[Federal Register Volume 84, Number 104 (Thursday, May 30, 2019)]
[Notices]
[Pages 25100-25105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11237]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85930; File No. SR-NYSE-2019-26]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change of 
New Rule 7.44 To Operate Its Retail Liquidity Program on Pillar, the 
Exchange's New Technology Trading Platform

May 23, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 13, 2019, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 new Rule 7.44 to operate its Retail Liquidity 
Program on Pillar, the Exchange's new technology trading platform. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 107C sets forth the Exchange's Retail Liquidity Program (the 
``Program''). To support the transition of NYSE-listed securities to 
the Exchange's Pillar trading platform, the Exchange proposes to 
relocate the substance of Rule 107C to Rule 7.44. As part of the 
transition of the Program to Pillar, the Exchange proposes the 
following substantive differences: (i) Define Retail Price Improvement 
Orders using Pillar terminology based on text used by NYSE Arca, Inc., 
the Exchange's affiliate, and new proposed rule text that uses Pillar 
terminology to describe the existing offset functionality and rank such 
orders as Priority 3--Non-Display Orders; (ii) remove unused 
functionality by adopting a single category of Retail Order and 
eliminating the Type 2 and Type 3 Retail Orders; and (iii) trade Retail 
Orders against eligible contra-side orders at the best available prices 
rather than a single ``clean-up price'' and allocate resting orders at 
the same price pursuant to the Exchange's established Pillar parity 
allocation process under Rule 7.37(b).
    The Exchange established the Program on a pilot basis to attract 
retail order flow to the Exchange, and allow such order flow to receive 
potential price improvement.\3\ The Program is limited to trades in 
NYSE-listed securities occurring at prices equal to and greater than 
$1.00 a share and was recently approved by the Commission to operate on 
a permanent, rather than pilot, basis.\4\
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    \3\ See Securities Exchange Act Release No. 67347 (July 3, 
2012), 77 FR 40673 (July 10, 2012) (SR-NYSE-2011-55) (``RLP Pilot 
Approval Order'').
    \4\ See Securities Exchange Act Release No. 85160 (February 15, 
2019), 84 FR 5754 (February 22, 2019) (SR-NYSE-2018-28) (``RLP 
Permanent Approval Order'').
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    Under Rule 107C, a class of market participant called Retail 
Liquidity Providers (``RLPs'') and non-RLP member organizations are 
able to provide potential price improvement to retail investor orders 
in the form of a non-displayed order that is priced at least $0.001 
better than the best protected bid or offer (``PBBO''), called a Retail 
Price Improvement Order (``RPI'').\5\ When there is an RPI in a 
particular security, the Exchange disseminates an indicator, known as 
the Retail Liquidity Identifier (``RLI''), that such interest exists. 
Retail Member Organizations (``RMOs'') can submit a Retail Order to the 
Exchange, which interacts, to the extent possible, with available 
contra-side RPIs and orders with a working price between the PBBO. The 
segmentation in the Program allows retail order flow to receive 
potential price improvement as a result of their order flow being 
deemed more desirable by liquidity providers.\6\
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    \5\ See Rule 107C(a)(4). The Program also allows for RLPs to 
register with the Exchange. However, any firm can enter RPI orders 
into the system.
    \6\ RLP Pilot Approval Order, 77 FR at 40679-40680.
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Proposed Rule 7.44, Retail Liquidity Program
    The Exchange proposes that Rule 7.44 would set forth the Program 
under the Exchange's Pillar Platform Rules and would use Pillar 
terminology based on NYSE Arca, Inc. (``NYSE Arca'') Rule 7.44-E. 
Except for the differences described below, proposed Rule 7.44 is 
substantively based on Rule 107C: Proposed Rules 7.44(a)(1)-(3), 
7.44(b), 7.44(c), 7.44(d), 7.44(e), 7.44(f), 7.44(g), 7.44(h), 7.44(i), 
and 7.44(j) are based on current rules 107C(a)(1)-(3), 107C (b), 107C 
(c), 107C (d), 107C (e), 107C (f), 107C (g), 107C (h), 107C (i), and 
107C (j), respectively, with only minor non-substantive differences to 
replace the term ``shall'' with ``will'' and update internal cross-
references to the Pillar rule. Proposed Rule 7.44(m) is based on the 
last sentence of current Rule 107C(l).

