrieve, review, and submit the stay of clearing information). Based on the above, the total estimated annual response burden pursuant to Rule 19b–4 and Form 19b– 4 is the sum of the total annual reporting burdens for filing proposed rule changes, Advance Notices, and Security-Based Swap Submissions; training staff to file such proposals; drafting, modifying, and implementing internal policies and procedures for filing such proposals; posting each proposal on the respondents’ websites; updating websites to enable posting of proposals; updating the respondents’ online rulebooks to reflect the proposals VerDate Sep<11>2014 16:53 Jan 26, 2023 Jkt 259001 that became effective; submitting copies of Advance Notices to the Board; and applying for stays from clearing requirements, which is 69,259 hours. Compliance with Rule 19b–4 is mandatory. Information received in response to Rule 19b–4 shall not be kept confidential; the information collected is public information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following website: www.reginfo.gov. Find this particular information collection by selecting ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Written comments and recommendations for the proposed information collection should be sent by February 27, 2023 to (i) MBX.OMB.OIRA.SEC_desk_officer@ omb.eop.gov and (ii) David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or by sending an email to: PRA_Mailbox@sec.gov. Dated: January 23, 2023. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–01613 Filed 1–26–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96735; File No. SR– NYSENAT–2023–04] Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31(i)(2) January 23, 2023. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on January 19, 2023, NYSE National, Inc. (‘‘NYSE National’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 5389 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 7.31(i)(2) to enhance the Exchange’s existing Self Trade Prevention (‘‘STP’’) modifiers. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 7.31(i)(2) to enhance the Exchange’s existing Self Trade Prevention (‘‘STP’’) modifiers. Specifically, the Exchange proposes to allow ETP Holders the option to apply STP modifiers to orders submitted not only from the same MPID, as the current rule provides, but also to orders submitted from (i) the same subidentifier of a particular MPID; (ii) other MPIDs associated with the same Client ID (as designated by the ETP Holder); and (iii) Affiliates of the ETP Holder. Background Currently, Rule 7.31(i)(2) offers optional anti-internalization functionality to ETP Holders in the form of STP modifiers that enable an ETP Holder to prevent two of its orders from executing against each other. Currently, ETP Holders can set the STP modifier to apply at the market participant identifier (‘‘MPID’’) level. The STP modifier on the order with the most recent time stamp controls the interaction between two orders marked with STP modifiers. STP functionality assists market participants by allowing E:\FR\FM\27JAN1.SGM 27JAN1 5390 Federal Register / Vol. 88, No. 18 / Friday, January 27, 2023 / Notices firms to better prevent unintended executions with themselves and to reduce the potential for ‘‘wash sales’’ that may occur as a result of the velocity of trading in a high-speed marketplace. STP functionality also assists market participants in reducing trading costs from unwanted executions potentially resulting from the interaction of executable buy and sell trading interest from the same firm. The Exchange notes that several equities exchanges—including IEX, Nasdaq, Nasdaq BX, Nasdaq Phlx, and MIAX Pearl Equities—have all recently amended their rules to provide additional levels at which orders may be grouped for the purposes of applying their anti-internalization rules. As such, the proposed changes herein are not novel and are familiar to market participants.4 khammond on DSKJM1Z7X2PROD with NOTICES Proposed Amendment The Exchange proposes to amend the Rule 7.31(i)(2) in three ways, each of which would enhance ETP Holders’ flexibility over the levels at which orders may be grouped for the purposes of applying the Exchange’s existing STP modifiers. First, the Exchange proposes to amend the rule to permit an ETP Holder to set the STP modifiers to apply at the level of a subidentifier of an MPID. This change would allow ETP Holders to prevent orders sent from the same subidentifier of a particular MPID from executing against each other, but permit orders sent from different subidentifiers of the same MPID to interact.5 Second, the Exchange proposes to amend Rule 7.31(i)(2) to permit an ETP Holder to set the STP modifiers to prevent orders from different MPIDs from executing against each other. The proposed amendment would address this by allowing ETP Holders to apply STP modifiers at the level of ‘‘Client 4 Several other equity exchanges recently amended their rules to allow affiliate grouping for their own anti-internalization functionality. See, e.g., Securities Exchange Act Release Nos. 96187 (October 31, 2022), 87 FR 66764 (November 4, 2022) (SR–IEX–2022–08); 96156 (October 25, 2022), 87 FR 65633 (October 31, 2022) (SR–BX–2022–020); 96154 (October 25, 2022), 87 FR 65631 (October 31, 2022) (SR–Phlx–2022–43); 96069 (October 13, 2022), 87 FR 63558 (October 19, 2022) (SR–NASDAQ–2022– 56, implemented by SR–NASSDAQ–2022–60); and 96334 (November 16, 2022), 87 FR 71368 (November 22, 2022) (SR–PEARL–2022–48). 