Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-E, 78413-78416 [2023-25206]

Download as PDF Federal Register / Vol. 88, No. 219 / Wednesday, November 15, 2023 / Notices 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– NYSEARCA–2023–76 on the subject line. [Release No. 34–98899; File No. SR– NYSEARCA–2023–77] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31–E Paper Comments November 9, 2023. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. 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 October 31, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. All submissions should refer to file number SR–NYSEARCA–2023–76. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSEARCA–2023–76 and should be submitted on or before December 6, 2023. ddrumheller on DSK120RN23PROD with NOTICES1 SECURITIES AND EXCHANGE COMMISSION For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–25204 Filed 11–14–23; 8:45 am] BILLING CODE 8011–01–P I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7.31–E to provide for the use of ALO Reserve Orders. 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–E to provide for the use of ALO Reserve Orders. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:49 Nov 14, 2023 Jkt 262001 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 78413 ALO Orders Rule 7.31–E(e)(2) defines an ALO Order as a Non-Routable Limit Order that, unless it receives price improvement, will not remove liquidity from the NYSE Arca Book. An ALO Order can be designated to be cancelled if it would be displayed at a price other than its limit price for any reason. An ALO Order can be designated as nondisplayed. As described in Rule 7.31–E(e)(2)(A), an Aggressing ALO Order to buy (sell) will trade if its limit price crosses the working price of any displayed or nondisplayed orders to sell (buy) on the NYSE Arca Book priced equal to or below (above) the PBO (PBB) of an Away Market, in which case it will trade as the liquidity taker with such orders. As noted above, Rule 7.31–E(e)(2) provides that an ALO Order may be designated to cancel if it would be displayed at a price other than its limit price. If an ALO Order is not so designated, any untraded quantity of such order to buy (sell) is processed as follows (Rules 7.31–E(e)(2)(B)(i) and (ii)): • If the limit price of the ALO Order locks the display price of any order to sell (buy) ranked Priority 2—Display Orders on the NYSE Arca Book, it will have a working price and display price (if designated to display) one MPV below (above) the price of the displayed order on the NYSE Arca Book. • If the limit price of the ALO Order locks or crosses the PBO (PBB) of an Away Market, it will have a working price equal to the PBO (PBB) of the Away Market and a display price (if designated to display) one MPV below (above) the PBO (PBB) of the Away Market. Rule 7.31–E(e)(2)(C) provides that any untraded quantity of an ALO Order to buy (sell) will have a working price and display price (if designated to display) equal to its limit price if it locks nondisplayed orders to sell (buy) on the NYSE Arca Book. Rule 7.31–E(e)(2)(D) provides that an ALO Order to buy (sell) will not be assigned a working price or display price above (below) the limit price of such order. Once resting on the NYSE Arca Book, ALO Orders may be re-priced or trade, or both, as described in Rule 7.31– E(e)(2)(E): • If order(s) to sell (buy) ranked Priority 2—Display Orders or the PBO (PBB) of an Away Market re-prices higher (lower), an ALO Order to buy (sell) will trade or be priced, or both, consistent with Rules 7.31–E(e)(2)(A), (e)(2)(B)(i) and (ii), and (e)(2)(C). E:\FR\FM\15NON1.SGM 15NON1 78414 Federal Register / Vol. 88, No. 219 / Wednesday, November 15, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 • If the PBO (PBB) of an Away Market re-prices lower (higher) to be equal to or lower (higher) than its last display price or if its limit price no longer locks or crosses the PBO (PBB) of the Away Market, an ALO Order to buy (sell) will be priced pursuant to Rules 7.31– E(e)(1)(A)(ii)(c) and (d). If the PBO (PBB) of an Away Market re-prices lower (higher) than the working price of a nondisplayed ALO Order to buy (sell), such order will have a working price equal to the PBO (PBB) of the Away Market. Reserve Orders Rule 7.31–E(d)(1) provides for Reserve Orders, which are Limit or Inside Limit Orders with a quantity of the size displayed and with a reserve quantity (‘‘reserve interest’’) of the size that is not displayed. The displayed quantity of a Reserve Order is ranked Priority 2— Display Orders, and the reserve interest is ranked Priority 3—Non-Display Orders. Both the display quantity and the reserve interest of an arriving marketable Reserve Order are eligible to trade with resting interest in the NYSE Arca Book or to route to Away Markets. The working price of the reserve interest of a resting Reserve Order will be adjusted in the same manner as a NonDisplayed Limit Order, as provided for in Rule 7.31–E(d)(2)(A). As described in Rule 7.31–E(d)(1)(A), the display quantity of a Reserve Order must be entered in round lots, and the displayed portion of a Reserve Order will be replenished when the display quantity is decremented to below a round lot. The replenish quantity will be the minimum display size of the order or the remaining quantity of the reserve interest if it is less than the minimum display quantity. Rule 7.31–E(d)(1)(B) provides that each time the display quantity of a Reserve Order is replenished from reserve interest, a new working time is assigned to the replenished quantity (each display quantity with a different time is referred to as a ‘‘child’’ order), while the reserve interest retains the working time of the original order entry. In addition, when a Reserve Order is replenished from reserve interest and already has two child orders that equal less than a round lot, the child order with the later working time will rejoin the reserve interest and be assigned the new working time assigned to the next replenished quantity. If a Reserve Order is not routable, the replenish quantity will be assigned a display and working price consistent with the instructions for the order. Rule 7.31–E(d)(1)(C) provides that a Reserve Order must be designated Day and may only be combined with a Non- VerDate