
[Federal Register Volume 84, Number 36 (Friday, February 22, 2019)]
[Notices]
[Pages 5794-5798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03035]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85158; File No. SR-NYSE-2018-52]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of a Proposed Rule Change To Amend NYSE Rule 7.31 
Relating to Discretionary Orders, Auction-Only Orders, Discretionary 
Modifier, and Yielding Modifier and Related Amendments to Rules 7.16, 
7.34, 7.36, and 7.37

February 15, 2019.

I. Introduction

    On November 29, 2018, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 7.31 (Orders and Modifiers) to: 
(i) Add a new order type, Discretionary Orders; (ii) add two new order 
type modifiers, the Last Sale Peg Modifier and the Yielding Modifier; 
and (iii) make related changes to NYSE Rules 7.16, 7.34, 7.36, and 7.37 
for trading on Pillar.\3\ The proposed rule change was published for 
comment in the Federal Register on December 18, 2018.\4\ The Commission 
has received no comments on the proposal. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Pillar is a new trading technology for the Exchange that 
currently trades securities pursuant to unlisted trading privileges 
(``UTP''). The Exchange intends to migrate trading in NYSE-listed 
securities to Pillar at a later date. See Securities Exchange 
Release No. 82945 (Mar. 26, 2018), 83 FR 13553 (Mar. 29, 2018) 
(Order approving equity trading rules for UTP securities on 
Pillar)(``Pillar Trading Rules Approval'').
    \4\ See Securities Exchange Act Release No. 84806 (Dec. 12, 
2018), 83 FR 64913 (Dec. 18, 2018) (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 7.31 (Orders and 
Modifiers) to: (i) Add a new order type, Discretionary Orders; (ii) add 
two new order type modifiers, the Last Sale Peg Modifier and the 
Yielding Modifier; and (iii) make related changes to NYSE Rules 7.16, 
7.34, 7.36, and 7.37.

Discretionary Order Overview

    Proposed NYSE Rule 7.31(d)(4) sets forth the general requirements 
for a new order type, a Discretionary Order or ``D Order,'' for 
securities trading on Pillar.

[[Page 5795]]

Specifically, a D Order would be a Limit Order that: (1) May trade at 
an undisplayed discretionary price; (2) must be designated as ``Day;'' 
(3) may be designated as routable or non-routable; (4) must have a 
minimum of one round lot displayed on entry; and (5) is only available 
to Floor Brokers during the Core Trading Session.\5\ D Orders, like d-
Quotes, may be combined with a Reserve Order.\6\ However, unlike d-
Quotes, D Orders would be required to have a display quantity.
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    \5\ The Core Trading Session begins at 9:30 a.m. Eastern Time 
and ends at the conclusion of Core Trading Hours. See NYSE Rule 
7.34(a)(2). The term ``Core Trading Hours'' means ``the hours of 
9:30 a.m. Easter Time through 4:00 p.m. Eastern Time or such other 
hours as may be determined by the Exchange from time to time.'' See 
NYSE Rule 1.1(d).
    \6\ See proposed NYSE Rule 7.31(d)(1)(C).
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Upon Arrival

    Proposed NYSE Rule 7.34(c)(1)(A) specifies that a D Order must be 
designated as either a: (i) Limit Price D Order or (ii) Midpoint Price 
D Order. Proposed NYSE Rule 7.31(d)(4)(A)(i) specifies that an arriving 
Limit Price D Order to buy (sell) would trade with sell (buy) orders on 
the Exchange Book, or, if designated as routable, route to an Away 
Market up (down) to the limit price of the order. If after trading or 
routing the PBBO is locked or crossed or there is no PBB (PBO), a Limit 
Price D Order would be canceled. For a Limit Price D Order that is 
partially routed to an Away Market on arrival, any returned quantity of 
such D Order would join the working price of the resting odd-lot 
quantity of the D Order.
    Proposed NYSE Rule 7.31(d)(4)(A)(ii) sets forth that an arriving 
Midpoint Price D Order to buy (sell) would trade with sell (buy) orders 
on the Exchange Book up (down) to the lower (higher) of the midpoint of 
the PBBO (``Midpoint Price'') or the order's limit price. The proposed 
rule also provides that a Midpoint Price D Order would not route on 
arrival, even if designated as routable. If designated as routable, a 
Midpoint Price D Order combined with a Reserve Order would be evaluated 
for routing each time the display quantity is replenished as provided 
for in NYSE Rule 7.31(d)(1)(D).\7\ The proposed rule further provides 
that if the PBBO is locked or crossed or if the Midpoint Price is 
unavailable, the Midpoint Price D Order would be rejected.
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    \7\ NYSE Rule 7.31(d)(1)(D) provides that a routable Reserve 
Order will be evaluated for routing both on arrival and each time 
the display quantity is replenished.
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Working and Display Price