5 This functionality exists on the Exchange’s affiliate exchange Arca Options, and as such is not novel and is familiar to market participants. See Arca Options Rule 6.62P–O(i)(2) (‘‘An Aggressing Order or Aggressing Quote to buy (sell) designated with one of the STP modifiers in this paragraph will be prevented from trading with a resting order or quote to sell (buy) also designated with an STP modifier from the same MPID, and, if specified, any subidentifier of that MPID.’’). VerDate Sep<11>2014 16:53 Jan 26, 2023 Jkt 259001 ID,’’ which would be an identifier designated by the ETP Holder. As proposed, a Client ID would function similarly to an MPID in that it would be a unique identifier assigned to an ETP Holder. The Exchange believes that this proposed enhancement would provide ETP Holders with greater flexibility in how they instruct the Exchange to apply STP modifiers to their orders. The Exchange notes that it is not novel for an exchange to provide its members with multiple methods by which to designate anti-internalization instructions.6 Third, the Exchange proposes to amend Rule 7.31(i)(2) to permit ETP Holders to direct orders not to execute against orders entered across MPIDs associated with Affiliates of the ETP Holder that are also ETP Holders.7 This change would expand the availability of the STP functionality to ETP Holders that have divided their business activities between separate corporate entities without disadvantaging them when compared to ETP Holders that operate their business activities within a single corporate entity. The Exchange believes that these enhancements will all provide helpful flexibility for ETP Holders by expanding their ability to apply STP modifiers at multiple levels, including within a subidentifier of a single MPID, across multiple MPIDs of the same Client ID, and across multiple MPIDs of the ETP Holder and its Affiliates, in addition to at the MPID level as the current rule provides. These proposed changes would help ETP Holders better manage their order flow and prevent undesirable executions or the potential for ‘‘wash sales’’ that might otherwise occur. To effect these changes, the Exchange proposes to amend the first sentence of Rule 7.31(i)(2) and add a new sentence as follows (proposed text italicized, deletions in brackets): ‘‘Any incoming order to buy (sell) designated with an STP modifier will be prevented from trading with a resting order to sell (buy) also designated with an STP modifier and from the same Client ID; the same MPID and, if specified, any 6 See, e.g., MIAX Pearl, LLC (‘‘MIAX Pearl Equities’’) Rule 2614(f) (specifying that Self-Trade Prevention Modifiers will be applicable to orders ‘‘from the same MPID, Exchange member identifier, trading group identifier, or Equity Member Affiliate (any such identifier, a ‘Unique Identifier’)’’). 7 The proposed definition of ‘‘Affiliate’’ is identical to the one currently provided in the Exchange’s Fee Schedule. See NYSE National, Inc. Schedule of Fees and Rebates, Section I.B(c) (‘‘For purposes of this Schedule of Fees and Rebates, the term ‘‘affiliate’’ shall mean any ETP Holder under 75% common ownership or control of that ETP Holder.’’). This 75% threshold is not novel. See, e.g., Nasdaq PHLX LLC (‘‘Nasdaq PHLX’’) Equity 4, Rule 3307(c). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 subidentifier; or an Affiliate identifier (any such identifier, a ‘‘Unique Identifier’’). For purposes of this rule, the term ‘‘Affiliate’’ means any ETP Holder under 75% common ownership or control of that ETP Holder.’’ The Exchange further proposes to replace references to ‘‘MPID’’ in Rules 7.31(i)(2)(A)–(D) with the term ‘‘Unique Identifier.’’ While this proposal would expand how an ETP Holder can designate orders with an STP modifier, nothing in this proposal would make substantive changes to the STP modifiers themselves or how they would function with respect to two orders interacting within a relevant level. The Exchange notes that, as with its current anti-internalization functionality, use of the proposed revised Rule 7.31(i)(2) will not alleviate or otherwise exempt ETP Holders from their best execution obligations. As such, ETP Holders using the proposed enhanced STP functionality will continue to be obligated to take appropriate steps to ensure that customer orders that do not execute because they were subject to antiinternalization ultimately receive the same price, or a better price, than they would have received had execution of the orders not been inhibited by antiinternalization. Timing and Implementation The Exchange anticipates that the technology changes required to implement this proposed rule change will become available on a rolling basis, beginning less than 30 days from the date of filing, to be completed by the end of the first quarter of 2023. