
[Federal Register Volume 82, Number 138 (Thursday, July 20, 2017)]
[Notices]
[Pages 33523-33525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15191]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81146; File No. SR-NYSEMKT-2017-44]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.38E To 
Specify the Ranking of an Odd Lot Order That Has a Display Price That 
Is Better Than Its Working Price

July 14, 2017.
    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 June 30, 2017, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7.38E (Odd and Mixed Lots) to 
specify the ranking of an odd lot order that has a display price that 
is better than its working price. The proposed rule change is available 
on the Exchange's Web site 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 7.38E (Odd and Mixed Lots) to 
specify the ranking of an odd lot order that has a display price that 
is better than its working price.
    Rule 7.38E provides that the working price of an odd lot order will 
be adjusted both on arrival and when resting on the Exchange Book based 
on the limit price of the order as follows:
     If the limit price of an odd lot order is equal to or 
worse than the contra-side PBBO, it will have a working price equal to 
the limit price.
     If the limit price of an odd lot order is better than the 
contra-side PBBO, it will have a working price equal to the contra-side 
PBBO.
     If the PBBO is crossed, the odd lot order will have a 
working price equal to the same-side PBB or PBO.
    By moving the working price, an odd lot order to buy (sell) will 
not trade at a price above (below) the PBO (PBB), or if the PBBO is 
crossed, above (below) the PBB (PBO). In either case, if the odd lot 
order is ranked Priority 2--Display Orders,\4\ its display price would 
not change when its working price is adjusted.
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    \4\ As described in Rule 7.36E(e)(2), Priority 2--Display Orders 
are non-marketable Limit Orders with a displayed working price.
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    Exchange rules are currently silent regarding how a resting odd lot 
order that has a display price that is better than its working price 
would be ranked for trading at that working price.\5\ This scenario 
would only occur if a resting odd lot order is displayed at a price, 
and then an Away Market PBBO crosses that display price. In that 
limited scenario, pursuant to Rule 7.38E(b)(1) described above, the 
working price of the odd-lot order would be adjusted to a price 
inferior to the display price, but it would remain displayed at the now 
crossed price.
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    \5\ Pursuant to Rule 7.38E(b)(1), on arrival, an odd lot order's 
working price may be adjusted consistent with the terms of the 
order. However, an arriving odd-lot order would not be assigned a 
working price that would be inferior to the price at which the 
arriving odd lot order would be displayed.
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    The Exchange proposes to specify that in such case, the ranking and 
priority category applicable to such an order at its display [sic], 
i.e., the price it is displayed and Priority 2--Display Orders, would 
govern its ranking for purposes of a trade at its different, inferior 
working price.\6\ This ranking would differ from the Exchange's general 
rule that an order is ranked based on its working price.\7\ However, 
the Exchange believes that if the display price of an order is better 
than its working price, such order has already demonstrated a public 
willingness to trade at a more aggressive price because it continues to 
be published in a market data feed at the more aggressive display 
price.\8\ In such case, the order should receive the benefit of the 
ranking (both price and priority category) associated with its better 
display price when determining how that order would be traded at its 
working price. In other words, an odd-lot order with a better display 
price than its working price would not be ranked based on its working 
price, including that it would not be assigned Priority 3--Non-Display 
Orders at its working price.
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    \6\ As described in Rule 7.36E(c), an order is ranked based on 
price, priority category, and time. Such ranking is only applicable 
once an order is resting on the Exchange Book.
    \7\ Rule 7.36E(d) provides that all orders are ranked based on 
the working price of the order. Rule 7.36E(e)(3) generally provides 
that non-marketable orders for which the working price is not 
displayed have third priority behind Market Orders and non-
marketable Limit Orders that are displayed at their working price. 
This proposed rule change would be an exception to these rules.
    \8\ See Rule 7.36E(b)(1) (odd-lot sized orders are considered 
displayed for ranking purposes).
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    The Exchange further believes that if an odd-lot order is assigned 
a new working price that is worse than its display price, such order 
should not be assigned a new working time. In other words, when trading 
at its working price, its time ranking would be based on the working 
time associated with its display price.\9\ Maintaining the original 
working time of such order would ensure that it maintains its original 
ranking, even if it trades at a different price.
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    \9\ Rule 7.36E(f)(2) provides that an order is assigned a new 
working time any time the working price of the order changes. This 
proposed rule change would be an exception to this general rule.
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    To effect this change, the Exchange proposes to amend Rule 
7.38E(b)(1) to provide that an odd-lot order ranked Priority 2--Display 
Orders would not be assigned a new working time if its working price is 
adjusted under Rule 7.38E(b)(1). In addition, if the display price of 
an odd lot order to buy (sell) is above (below) its working price, it 
would be ranked based on its display price.\10\
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    \10\ For example, assume the PBBO is 10.07 x 10.10 and the 
Exchange receives orders ranked Priority 2--Display Orders in the 
following sequence: T1 to buy 25 shares displayed at 10.08, T2 to 
buy 25 shares displayed at 10.09, T3 to buy 25 shares displayed at 
10.08, and T4 to buy 100 shares displayed at 10.07. Assume next that 
the PBO changes to 10.07. The working price of T1, T2, and T3 will 
be adjusted to 10.07, but they would keep their original working 
time. Next, the Exchange receives an incoming order to sell 100 
shares at 10.07. The Exchange would trade the incoming order with 
the resting orders in the following sequence: T2, T1, T3, and then 
T4 would be allocated the remaining 25 shares. T2 would trade before 
T1 because it has a better price ranking based on its display price. 
If the incoming order to sell were for 50 shares, only T2 and T1 
would trade.