    Proposed NYSE Rule 7.31(d)(4)(B) provides that the working and 
display price for a D Order to buy (sell) would be pegged to the PBB 
(PBO).\8\ If the PBB (PBO) is higher (lower) than the limit price of a 
D Order to buy (sell), the working and display price would be the limit 
price of the order. The proposed rule also provides that a D Order to 
buy (sell) would be canceled if there is no PBB (PBO) against which to 
peg. As proposed, the rule further provides that, at its display price, 
a D Order would be ranked Priority 2--Display Orders.\9\
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    \8\ ``Working price'' means the price at which an order is 
eligible to trade at any given time, which may be different from the 
limit price or display price of the order. See NYSE Rule 7.36(a)(3). 
``Display price'' means the price at which a Limit Order is 
displayed, which may be different from the limit price or working 
price of the order. See NYSE Rule 7.36(a)(1).
    \9\ NYSE Rule 7.36(e) governs execution priority for orders 
resting on the Exchange Book and currently sets forth three priority 
categories: Priority 1--Market Orders, Priority 2--Display Orders, 
and Priority 3--Non-Display Orders. If a D Order is combined with a 
Reserve Order, the reserve interest of such order would be ranked 
Priority 3--Non-Display Orders. See NYSE Rule 7.31(d)(1).
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Discretion

    Proposed NYSE Rule 7.31(d)(4)(C) provides that a resting D Order to 
buy (sell) would be eligible to exercise discretion up (down) to the 
limit price of the order. This proposed rule further provides that the 
display price of a D Order would: (i) Be pegged to the same-side PBBO; 
(ii) not be based on the limit price; and (iii) not exercise discretion 
if the PBBO is locked or crossed or if there is no Midpoint Price.
    Proposed NYSE Rule 7.31(d)(4)(C)(i) provides that a D Order to buy 
(sell) would be triggered to exercise discretion if the price of an 
Aggressing Order to sell (buy) is above (below) the PBB (PBO) and at or 
below (above) the Midpoint Price (the ``discretionary price 
range'').\10\
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    \10\ An Aggressing Order is a buy (sell) order that is or 
becomes marketable against sell (buy) interest on the Exchange Book. 
See Rule 7.36(a)(6). A resting order may become an Aggressing Order 
if its working price changes, if the PBBO or NBBO is updated, 
because of changes to other orders on the Exchange Book, or when 
processing inbound messages. Id.
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    Proposed NYSE Rule 7.31(d)(4)(C)(ii) provides that the 
discretionary price at which a D Order to buy (sell) would trade would 
be the price of the sell (buy) order. In addition, proposed NYSE Rule 
7.36(a)(7) defines the term ``discretionary price'' as the undisplayed 
price at which a D Order would trade if it exercises discretion.
    Proposed NYSE Rule 7.31(d)(4)(C)(ii) provides that if other 
interest to buy (sell) priced equal to or higher (lower) than the price 
of the sell (buy) order is present on the Exchange Book, the 
discretionary price would be one MPV higher (lower) than the highest 
(lowest) priced resting order to buy (sell), capped by the Midpoint 
Price.\11\
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    \11\ The MPV for securities is defined in NYSE Rule 7.6.
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Ranking and Working Time

    Proposed NYSE Rule 7.31(d)(4)(D)(i) provides that a D Order would 
be assigned a new temporary working time that is later than any same-
side resting interest at its discretionary price. Proposed NYSE Rule 
7.31(d)(4)(D)(ii) provides that multiple D Orders, when eligible to 
trade at the same discretionary price, would be ranked by limit price 
and time. Finally, proposed NYSE Rule 7.31(d)(4)(D)(iii) provides that 
the unexecuted portion of a D Order at its discretionary price would be 
given the working time associated with its working and display price.

Resting D Order That Becomes Marketable

    Proposed NYSE Rule 7.31(d)(4)(E) provides that after the PBBO 
unlocks or uncrosses or a Midpoint Price becomes accessible, resting D 
Orders to buy (sell) would be ranked based on the lower (higher) of the 
Midpoint Price or limit price of the order to determine whether a D 
Order is marketable within its discretionary price range with contra-
side orders on the Exchange Book.