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,8 in general, and furthers the objectives of section 6(b)(5) of the Act,9 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and because it is not designed to permit unfair 8 15 9 15 E:\FR\FM\27JAN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 27JAN1 Federal Register / Vol. 88, No. 18 / Friday, January 27, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES discrimination between customers, issuers, brokers, or dealers. Specifically, the Exchange believes that the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system and is consistent with the protection of investors and the public interest because enhancing how ETP Holders may apply STP modifiers will provide ETP Holders with additional flexibility with respect to how they implement self-trade protections provided by the Exchange that may better support their trading strategies. The Exchange believes that the proposed rule change does not unfairly discriminate among ETP Holders because the proposed STP protections will be available to all ETP Holders, and ETP Holders that prefer setting STP modifiers at the MPID level will still be able to do so. In addition, allowing ETP Holders to apply STP modifiers to trades submitted by their Affiliates that are also ETP Holders is intended to avoid disparate treatment of firms that have divided their various business activities between separate corporate entities as compared to firms that operate those business activities within a single corporate entity. Finally, the Exchange notes that other equity exchanges recently amended their rules to allow affiliate grouping for their own anti-internalization functionality and similarly use a 75% threshold of common ownership for assessing whether such orders would be eligible for this enhancement.10 Consequently, the Exchange does not believe that this change raises new or novel issues not already considered by the Commission. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the proposal is designed to enhance the Exchange’s competitiveness by providing additional flexibility over the levels at which orders may be grouped for STP purposes, thereby incentivizing ETP Holders to send orders to the Exchange and increase the liquidity available on the Exchange. The Exchange also notes that the proposed new STP grouping options, like the Exchange’s current anti-internalization functionality, are completely optional and ETP Holders can determine whether to apply anti-internalization protections 10 See supra notes 4 and 7. VerDate Sep<11>2014 16:53 Jan 26, 2023 Jkt 259001 to orders submitted to the Exchange, and if so, at what level to apply those protections (e.g., MPID, subidentifier, Client ID, or Affiliate level). The proposed rule change would also improve the Exchange’s ability to compete with other exchanges that recently amended their rules to expand the groupings for their own antiinternalization functionality. There is no barrier to other national securities exchanges adopting similar antiinternalization groupings as those proposed herein. 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 Because the foregoing 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 for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to section 19(b)(3)(A) of the Act 11 and Rule 19b–4(f)(6) 12 thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 13 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),14 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative upon filing. The Exchange requested the waiver because it would enable the Exchange to compete with other exchanges that have recently amended their rules to expand the levels at which orders may be grouped for STP purposes. The Exchange states that at 11 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 13 17 CFR 240.19b–4(f)(6). 14 17 CFR 240.19b–4(f)(6)(iii). 12 17 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 5391 least one such competitor exchange plans to introduce similar capabilities to market participants as early as January 9, 2023. The Exchange also states that it is currently working on technological solutions to meet this competition and to make similar offerings available to market participants as soon as possible. The Exchange expects to begin rolling out this functionality in less than 30 days from the date of filing, and thus requests waiver of the operative delay in order to promptly meet market competition. For these reasons, and because the proposed rule change does not raise any novel regulatory issues, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.15 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– NYSENAT–2023–04 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSENAT–2023–04. This file number should be included on the subject line if email is used. To help the Commission process and review your 15 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\27JAN1.SGM 27JAN1 5392 Federal Register / Vol. 88, No. 18 / Friday, January 27, 2023 / Notices 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–NYSENAT–2023–04 and should be submitted on or before February 17, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–01628 Filed 1–26–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96734; File No. SR– NYSECHX–2023–04] Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Add Violations of Article 6, Rule 13 to the List of Minor Rule Violations in Rule 10.9217 khammond on DSKJM1Z7X2PROD with NOTICES January 23, 2023. 