[[Page 25101]]

    The Exchange proposes non-substantive differences for proposed 
Rules 7.44(a)(3) and 7.44(a)(4)(E), which are based on Rule 107C(a)(3) 
and the last sentence of Rule 107C(a)(4), respectively, to replace the 
term ``PRL'' with the term ``mixed lot'' to conform to Pillar 
terminology. Both a PRL and a mixed lot are an order of any amount 
greater than one round lot that is not a multiple of a round lot.\7\
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    \7\ See Rules 7.5 and 61(a)(ii).
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    The Exchange further proposes a non-substantive difference for 
proposed Rule 7.44(c)(3), which is based on Rule 107C(c)(3), to not 
include references to mnemonics, which will not be used on the Pillar 
trading platform for RLPs. Proposed Rule 7.44(c)(3) would continue to 
require an RLP to use Exchange-supplied designations that identify to 
the Exchange RLP trading activity in assigned RLP securities. This 
proposed rule text is based on NYSE Arca Rule 7.44-E(c)(3).
    The Exchange also proposes a non-substantive difference for 
proposed Rule 7.44(i)(2), which is based on current Rule 107C(i)(2), to 
reference the ``Exchange's Chief Regulatory Officer'' rather than the 
``NYSE's Chief Regulatory Officer,'' and to use the phrase ``two 
qualified Exchange employees'' instead of ``officers of the Exchange 
designated by the Co-Head of U.S. Listings and Cash Execution.'' The 
Exchange proposes not to include specific titles, other than Chief 
Regulatory Officer, in Pillar rules because the Exchange has 
restructured and no longer has the position of Co-Head of U.S. Listings 
and Cash Executions. In addition, as a result of the restructuring, the 
title of ``officer'' is no longer used by employees who were previously 
designated for this role. The Exchange believes that the term 
``qualified Exchange employees'' would provide the Exchange with 
discretion to delegate this responsibility to appropriate Exchange 
staff. As amended, proposed Rule 7.44(i)(2) is based on NYSE Arca Rule 
7.44-E(i)(2).
    The Exchange also proposes a non-substantive difference for 
proposed Rule 7.44(j), which is based on current Rule 107C(j), to 
replace the phrase ``or as appropriate'' with ``and'' in the first 
sentence. The first sentence of Rule 107C(j) provides that a Retail 
Liquidity Identifier is ``disseminated through proprietary data feeds 
or as appropriate through the Consolidation Quotation System when RPI 
interest priced at least $0.001 better than the PBB or PBO for a 
particular security is available in Exchange systems'' (emphasis 
added). This non-substantive change would clarify that the Exchange 
disseminates the Retail Liquidity Identifier through both its 
proprietary data feeds and the Consolidated Quotation System.
    Because proposed Rule 7.44 would have identical requirements to be 
approved as either an RMO (proposed Rule 7.44(b)) or a Retail Liquidity 
Provider (proposed Rule 7.44(c)-(d)) as under current Rules 107C(b) and 
(c)-(d), the Exchange further proposes that any member organizations 
that are approved as either an RMO or RLP under current Rule 107C would 
be deemed approved as either an RMO or RLP under proposed Rule 7.44 and 
would not have to re-apply. The Exchange believes this will promote 
continuity for the RLP Program when NYSE-listed securities transition 
to the Pillar trading platform and will reduce the administrative 
burden on member organizations that are already approved as either an 
RMO or RLP.
    Currently, all member organizations communicate with the Exchange 
using Pillar phase I protocols, which support trading both on the 
Pillar trading platform and in Exchange-listed securities. The Exchange 
notes that currently on the Pillar trading platform, orders with a 
limit price of less than $1.00 in securities that are priced at 
$100,000 or above, are rejected if not entered with an MPV of $0.01. 
The Exchange further notes that this functionality is only applicable 
to one security traded on the Exchange. The Exchange proposes to codify 
this functionality as it applies to the Program in proposed Commentary 
.01 to Rule 7.44, which would provide that when using Pillar phase 1 
protocols, for securities that trade at prices of $100,000 or above, 