D Orders Rejected and Modifiers

    Proposed NYSE Rule 7.31(d)(4)(F) provides that a D Order may be 
designated with a Self Trade Prevention Modifier (``STP'') and would be 
rejected if combined with any other modifiers or if the same-side PBBO 
is zero.
    Proposed NYSE Rule 7.31(i)(2)(C) provides that a resting D Order 
with an STP Modifier that is triggered to exercise discretion, and is 
not an Aggressing Order, will not trade at a discretionary price 
against a contra-side order that is also designated with an STP 
Modifier and from the same Client ID, and that, in such case, the D 
Order would not be canceled.

Last 10 Seconds of Trading

    Proposed NYSE Rule 7.31(d)(4)(G) provides that a request to enter a 
D Order in any security 10 seconds or less before the scheduled close 
of trading would be rejected.

Allocation of D Orders

    Proposed NYSE Rule 7.37(b) sets forth the allocation process for D 
Orders. Pursuant to NYSE Rule 7.37(b)(1) the allocation sequence would 
be as follows: (1) Market Orders trade first based on time; (2) orders 
with Setter

[[Page 5796]]

Priority as described in NYSE Rule 7.36(h) receive an allocation; (3) 
orders ranked Priority 2--Displayed Orders are allocated on parity by 
Participant; (4) orders ranked Priority 3--Non-Display Orders, other 
than Mid-Point Liquidity (``MPL'') Orders \12\ with an MTS Modifier, 
are allocated on parity by Participant; \13\ and then (5) MPL Orders 
with an MTS Modifier are allocated based on MTS size (smallest to 
largest) and time. After these order types have been allocated, D 
Orders trading at a discretionary price would be allocated next on 
parity by a Floor Broker Participant pursuant to proposed NYSE Rule 
7.37(b)(1)(F).\14\ Specifically, at their discretionary price, D Orders 
would be allocated after all other orders at that price, except for 
Yielding Orders, which are described below.
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    \12\ See NYSE Rule 7.31(d)(3) for a description of MPL Orders.
    \13\ An order with an MTS Modifier would only trade with contra-
side orders that, either individually or in the aggregate, satisfy 
the order's minimum trade size condition. See NYSE Rule 7.31(i)(3) 
for a full description of the MTS Modifier.
    \14\ See NYSE Rule 7.36(a)(5) for the definition of the term 
``Floor Broker Participant.''
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    NYSE Rule 7.37(b)(2) describes the process for the parity 
allocation wheel. Currently, the Exchange creates separate allocation 
wheels for orders ranked Priority 2--Display Orders and orders ranked 
Priority 3--Non-Display Orders. The Exchange proposes to create a third 
allocation wheel if there is more than one D Order eligible to trade at 
a discretionary price. In that case, the Exchange would create an 
allocation wheel for D Orders at that discretionary price.\15\
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    \15\ See proposed NYSE Rule 7.37(b)(2).
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    The Exchange proposes to amend NYSE Rule 7.37(b)(2)(A) to provide 
that for each D Order parity allocation wheel, a D Order to buy (sell) 
with the highest (lowest) limit price would establish the first 
position on that allocation wheel.

Re-Pricing of D Orders During a Short Sale Period

    The Exchange proposes to amend NYSE Rule 7.16(f)(5)(C) to specify 
that, during a Short Sale Period,\16\ the Exchange proposes to process 
sell short D Orders as Pegged Orders and MPL Orders are processed under 
the current rules. Thus, under proposed NYSE Rule 7.16(f)(5)(C), D 
Orders--including orders marked buy, sell long, and sell short exempt--
would use the National Best Bid and Offer (``NBBO'') instead of the 
PBBO as the reference price. The proposed rule also provides that the 
Midpoint Price of D Orders would be the midpoint price of the NBBO, 
including situations in which the midpoint is less than one minimum 
price increment above the National Best Bid (``NBB'').
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    \16\ A ``Short Sale Period'' is defined in NYSE Rule 7.16(f)(4) 
to mean the period when a Short Sale Price Test is in effect. A 
``Short Sale Price Test'' is defined in NYSE Rule 7.16(f)(3) to mean 
the period during which Exchange systems will not execute or display 
a short sale order with respect to a covered security at a price 
that is less than or equal to the current NBB in compliance with 
Rule 201 of Regulation SHO (``Rule 201''). 17 CFR 242.201. The 
Commission notes that the re-pricing of D Orders during a Short Sale 
Period would need to be compliant with the requirements of Rule 201.
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Last Sale Peg Modifier