Sep<11>2014 17:49 Nov 14, 2023 Jkt 262001 Routable Limit Order or a Primary Pegged Order. Rule 7.31–E(d)(1)(C) also currently provides that a Reserve Order may not be designated as an ALO Order. Rule 7.31–E(d)(1)(D) provides that routable Reserve Orders will be evaluated for routing both on arrival and each time their display quantity is replenished. Rule 7.31–E(d)(1)(E) provides that a request to reduce the size of a Reserve Order will cancel the reserve interest before cancelling the display quantity, and, if the Reserve Order has more than one child order, the child order with the latest working time will be cancelled first. Rule 7.31–E(d)(1)(F) provides that, if the PBBO is crossed and the display quantity of a Reserve Order to buy (sell) that is a Non-Routable Limit Order is decremented to less than a round lot, the display price and working price of such Reserve Order will not change and the reserve interest that replenishes the display quantity will be assigned a display price one MPV below (above) the PBO (PBB) and a working price equal to the PBO (PBB). Rule 7.31– E(d)(1)(F) further provides that, when the PBBO uncrosses, the display price and working price will be adjusted as provided for under Rule 7.31–E(e)(1) relating to Non-Routable Limit Orders. ALO Reserve Orders The Exchange proposes to amend Rule 7.31–E to provide for the use of ALO Reserve Orders. The proposed change is not intended to introduce any new functionality or modify any current functionality, but rather to facilitate the combination of two order types currently offered by the Exchange. As proposed, ALO Reserve Orders would, except as otherwise noted, operate consistent with current Rule 7.31– E(d)(1) regarding Reserve Orders and current Rule 7.31–E(e)(2) regarding ALO Orders. To allow for the use of ALO Reserve Orders, the Exchange first proposes to amend Rule 7.31–E(d)(1)(C) to delete the last sentence of such rule, which currently provides that a Reserve Order may not be designated as an ALO Order. The proposed change is intended to allow ALO Orders, as described in Rule 7.31–E(e)(2) and the paragraphs thereunder,4 to have a displayed quantity, along with non-displayed reserve interest, as described in Rule 7.31–E(d)(1). The display quantity of an 4 The Exchange does not propose to allow nondisplayed ALO Orders to be designated as Reserve Orders, given that a Reserve Order must have both displayed and non-displayed portions, and thus proposes to amend Rule 7.31–E(e)(2) to specify accordingly. PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 ALO Reserve Order would be replenished as provided in Rules 7.31– E(d)(1)(A) and (B). As ALO Reserve Orders are non-routable, under Rule 7.31–E(d)(1)(B)(ii), the replenish quantity of an ALO Reserve Order would be assigned a display price and working price consistent with the behavior of ALO Orders as described in current Exchange rules. Aggressing ALO Reserve Orders would trade in accordance with current Rule 7.31–E(e)(2)(A). If an ALO Reserve Order is designated to cancel, it will cancel if it would be displayed at a price other than its limit price for any reason, as described in Rule 7.31–E(e)(2). Otherwise, any untraded quantity of an ALO Reserve Order would continue to be processed as ALO Orders are currently, as described in Rules 7.31– E(e)(2)(B) and (C). Similarly, the working price of the reserve interest of a resting ALO Reserve Order would be adjusted as provided for in Rule 7.31– E(d)(1) (i.e., in accordance with Rule 7.31–E(d)(2)(A)). Rule 7.31–E(d)(1)(E) would also apply to requests to reduce the size of ALO Reserve Orders. As described in Rule 7.31–E(d)(1)(F), when the PBBO is crossed and the display quantity of an ALO Reserve Order to buy (sell) is decremented to less than a round lot, the display price and working price of the order would not change, but the reserve interest that replenishes the display quantity would be assigned a display price one MPV below (above) the PBO (PBB) and a working price equal to the PBO (PBB). The Exchange proposes to amend Rule 7.31–E(d)(1)(F) to add new rule text describing how the display price and working price of an ALO Reserve Order would be adjusted when a previously crossed PBBO uncrosses. Specifically, the Exchange proposes to add text to the last sentence of Rule 7.31–E(d)(1)(F) providing that the display price and working price of an ALO Reserve Order would be adjusted in accordance with Rule 7.31–E(e)(2)(E), which describes how ALO Orders resting on the NYSE Arca Book are repriced and/or traded. Because ALO Orders behave differently from other Non-Routable Limit Orders and may only trade when they receive price improvement, the Exchange proposes to add text to Rule 7.31– E(e)(2)(F) clarifying that ALO Reserve Orders would have their display price and working price adjusted consistent with the rules applicable to ALO Orders when the PBBO uncrosses. The proposed change is intended to facilitate the combined use of two existing order types available on the Exchange, thereby providing ETP Holders with enhanced flexibility and E:\FR\FM\15NON1.SGM 15NON1 Federal Register / Vol. 88, No. 219 / Wednesday, November 15, 2023 / Notices optionality when trading on the Exchange. The proposed change could also promote increased liquidity and trading opportunities on the Exchange, to the benefit of all market participants. The Exchange also believes the proposed change would permit the Exchange to offer functionality already available on at least one other equities exchange, thereby promoting competition among equities exchanges.5 Because of the technology changes associated with this proposed rule change, the Exchange will announce the implementation date by Trader Update, which, subject to effectiveness of this proposed rule change, will be in the fourth quarter of 2023. ddrumheller on DSK120RN23PROD with NOTICES1 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Section 6(b)(5),7 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to remove impediments to and perfect the mechanism of a free and open market because it would allow for the combined use of two existing order types available on the Exchange and permit the Exchange to offer functionality similar to that already available on at least one other equities exchange.8 ETP Holders would be free to choose to use the proposed ALO Reserve Order type or not, and the proposed change would not otherwise impact the operation of the Reserve Order or ALO Order as described in current Exchange rules. The Exchange also believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market, as well as protect investors and the public interest, by expanding the options available to ETP Holders 5 See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing that a Limit Order may include a reserve quantity and may be designated with a Post Only instruction); see also MEMX User Manual, available at https://info.memxtrading.com/wp-content/ uploads/2023/03/MEMX-User-Manual-03.10.23.pdf, at 9 (providing that a Limit Order designated Day may have both reserve quantity and Post Only instructions). 