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 January 9, 2023, NYSE Chicago, Inc. (‘‘NYSE 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:53 Jan 26, 2023 Jkt 259001 Chicago’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II 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 and approving the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to add Article 6, Rule 13 (Registration Requirements) to the list of minor rule violations in Rule 10.9217. 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 III 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 add Article 6, Rule 13 (Registration Requirements) to the list of minor rule violations in Rule 10.9217. Article 6, Rule 13, which was adopted in 2018,4 sets forth the requirements for persons engaged in the investment banking or securities business of a Participant to be registered with the Exchange as a representative or principal in each category of registration appropriate to his or her functions and responsibilities as specified in Article 6, Rule 14. The Exchange proposes to add Article 6, Rule 13 to the list of rules in Rule 4 See Securities Exchange Act Release No. 84896 (December 20, 2018), 83 FR 67376 (December 28, 2018) (SR–CHX–2018–07) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Qualification, Registration and Continuing Education Requirements Applicable to Participants). PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 10.9217 eligible for disposition pursuant to a fine under Rule 10.9216(b). Specifically, the Exchange proposes to add Article 6, Rule 13 to the ‘‘List of Rule Violations and Fines Applicable Thereto’’ as item 25 under current subsection (e), titled ‘‘Reporting and Record Retention Violations.’’ The substantially similar version of Article 6, Rule 13 was adopted by the Exchange’s affiliate New York Stock Exchange LLC (‘‘NYSE’’) in 2018 5 and is currently eligible for minor rule fines under the NYSE’s version of Rule 10.9217.6 The Exchange believes that having the ability to issue a minor rule fine for failing to comply with the registration requirements of Article 6, Rule 13 would be consistent with and complement the Exchange’s current ability to issue minor rule fines for other registration violations (e.g., Registration and Approval of Participant Personnel (Article 6, Rule 2(a) & (b), Registration of Market Makers and Market Maker Authorized Traders (Article 16, Rules 1 and 3)). The Exchange further believes that the violations of the registration requirements are particularly suited to minor rule fines because minor fines provide a reasonable means of addressing violations that do not rise to the level of requiring formal disciplinary proceedings, while providing greater flexibility in handling certain violations. The Exchange further proposes to add fine levels for violations of Article 6, Rule 13. The Exchange would add proposed first, second and third level fines for violations of Article 6, Rule 13 to the fine schedule of $250 for the first violation, $750 for the second violation and $1,500 for the third and subsequent violations. The proposed fine levels would be the same as those in current Rule 10.9217(f).13 and (f).21 for violations of Article 6, Rule 2(a) & (b) and Article 16, Rules 1 and 3, respectively. The Exchange believes that the proposed change would strengthen the Exchange’s ability to carry out its 5 See Securities Exchange Act Release No. 84336 (October 2, 2018), 83 FR 50727 (October 9, 2018) (SR–NYSE–2018–44) (Notice of Filing and Immediate Effectiveness of Amendments To Rules Regarding Qualification, Registration and Continuing Education Applicable to Members and Member Organizations). The Exchange’s other affiliates also adopted substantially similar versions of Article 6, Rule 13. See NYSE American LLC (‘‘NYSE American’’) Rule 2.1210; NYSE Arca, Inc. (‘‘NYSE Arca’’) Rule 2.1210; & NYSE National, Inc. (‘‘NYSE National’’) Rule 2.1210. 6 See NYSE Rule 9217. The substantially similar versions of Article 6, Rule 13 are also eligible for minor rule fines under each affiliate’s version of Rule 10.9217. See NYSE American Rule 9217; NYSE Arca Rule 10.9217(g)(13); & NYSE National Rule 10.9217(f). E:\FR\FM\27JAN1.SGM 27JAN1

Agencies

[Federal Register Volume 88, Number 18 (Friday, January 27, 2023)]
[Notices]
[Pages 5389-5392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01628]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96735; File No. SR-NYSENAT-2023-04]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 7.31(i)(2)

January 23, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on January 19, 2023, NYSE National, Inc. (``NYSE National'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 7.31(i)(2) to enhance the 
Exchange's existing Self Trade Prevention (``STP'') modifiers. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 7.31(i)(2) to enhance the 
Exchange's existing Self Trade Prevention (``STP'') modifiers. 