    Proposed Rule 7.31(i)(4) would add a new order type modifier, Last 
Sale Peg, that would be similar to the current Buy Minus Zero Plus 
(``BMZP'') \17\ instruction for trading in Exchange-listed securities, 
with specified differences to reflect Pillar functionality and 
terminology.
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    \17\ See NYSE Rule 13(f)(4).
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    Pursuant to proposed Rule 7.31(i)(4), a Non-Routable Limit Order to 
buy may be designated with a Last Sale Peg modifier and would be 
referred to as a ``Last Sale Peg Order.'' Proposed Rule 7.31(i)(4) also 
provides that a Last Sale Peg Order would not trade or be displayed at 
a price higher than the later of the most recent last-sale eligible 
trade executed on the Exchange or the most recent consolidated last-
sale eligible trade, which would be defined, for purposes of this rule, 
as the ``last-sale price.'' \18\
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    \18\ A consolidated last-sale eligible trade is the last-sale 
eligible trade reported to the responsible single plan processor. 
See Notice, supra note 4, 83 FR at 64917, n.50. A last-sale eligible 
trade must be of at least one round lot. See id. at 64917, n.49.
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    Proposed NYSE Rule 7.31(i)(4)(A) provides that the working price of 
a Last Sale Peg Order would be pegged to the lower of the last-sale 
price, the limit price of the order, or the PBO. Proposed NYSE Rule 
7.31(i)(4)(A) also provides that the working price of a resting Last 
Sale Peg Order would not be adjusted until an Aggressing Order is fully 
processed. In other words, if an Aggressing Order trades at multiple 
prices, the Exchange would wait for the last price at which that order 
trades to determine the last-sale price for purposes of re-pricing the 
working price of a resting Last Sale Peg Order. The proposed rule 
further provides that if the last-sale price is not at a permissible 
MPV, the working price of the order would be rounded down to the 
nearest MPV.
    Pursuant to proposed NYSE Rule 7.31(i)(4)(B), the display price of 
a Last Sale Peg Order would be the same as the working price, unless 
the working price is pegged to the PBO, in which case, the display 
price would be determined pursuant to NYSE Rule 7.31(e)(1).
    Proposed NYSE Rule 7.31(i)(4)(C) provides that a Last Sale Peg 
Order may be designated with an STP Modifier and would be rejected if 
combined with any other modifiers or if there is no last-sale price.
    NYSE Rule 7.34(c)(1)(A) is being amended to add Last Sale Peg 
Orders to the description of orders that may be accepted, but not 
eligible to trade, during the Early Trading Session.

Yielding Modifier

    Proposed NYSE Rule 7.31(i)(5) sets forth the requirements for the 
Yielding Modifier and provides that a Limit Order, Non-Routable Limit 
Order, or Reserve Order may be designated with a Yielding Modifier, 
which, for purposes of this proposed rule, would be referred to as 
``Yielding Order.'' A Yielding Order would yield priority to all other 
displayed and non-displayed orders at the same price, and, similar to 
g-Quotes,\19\ may only be entered by Floor brokers and would be ranked 
Priority 4--Yielding Orders. Proposed NYSE Rule 7.36(e)(4) would add 
this additional priority category and provide that Priority 4--Yielding 
Orders have fourth priority.
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    \19\ See Rule 70(a)(ii) and (iii). The Exchange states that g-
Quotes are designed to assist Floor Brokers with compliance with 
Section 11(a)(1) of the Act. See Notice, supra note 4, 83 FR at 
64918. Section 11(a)(1) of the Act generally prohibits a member of a 
national securities exchange from effecting transactions on that 
exchange for its own account, the account of an associated person, 
or any account over which it or an associated person exercises 
discretion. Subsection (G) of Section 11(a)(1) provides an exemption 
from this prohibition, allowing an exchange member to have its own 
floor broker execute a proprietary order, also known as a ``G 
order,'' provided such order yields priority, parity, and precedence 
(the ``G Rule''). Under the G Rule, G orders are not required to 
yield to other orders that are for the account of a member, e.g., 
Designated Market Maker (``DMM'') interest or other g-Quotes. See 
id. at 64918, n.54.
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    Proposed NYSE Rule 7.31(i)(5)(A) provides that an Aggressing 
Yielding Order to buy (sell) with a limit price higher (lower) than the 
limit price of a resting order to buy (sell) would trade ahead of the 
resting order.
    Proposed NYSE Rule 7.31(i)(5)(B) provides that an Aggressing 
Yielding Order to buy (sell) with a limit price equal to the limit 
price of a resting order to buy (sell) would either: (i) Trigger the 
resting order to become an Aggressing Order, unless the order to sell 
(buy) is an MPL-ALO Order or an MPL Order with an MTS Modifier,\20\ in 
which case neither the Yielding Order nor the same-side resting order 
would trade; or (ii)