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 See note 5, supra. VerDate Sep<11>2014 17:49 Nov 14, 2023 Jkt 262001 when trading on the Exchange and promoting increased liquidity and additional trading opportunities for all market participants. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In addition, as noted above, Exchange believes the proposed rule change would allow the Exchange to offer functionality already available on at least one other equities exchange 9 and thus would promote competition among equities exchanges. The Exchange also believes that, to the extent the proposed change increases opportunities for order execution, the proposed change would promote competition by making the Exchange a more attractive venue for order flow and enhancing market quality for all market participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 10 and Rule 19b–4(f)(6) thereunder.11 Because the proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.12 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may 9 See id. U.S.C. 78s(b)(3)(A)(iii). 11 17 CFR 240.19b–4(f)(6). 12 17 CFR 240.19b–4(f)(6)(iii). 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 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. 10 15 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 78415 temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 13 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– NYSEARCA–2023–77 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–NYSEARCA–2023–77. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; 13 15 E:\FR\FM\15NON1.SGM U.S.C. 78s(b)(2)(B). 15NON1 78416 Federal Register / Vol. 88, No. 219 / Wednesday, November 15, 2023 / Notices you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NYSEARCA–2023–77 and should be submitted on or before December 6, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–25206 Filed 11–14–23; 8:45 am] A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98898; File No. SR– NYSECHX–2023–19] Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.37 November 9, 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 November 2, 2023, the NYSE Chicago, Inc. (‘‘NYSE 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 self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. ddrumheller on DSK120RN23PROD with NOTICES1 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7.37 to specify the Exchange’s source of data feeds from MIAX PEARL, LLC (‘‘MIAX PEARL’’) for purposes of order handling, order execution, order routing, and regulatory compliance. 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. 14 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. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1. Purpose The Exchange proposes to update and amend the use of data feeds table in Rule 7.37(d), which sets forth on a market-by-market basis the specific securities information processor (‘‘SIP’’) and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks related to each of those functions. Specifically, the Exchange proposes to amend the table in Rule 7.37(d) to specify that, with respect to MIAX PEARL, the Exchange will receive a MIAX PEARL direct feed as its primary source of data for order handling, order execution, order routing, and regulatory compliance, and will use the SIP Data Feed as its secondary source for data from MIAX PEARL. The Exchange proposes to make this change operative in the fourth quarter of 2023, and, in any event, before December 31, 2023. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act,4 in general, and furthers the objectives of Section 6(b)(5),5 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. Additionally, the Exchange believes that the proposed 1 15 VerDate Sep<11>2014 17:49 Nov 14, 2023 4 15 5 15 Jkt 262001 PO 00000 Fmt 4703 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. Rather, the Exchange believes that the proposal will enhance competition because providing the public and market participants with up-to-date information about the data feeds the Exchange will use for the handling, execution, and routing of orders, as well as for regulatory compliance would enhance transparency and enable investors to better assess the quality of the Exchange’s execution and routing services. The Exchange also believes the proposal would enhance competition because it would potentially enhance the performance of its order handling and execution of orders in equity securities by receiving market data directly from MIAX PEARL. Finally, the proposed rule change would not impact competition between market participants because it will affect all market participants equally. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00134 rule change is consistent with the Section 6(b)(5) requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes its proposal to update the table in Rule 7.37(d) to include the MIAX PEARL direct feed will ensure that the Rule correctly identifies and publicly states on a market-by-market basis all of the specific SIP and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks for each of those functions. The proposed rule change also removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest by providing additional specificity, clarity, and transparency in the Exchange’s rules. Sfmt 4703 E:\FR\FM\15NON1.SGM 15NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 219 (Wednesday, November 15, 2023)]
[Notices]
[Pages 78413-78416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98899; File No. SR-NYSEARCA-2023-77]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-
E