Specifically, the Exchange proposes to allow ETP Holders the option to 
apply STP modifiers to orders submitted not only from the same MPID, as 
the current rule provides, but also to orders submitted from (i) the 
same subidentifier of a particular MPID; (ii) other MPIDs associated 
with the same Client ID (as designated by the ETP Holder); and (iii) 
Affiliates of the ETP Holder.
Background
    Currently, Rule 7.31(i)(2) offers optional anti-internalization 
functionality to ETP Holders in the form of STP modifiers that enable 
an ETP Holder to prevent two of its orders from executing against each 
other. Currently, ETP Holders can set the STP modifier to apply at the 
market participant identifier (``MPID'') level. The STP modifier on the 
order with the most recent time stamp controls the interaction between 
two orders marked with STP modifiers. STP functionality assists market 
participants by allowing

[[Page 5390]]

firms to better prevent unintended executions with themselves and to 
reduce the potential for ``wash sales'' that may occur as a result of 
the velocity of trading in a high-speed marketplace. STP functionality 
also assists market participants in reducing trading costs from 
unwanted executions potentially resulting from the interaction of 
executable buy and sell trading interest from the same firm.
    The Exchange notes that several equities exchanges--including IEX, 
Nasdaq, Nasdaq BX, Nasdaq Phlx, and MIAX Pearl Equities--have all 
recently amended their rules to provide additional levels at which 
orders may be grouped for the purposes of applying their anti-
internalization rules. As such, the proposed changes herein are not 
novel and are familiar to market participants.\4\
---------------------------------------------------------------------------

    \4\ Several other equity exchanges recently amended their rules 
to allow affiliate grouping for their own anti-internalization 
functionality. See, e.g., Securities Exchange Act Release Nos. 96187 
(October 31, 2022), 87 FR 66764 (November 4, 2022) (SR-IEX-2022-08); 
96156 (October 25, 2022), 87 FR 65633 (October 31, 2022) (SR-BX-
2022-020); 96154 (October 25, 2022), 87 FR 65631 (October 31, 2022) 
(SR-Phlx-2022-43); 96069 (October 13, 2022), 87 FR 63558 (October 
19, 2022) (SR-NASDAQ-2022-56, implemented by SR-NASSDAQ-2022-60); 
and 96334 (November 16, 2022), 87 FR 71368 (November 22, 2022) (SR-
PEARL-2022-48).
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Proposed Amendment
    The Exchange proposes to amend the Rule 7.31(i)(2) in three ways, 
each of which would enhance ETP Holders' flexibility over the levels at 
which orders may be grouped for the purposes of applying the Exchange's 
existing STP modifiers.