[[Page 5797]]

trade ahead of the resting order if the resting order is not eligible 
to trade (e.g., an ALO Order or an order with an MTS Modifier).
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    \20\ See Rule 7.31(e)(2) for a description of the ALO Order. An 
MPL Order may be designated with the ALO modifier. See Rule 
7.31(d)(3)(E).
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    Similar to the proposed Last Sale Peg Order, proposed NYSE Rule 
7.31(i)(5)(C) provides that a Yielding Order may be designated with an 
STP Modifier and would be rejected if combined with any other 
modifiers.
    NYSE Rule 7.37(b) would also be amended to describe how orders with 
a Yielding Modifier would participate in the allocation process. The 
Exchange proposes that after the allocation of all other displayed and 
non-displayed orders, D Orders would be allocated on parity. Proposed 
NYSE Rule 7.37(b)(1)(G) provides that after D Orders have been 
allocated, the display quantity of orders ranked Priority 4--Yielding 
Orders would be allocated based on time. Proposed NYSE Rule 
7.37(b)(1)(H) would provide that, next, the non-display quantity of 
orders ranked Priority 4--Yielding Orders would be allocated based on 
time.
    The Exchange asserts that by extending the availability of order 
types that are currently available for Exchange-listed securities to 
trading on Pillar, the Exchange would provide its members with 
consistency across trading of all securities on the Exchange, thus 
promoting just and equitable principals of trade and promoting a fair 
and open market. Specifically, the Exchange states that the proposed D 
Order is based in part on current d-Quote functionality, which is 
available only to Floor brokers, and is designed to replicate 
electronically the Floor broker's agency role to exercise price 
discretion on behalf of its customer.\21\ The Exchange asserts that 
differences between g-Quotes and the proposed D Orders are aimed at 
simplifying and streamlining D Order functionality, while allowing such 
orders to contribute to the display of liquidity at the Exchange and 
offering price improvement opportunities to contra-side orders.\22\ 
Similarly, the Exchange states that the proposed Last Sale Peg Modifier 
would offer functionality based on the existing BMZP instruction,\23\ 
with differences designed to streamline the operation of the modifier, 
while maintaining its core purpose.\24\ In addition, the Exchange 
states that the proposed Yielding Modifier is based on current g-Quote 
functionality, including its availability to Floor brokers only. The 
Exchange notes that, because this modifier provides Floor brokers with 
an electronic method for representing orders on Pillar that is in 
compliance with the G Rule,\25\ offering this modifier to non-Floor 
brokers in unnecessary, because Floor brokers are the only members with 
the specified G Rule obligation today.\26\ The Exchange states that it 
believes the proposed rule change will contribute to the protection of 
investors and the public interest by enhancing transparency with 
respect to system functionality across trading of all securities in the 
Exchange.
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    \21\ In the Notice, the Exchange represents that Floor brokers 
provide services certain illiquid securities, which upstairs trading 
desks may not be staffed to manage, without any conflict of interest 
because they are is not trading for her their account and do not 
sell research to customers. This allows Floor brokers to manage 
order flow with a focus on price discovery and volume discovery in 
order to minimize price impact on the market. See Notice, supra note 
4, 83 FR at 13569.
    \22\ See Notice, supra note 4, 83 FR at 64920. The Exchange 
states proposed NYSE Rule 7.16(f)(5)(C) to add D Orders, like Pegged 
Orders and MPL Orders today, including orders marked buy, sell long, 
and sell short exempt, is based on the existing Pillar logic for D 
Orders that peg to the PBBO. See Notice, supra note 4, 83 FR at 
63917.
    \23\ The Exchange states that the Last Sale Peg Modifier is 
based on the existing Buy Minus Zero Plus Instruction available to 
buy orders, and is designed to facilitate compliance with the safe 
harbor provisions of Rule 10b-18 under the Act. See, e.g., Notice, 
supra note 4, 83 FR at 64921; NYSE Rule 13(f)(4).
    \24\ For example, the Exchange states that limiting this 
modifier to Non-Routable Limit Orders would simplify its operation, 
because the Exchange would not be able to assist a member 
organization to comply with Rule 10b-18 if such order were routed to 
an away market. See Notice, supra note 4, 83 FR at 64921.
    \25\ See, e.g., supra, note 23 and accompanying text; Notice, 
supra note 4, 83 FR at 64918, 64921.
    \26\ Exchange asserts that the electronic, off-Floor entry of 
orders is subject to an exception to the G Rule. See Notice, supra, 
note 4, 83 FR at 64918, 64021.
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    With respect to making the proposed D Order available only to Floor 
brokers, the Exchange states that D Orders are based on current d-Quote 
functionality, which is available only to Floor brokers and is designed 
to replicate electronically the Floor broker's agency role to exercise 
price discretion on an order on behalf of a customer. Additionally, the 
Exchange asserts that Floor brokers fulfill an agency broker role on 
behalf of their customers without conflicts and fill a void for firms 
that have chosen to allocate resources away from trading desks. In 
addition to this role, according to the Exchange, Floor brokers provide 
services for more illiquid securities, which upstairs trading desks may 
not be staffed to manage. The Exchange asserts that use of the D Order 
would facilitate this agency function by allowing Floor brokers to 
enter orders on behalf of their customers without pricing impact 
because the discretionary price range would be undisplayed and that, 
when managing this customer order flow, Floor brokers trading in UTP 
Securities would continue to be subject to Exchange rules that are 
unique to Floor brokers, including Rules 95, 122, 123, and paragraphs 
(d)-(j) of Rule 134.\27\
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    \27\ See Notice, supra note 4, 83 FR at 64920.
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    In addition, the Exchange notes that, while D Orders would be 
available only to Floor brokers, any member organization can choose to 
have a Floor broker operation and thus have direct access to D Orders 
on behalf of its customers, and that any such orders would not receive 
any execution priority or benefit when trading at a discretionary 
price. To the contrary, the Exchange asserts, if a D Order were to 
exercise discretion and trade at an undisplayed, discretionary price, 
that D Order would be ranked behind all other same-side orders at that 
price, except for a Yielding Order, which by definition yields to all 
other orders and can only be entered by another Floor broker.\28\
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    \28\ See id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\29\ In particular, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act,\30\ which requires, among other things, that the Exchange's 
rules be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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 are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \29\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \30\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposed rule change would extend the 
availability of certain orders and modifiers--which are currently 
available for the trading of Exchange-listed securities on the 
Exchange's existing technology platform--to trading on Pillar. 
Specifically, the D Order, Last Sale Peg Modifier, and Yielding 
Modifier that the Exchange proposes for Pillar would operate in a 
manner similar to the Exchange's existing d-Quotes, BMZP, and g-Quotes, 
respectively.