November 9, 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 October 31, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7.31-E to provide for the use 
of ALO Reserve Orders. 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-E to provide for the use 
of ALO Reserve Orders.
ALO Orders
    Rule 7.31-E(e)(2) defines an ALO Order as a Non-Routable Limit 
Order that, unless it receives price improvement, will not remove 
liquidity from the NYSE Arca Book. An ALO Order can be designated to be 
cancelled if it would be displayed at a price other than its limit 
price for any reason. An ALO Order can be designated as non-displayed.
    As described in Rule 7.31-E(e)(2)(A), an Aggressing ALO Order to 
buy (sell) will trade if its limit price crosses the working price of 
any displayed or non-displayed orders to sell (buy) on the NYSE Arca 
Book priced equal to or below (above) the PBO (PBB) of an Away Market, 
in which case it will trade as the liquidity taker with such orders.
    As noted above, Rule 7.31-E(e)(2) provides that an ALO Order may be 
designated to cancel if it would be displayed at a price other than its 
limit price. If an ALO Order is not so designated, any untraded 
quantity of such order to buy (sell) is processed as follows (Rules 
7.31-E(e)(2)(B)(i) and (ii)):
     If the limit price of the ALO Order locks the display 
price of any order to sell (buy) ranked Priority 2--Display Orders on 
the NYSE Arca Book, it will have a working price and display price (if 
designated to display) one MPV below (above) the price of the displayed 
order on the NYSE Arca Book.
     If the limit price of the ALO Order locks or crosses the 
PBO (PBB) of an Away Market, it will have a working price equal to the 
PBO (PBB) of the Away Market and a display price (if designated to 
display) one MPV below (above) the PBO (PBB) of the Away Market.
    Rule 7.31-E(e)(2)(C) provides that any untraded quantity of an ALO 
Order to buy (sell) will have a working price and display price (if 
designated to display) equal to its limit price if it locks non-
displayed orders to sell (buy) on the NYSE Arca Book. Rule 7.31-
E(e)(2)(D) provides that an ALO Order to buy (sell) will not be 
assigned a working price or display price above (below) the limit price 
of such order.
    Once resting on the NYSE Arca Book, ALO Orders may be re-priced or 
trade, or both, as described in Rule 7.31-E(e)(2)(E):
     If order(s) to sell (buy) ranked Priority 2--Display 
Orders or the PBO (PBB) of an Away Market re-prices higher (lower), an 
ALO Order to buy (sell) will trade or be priced, or both, consistent 
with Rules 7.31-E(e)(2)(A), (e)(2)(B)(i) and (ii), and (e)(2)(C).