    First, the Exchange proposes to amend the rule to permit an ETP 
Holder to set the STP modifiers to apply at the level of a 
subidentifier of an MPID. This change would allow ETP Holders to 
prevent orders sent from the same subidentifier of a particular MPID 
from executing against each other, but permit orders sent from 
different subidentifiers of the same MPID to interact.\5\
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    \5\ This functionality exists on the Exchange's affiliate 
exchange Arca Options, and as such is not novel and is familiar to 
market participants. See Arca Options Rule 6.62P-O(i)(2) (``An 
Aggressing Order or Aggressing Quote to buy (sell) designated with 
one of the STP modifiers in this paragraph will be prevented from 
trading with a resting order or quote to sell (buy) also designated 
with an STP modifier from the same MPID, and, if specified, any 
subidentifier of that MPID.'').
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    Second, the Exchange proposes to amend Rule 7.31(i)(2) to permit an 
ETP Holder to set the STP modifiers to prevent orders from different 
MPIDs from executing against each other. The proposed amendment would 
address this by allowing ETP Holders to apply STP modifiers at the 
level of ``Client ID,'' which would be an identifier designated by the 
ETP Holder. As proposed, a Client ID would function similarly to an 
MPID in that it would be a unique identifier assigned to an ETP Holder. 
The Exchange believes that this proposed enhancement would provide ETP 
Holders with greater flexibility in how they instruct the Exchange to 
apply STP modifiers to their orders. The Exchange notes that it is not 
novel for an exchange to provide its members with multiple methods by 
which to designate anti-internalization instructions.\6\
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    \6\ See, e.g., MIAX Pearl, LLC (``MIAX Pearl Equities'') Rule 
2614(f) (specifying that Self-Trade Prevention Modifiers will be 
applicable to orders ``from the same MPID, Exchange member 
identifier, trading group identifier, or Equity Member Affiliate 
(any such identifier, a `Unique Identifier')'').
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    Third, the Exchange proposes to amend Rule 7.31(i)(2) to permit ETP 
Holders to direct orders not to execute against orders entered across 
MPIDs associated with Affiliates of the ETP Holder that are also ETP 
Holders.\7\ This change would expand the availability of the STP 
functionality to ETP Holders that have divided their business 
activities between separate corporate entities without disadvantaging 
them when compared to ETP Holders that operate their business 
activities within a single corporate entity.
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    \7\ The proposed definition of ``Affiliate'' is identical to the 
one currently provided in the Exchange's Fee Schedule. See NYSE 
National, Inc. Schedule of Fees and Rebates, Section I.B(c) (``For 
purposes of this Schedule of Fees and Rebates, the term 
``affiliate'' shall mean any ETP Holder under 75% common ownership 
or control of that ETP Holder.''). This 75% threshold is not novel. 
See, e.g., Nasdaq PHLX LLC (``Nasdaq PHLX'') Equity 4, Rule 3307(c).
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    The Exchange believes that these enhancements will all provide 
helpful flexibility for ETP Holders by expanding their ability to apply 
STP modifiers at multiple levels, including within a subidentifier of a 
single MPID, across multiple MPIDs of the same Client ID, and across 
multiple MPIDs of the ETP Holder and its Affiliates, in addition to at 
the MPID level as the current rule provides. These proposed changes 
would help ETP Holders better manage their order flow and prevent 
undesirable executions or the potential for ``wash sales'' that might 
otherwise occur.
    To effect these changes, the Exchange proposes to amend the first 
sentence of Rule 7.31(i)(2) and add a new sentence as follows (proposed 
text italicized, deletions in brackets): ``Any incoming order to buy 
(sell) designated with an STP modifier will be prevented from trading 
with a resting order to sell (buy) also designated with an STP modifier 
and from the same Client ID; the same MPID and, if specified, any 
subidentifier; or an Affiliate identifier (any such identifier, a 
``Unique Identifier''). For purposes of this rule, the term 
``Affiliate'' means any ETP Holder under 75% common ownership or 
control of that ETP Holder.'' The Exchange further proposes to replace 
references to ``MPID'' in Rules 7.31(i)(2)(A)-(D) with the term 
``Unique Identifier.''
    While this proposal would expand how an ETP Holder can designate 
orders with an STP modifier, nothing in this proposal would make 
substantive changes to the STP modifiers themselves or how they would 
function with respect to two orders interacting within a relevant 
level.