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[[Page 33524]]

    Because once on Pillar, the Exchange would trade an odd lot order 
with a display price better than its working price trades in this 
manner [sic], these changes will be in effect when the Exchange 
implements Pillar.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and 
furthers the objectives of Section 6(b)(5),\12\ 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the Exchange believes 
that an order that has been displayed should receive the benefit of the 
ranking of that displayed price if it trades at a less aggressive 
working price. This scenario would only occur if a resting odd-lot 
order has been displayed at a price, and then an Away Market PBBO 
crosses that price and then the working price of that order is adjusted 
to a price inferior to its display price. In such case, while the odd 
lot order would be executed at its working price, because it was both 
willing to trade at a better price and is still displayed at that 
better price, the Exchange proposes that it would be ranked based on 
its display price for purposes of its execution at the working price. 
If the PBBO had not crossed the odd-lot order, such order would have 
had the benefit of the ranking based on its display price and the 
Exchange believes it would be consistent with the protection of 
investors and the public for the odd-lot order to retain such ranking 
when its working price is moved to an inferior price. The Exchange 
further believes that the proposed rule change would promote fair and 
orderly markets that would protect investors and the public interest 
because it would to [sic] promote the display of liquidity by ensuring 
that a displayed odd lot order maintains its ranking even if it trades 
at a less aggressive price.
    The Exchange further believes that the proposed rule change would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would promote 
transparency in Exchange rules and reduce potential confusion regarding 
how an odd-lot order would be ranked and execute in the limited 
scenario when the display price of a resting odd lot has been crossed, 
and it has been assigned a working price inferior to its display price.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change is not designed to address any competitive 
issues but rather to provide an incentive for market participants to 
enter aggressively-priced displayed liquidity.

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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). The Commission has waived the 
requirement under Rule 19b-4(f)(6)(iii) that the Exchange provide it 
with written notice of its intent to file the proposed rule change, 
along with a brief description and the text of the proposed rule 
change, at least five business days prior to the date of the filing 
of the proposed rule change, or such shorter time as designated by 
the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to 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. The 
Exchange represents that it anticipates beginning the migration of 
symbols to Pillar on July 24, 2017. Waiver of the 30-day operative 
delay would allow the Exchange to implement the proposed rule change 
concurrently with the commencement of its migration of symbols to 
Pillar, and thus reduce any potential for confusion of how odd-lot 
orders would be processed on the new trading platform. Accordingly, the 
Commission finds that waiving the 30-day operative delay is consistent 
with the protection of investors and the public interest and designates 
the proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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. 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2017-44 on the subject line.

[[Page 33525]]

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2017-44. 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 Web site (http://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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2017-44 and should 
be submitted on or before August 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Jill M. Peterson,
Assistant Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-15191 Filed 7-19-17; 8:45 am]
BILLING CODE 8011-01-P