[[Page 78414]]

     If the PBO (PBB) of an Away Market re-prices lower 
(higher) to be equal to or lower (higher) than its last display price 
or if its limit price no longer locks or crosses the PBO (PBB) of the 
Away Market, an ALO Order to buy (sell) will be priced pursuant to 
Rules 7.31-E(e)(1)(A)(ii)(c) and (d). If the PBO (PBB) of an Away 
Market re-prices lower (higher) than the working price of a non-
displayed ALO Order to buy (sell), such order will have a working price 
equal to the PBO (PBB) of the Away Market.
Reserve Orders
    Rule 7.31-E(d)(1) provides for Reserve Orders, which are Limit or 
Inside Limit Orders with a quantity of the size displayed and with a 
reserve quantity (``reserve interest'') of the size that is not 
displayed. The displayed quantity of a Reserve Order is ranked Priority 
2--Display Orders, and the reserve interest is ranked Priority 3--Non-
Display Orders. Both the display quantity and the reserve interest of 
an arriving marketable Reserve Order are eligible to trade with resting 
interest in the NYSE Arca Book or to route to Away Markets. The working 
price of the reserve interest of a resting Reserve Order will be 
adjusted in the same manner as a Non-Displayed Limit Order, as provided 
for in Rule 7.31-E(d)(2)(A).
    As described in Rule 7.31-E(d)(1)(A), the display quantity of a 
Reserve Order must be entered in round lots, and the displayed portion 
of a Reserve Order will be replenished when the display quantity is 
decremented to below a round lot. The replenish quantity will be the 
minimum display size of the order or the remaining quantity of the 
reserve interest if it is less than the minimum display quantity.
    Rule 7.31-E(d)(1)(B) provides that each time the display quantity 
of a Reserve Order is replenished from reserve interest, a new working 
time is assigned to the replenished quantity (each display quantity 
with a different time is referred to as a ``child'' order), while the 
reserve interest retains the working time of the original order entry. 
In addition, when a Reserve Order is replenished from reserve interest 
and already has two child orders that equal less than a round lot, the 
child order with the later working time will rejoin the reserve 
interest and be assigned the new working time assigned to the next 
replenished quantity. If a Reserve Order is not routable, the replenish 
quantity will be assigned a display and working price consistent with 
the instructions for the order.
    Rule 7.31-E(d)(1)(C) provides that a Reserve Order must be 
designated Day and may only be combined with a Non-Routable Limit Order 
or a Primary Pegged Order. Rule 7.31-E(d)(1)(C) also currently provides 
that a Reserve Order may not be designated as an ALO Order.
    Rule 7.31-E(d)(1)(D) provides that routable Reserve Orders will be 
evaluated for routing both on arrival and each time their display 
quantity is replenished.
    Rule 7.31-E(d)(1)(E) provides that a request to reduce the size of 
a Reserve Order will cancel the reserve interest before cancelling the 
display quantity, and, if the Reserve Order has more than one child 
order, the child order with the latest working time will be cancelled 
first.
    Rule 7.31-E(d)(1)(F) provides that, if the PBBO is crossed and the 
display quantity of a Reserve Order to buy (sell) that is a Non-
Routable Limit Order is decremented to less than a round lot, the 
display price and working price of such Reserve Order will not change 
and the reserve interest that replenishes the display quantity will be 
assigned a display price one MPV below (above) the PBO (PBB) and a 
working price equal to the PBO (PBB). Rule 7.31-E(d)(1)(F) further 
provides that, when the PBBO uncrosses, the display price and working 
price will be adjusted as provided for under Rule 7.31-E(e)(1) relating 
to Non-Routable Limit Orders.
ALO Reserve Orders
    The Exchange proposes to amend Rule 7.31-E to provide for the use 
of ALO Reserve Orders. The proposed change is not intended to introduce 
any new functionality or modify any current functionality, but rather 
to facilitate the combination of two order types currently offered by 
the Exchange. As proposed, ALO Reserve Orders would, except as 
otherwise noted, operate consistent with current Rule 7.31-E(d)(1) 
regarding Reserve Orders and current Rule 7.31-E(e)(2) regarding ALO 
Orders. To allow for the use of ALO Reserve Orders, the Exchange first 
proposes to amend Rule 7.31-E(d)(1)(C) to delete the last sentence of 
such rule, which currently provides that a Reserve Order may not be 
designated as an ALO Order.
    The proposed change is intended to allow ALO Orders, as described 
in Rule 7.31-E(e)(2) and the paragraphs thereunder,\4\ to have a 
displayed quantity, along with non-displayed reserve interest, as 
described in Rule 7.31-E(d)(1). The display quantity of an ALO Reserve 
Order would be replenished as provided in Rules 7.31-E(d)(1)(A) and 
(B). As ALO Reserve Orders are non-routable, under Rule 7.31-
E(d)(1)(B)(ii), the replenish quantity of an ALO Reserve Order would be 
assigned a display price and working price consistent with the behavior 
of ALO Orders as described in current Exchange rules.
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    \4\ The Exchange does not propose to allow non-displayed ALO 
Orders to be designated as Reserve Orders, given that a Reserve 
Order must have both displayed and non-displayed portions, and thus 
proposes to amend Rule 7.31-E(e)(2) to specify accordingly.
---------------------------------------------------------------------------