[[Page 5798]]

Additionally, the Commission notes that--after considering the 
potential effects on competition and the potential for discrimination 
against other exchange participants--it previously approved the 
extension of parity allocations to Floor brokers with respect to 
trading UTP Securities.\31\ The Commission believes that the rules that 
the Exchange now proposes with respect to the use of D Orders by Floor 
brokers are similarly designed to ensure that the benefits of this 
order type will flow to the customers of the Floor brokers.\32\
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    \31\ See Pillar Trading Rules Approval, supra, note 3, 83 FR at 
13572.
    \32\ See supra notes 27-28 and accompanying text. See also 
Pillar Trading Rules Approval, supra, note 3, 83 FR at 13572 
(finding that the Exchange's proposal to provide Floor brokers with 
parity allocation in UTP Securities was designed to ensure that the 
benefit of parity allocation would flow to customers of the floor 
brokers).
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    The Exchange also proposes to amend NYSE Rule 7.16(f)(5)(C) to 
specify that D Orders--including orders marked buy, sell long, and sell 
short exempt--would use the NBBO instead of the PBBO as the reference 
price. The Commission notes that any repricing of orders by the 
Exchange must be done consistent with applicable rules and regulations, 
including Rule 201 of Regulation SHO.\33\
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    \33\ See 17 CFR 242.201.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\34\ that the proposed rule change (SR-NYSE-2018-52) be, and it 
hereby is, approved.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03035 Filed 2-21-19; 8:45 am]
 BILLING CODE 8011-01-P