    The Exchange notes that, as with its current anti-internalization 
functionality, use of the proposed revised Rule 7.31(i)(2) will not 
alleviate or otherwise exempt ETP Holders from their best execution 
obligations. As such, ETP Holders using the proposed enhanced STP 
functionality will continue to be obligated to take appropriate steps 
to ensure that customer orders that do not execute because they were 
subject to anti-internalization ultimately receive the same price, or a 
better price, than they would have received had execution of the orders 
not been inhibited by anti-internalization.
Timing and Implementation
    The Exchange anticipates that the technology changes required to 
implement this proposed rule change will become available on a rolling 
basis, beginning less than 30 days from the date of filing, to be 
completed by the end of the first quarter of 2023.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\9\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest, 
and because it is not designed to permit unfair

[[Page 5391]]

discrimination between customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change 
will remove impediments to and perfect the mechanism of a free and open 
market and a national market system and is consistent with the 
protection of investors and the public interest because enhancing how 
ETP Holders may apply STP modifiers will provide ETP Holders with 
additional flexibility with respect to how they implement self-trade 
protections provided by the Exchange that may better support their 
trading strategies.
    The Exchange believes that the proposed rule change does not 
unfairly discriminate among ETP Holders because the proposed STP 
protections will be available to all ETP Holders, and ETP Holders that 
prefer setting STP modifiers at the MPID level will still be able to do 
so. In addition, allowing ETP Holders to apply STP modifiers to trades 
submitted by their Affiliates that are also ETP Holders is intended to 
avoid disparate treatment of firms that have divided their various 
business activities between separate corporate entities as compared to 
firms that operate those business activities within a single corporate 
entity.
    Finally, the Exchange notes that other equity exchanges recently 
amended their rules to allow affiliate grouping for their own anti-
internalization functionality and similarly use a 75% threshold of 
common ownership for assessing whether such orders would be eligible 
for this enhancement.\10\ Consequently, the Exchange does not believe 
that this change raises new or novel issues not already considered by 
the Commission.
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    \10\ See supra notes 4 and 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
proposal is designed to enhance the Exchange's competitiveness by 
providing additional flexibility over the levels at which orders may be 
grouped for STP purposes, thereby incentivizing ETP Holders to send 
orders to the Exchange and increase the liquidity available on the 
Exchange. The Exchange also notes that the proposed new STP grouping 
options, like the Exchange's current anti-internalization 
functionality, are completely optional and ETP Holders can determine 
whether to apply anti-internalization protections to orders submitted 
to the Exchange, and if so, at what level to apply those protections 
(e.g., MPID, subidentifier, Client ID, or Affiliate level). The 
proposed rule change would also improve the Exchange's ability to 
compete with other exchanges that recently amended their rules to 
expand the groupings for their own anti-internalization functionality. 
There is no barrier to other national securities exchanges adopting 
similar anti-internalization groupings as those proposed herein.

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

    Because the foregoing 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 for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) \12\ thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange requested 
the waiver because it would enable the Exchange to compete with other 
exchanges that have recently amended their rules to expand the levels 
at which orders may be grouped for STP purposes. The Exchange states 
that at least one such competitor exchange plans to introduce similar 
capabilities to market participants as early as January 9, 2023. The 
Exchange also states that it is currently working on technological 
solutions to meet this competition and to make similar offerings 
available to market participants as soon as possible. The Exchange 
expects to begin rolling out this functionality in less than 30 days 
from the date of filing, and thus requests waiver of the operative 
delay in order to promptly meet market competition. For these reasons, 
and because the proposed rule change does not raise any novel 
regulatory issues, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposal operative upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of 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 [email protected]. Please include 
File Number SR-NYSENAT-2023-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSENAT-2023-04. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 5392]]

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-
NYSENAT-2023-04 and should be submitted on or before February 17, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01628 Filed 1-26-23; 8:45 am]
BILLING CODE 8011-01-P
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