    Aggressing ALO Reserve Orders would trade in accordance with 
current Rule 7.31-E(e)(2)(A). If an ALO Reserve Order is designated to 
cancel, it will cancel if it would be displayed at a price other than 
its limit price for any reason, as described in Rule 7.31-E(e)(2). 
Otherwise, any untraded quantity of an ALO Reserve Order would continue 
to be processed as ALO Orders are currently, as described in Rules 
7.31-E(e)(2)(B) and (C). Similarly, the working price of the reserve 
interest of a resting ALO Reserve Order would be adjusted as provided 
for in Rule 7.31-E(d)(1) (i.e., in accordance with Rule 7.31-
E(d)(2)(A)). Rule 7.31-E(d)(1)(E) would also apply to requests to 
reduce the size of ALO Reserve Orders.
    As described in Rule 7.31-E(d)(1)(F), when the PBBO is crossed and 
the display quantity of an ALO Reserve Order to buy (sell) is 
decremented to less than a round lot, the display price and working 
price of the order would not change, but the reserve interest that 
replenishes the display quantity would be assigned a display price one 
MPV below (above) the PBO (PBB) and a working price equal to the PBO 
(PBB). The Exchange proposes to amend Rule 7.31-E(d)(1)(F) to add new 
rule text describing how the display price and working price of an ALO 
Reserve Order would be adjusted when a previously crossed PBBO 
uncrosses. Specifically, the Exchange proposes to add text to the last 
sentence of Rule 7.31-E(d)(1)(F) providing that the display price and 
working price of an ALO Reserve Order would be adjusted in accordance 
with Rule 7.31-E(e)(2)(E), which describes how ALO Orders resting on 
the NYSE Arca Book are repriced and/or traded. Because ALO Orders 
behave differently from other Non-Routable Limit Orders and may only 
trade when they receive price improvement, the Exchange proposes to add 
text to Rule 7.31-E(e)(2)(F) clarifying that ALO Reserve Orders would 
have their display price and working price adjusted consistent with the 
rules applicable to ALO Orders when the PBBO uncrosses.
    The proposed change is intended to facilitate the combined use of 
two existing order types available on the Exchange, thereby providing 
ETP Holders with enhanced flexibility and

[[Page 78415]]

optionality when trading on the Exchange. The proposed change could 
also promote increased liquidity and trading opportunities on the 
Exchange, to the benefit of all market participants. The Exchange also 
believes the proposed change would permit the Exchange to offer 
functionality already available on at least one other equities 
exchange, thereby promoting competition among equities exchanges.\5\
---------------------------------------------------------------------------

    \5\ See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing that a 
Limit Order may include a reserve quantity and may be designated 
with a Post Only instruction); see also MEMX User Manual, available 
at https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf, at 9 (providing that a Limit Order 
designated Day may have both reserve quantity and Post Only 
instructions).
---------------------------------------------------------------------------

    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update, which, subject to effectiveness of this proposed rule 
change, will be in the fourth quarter of 2023.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\ 
in particular, because it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
remove impediments to and perfect the mechanism of a free and open 
market because it would allow for the combined use of two existing 
order types available on the Exchange and permit the Exchange to offer 
functionality similar to that already available on at least one other 
equities exchange.\8\ ETP Holders would be free to choose to use the 
proposed ALO Reserve Order type or not, and the proposed change would 
not otherwise impact the operation of the Reserve Order or ALO Order as 
described in current Exchange rules. The Exchange also believes that 
the proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market, as well as protect investors and 
the public interest, by expanding the options available to ETP Holders 
when trading on the Exchange and promoting increased liquidity and 
additional trading opportunities for all market participants.
---------------------------------------------------------------------------

    \8\ See note 5, supra.
---------------------------------------------------------------------------

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. In addition, as noted above, 
Exchange believes the proposed rule change would allow the Exchange to 
offer functionality already available on at least one other equities 
exchange \9\ and thus would promote competition among equities 
exchanges. The Exchange also believes that, to the extent the proposed 
change increases opportunities for order execution, the proposed change 
would promote competition by making the Exchange a more attractive 
venue for order flow and enhancing market quality for all market 
participants.
---------------------------------------------------------------------------

    \9\ See id.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii). 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 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.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2023-77 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-NYSEARCA-2023-77. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions;

[[Page 78416]]

you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NYSEARCA-2023-77 and 
should be submitted on or before December 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25206 Filed 11-14-23; 8:45 am]
BILLING CODE 8011-01-P

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