RPI Orders would be rejected if not entered with an MPV of $0.01.\8\
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    \8\ Pursuant to its authority under Rule 612(c) of Regulation 
NMS, 17 CFR 242.612(c), the Commission grants the Exchange a limited 
exemption from Rule 612 of Regulation NMS, 17 CFR 242.612, (the 
``Sub-Penny Rule'') to operate the Program. See Securities Exchange 
Act Release No. 85160 (February 15, 2019), 84 FR 5754 (February 22, 
2019) (SR-NYSE-2018-28).
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Retail Price Improvement Orders
    Proposed Rule 7.44(a)(4) would define the RPI. The rule text is 
based on current Rule 107C(a)(4), and the Exchange is not proposing any 
substantive changes to the definition of RPI Orders. However, the 
proposed rule would include non-substantive differences to use Pillar 
terminology to describe RPIs.
    As proposed, new Rule 7.44(a)(4) would provide that an RPI would be 
non-displayed interest that would trade at prices better than the PBB 
or PBO by at least $0.001 and that is identified as such. This rule 
text is based on the first sentence of current Rule 107C(a)(4), with 
non-substantive differences to use the terms PBB and PBO and delete the 
reference to Regulation NMS definition as redundant of the definition 
of PBB/PBO in Rule 1.1(o). The Exchange also proposes to replace the 
term ``is priced better than'' the PBB or PBO to ``would trade at 
prices better than'' the PBB or PBO. Because RPI interest does not need 
to be priced better than the PBB or PBO on arrival, but could trade in 
sub-penny increments, the Exchange believes the proposed non-
substantive difference describes how RPIs would operate in Pillar. This 
proposed rule text also uses Pillar terminology that is based on NYSE 
Arca Rule 7.44-E(a)(4).
    Proposed Rule 7.44(a)(4)(A) would provide that an RPI would remain 
non-displayed in its entirety and would be ranked Priority 3--Non-
Display Orders. This proposed rule text is based on the third sentence 
of current Rule 107C(a)(4), which provides that an RPI remains non-
displayed in its entirety and uses Pillar terminology to describe the 
priority category to which RPIs would belong. The proposed rule also 
uses Pillar terminology that is based on NYSE Arca Rule 7.44-
E(a)(4)(A).
    Proposed Rule 7.44(a)(4)(B) would provide that Exchange systems 
would monitor whether RPI buy or sell interest would be eligible to 
trade with incoming Retail Orders and if it is priced at or outside the 
PBBO, the RPI would not be eligible to trade with an incoming Retail 
Order. The rule would further provide that an RPI to buy (sell) with a 
limit price at or below (above) the PBB (PBO) or at or above (below) 
the PBO (PBB) would not be eligible to trade with incoming Retail 
Orders to sell (buy) and that if not cancelled, an RPI to buy (sell) 
with a limit price that is no longer at or below (above) the PBB (PBO) 
or at or above (below) the PBO (PBB) would again be eligible to trade 
with incoming Retail Orders. This rule text is based on Rule 
107C(a)(4), which provides that an RPI must be priced better than the 
PBB or PBO and that the Exchange monitors whether such orders are 
eligible to trade, with non-substantive differences to use Pillar 
terminology. This proposed rule text also uses Pillar terminology that 
is based on NYSE Arca Rule 7.44-E(a)(4)(B) with one difference to 
account for a proposed change to the definition of Retail Order 
described below. The proposed rule text would, therefore, not include 
text from NYSE Arca Rule 7.44-E(a)(4)(B) that provides for the 
cancellation of an RPI if a Retail Order

[[Page 25102]]

to sell (buy) trades with all displayed liquidity at the PBB (PBO).
    Proposed Rule 7.44(a)(4)(C) would provide that an RPI may include 
an optional offset, which may be specified up to three decimals. As 
further proposed, the working price of an RPI to buy (sell) with an 
offset would be the lower (higher) of the PBB (PBO) plus (minus) the 
offset or the limit price of the RPI; an RPI with an offset would not 
be eligible to trade if the working price is below $1.00, and if an RPI 
to buy (sell) with an offset would have a working price that is more 
than three decimals, the working price would be truncated to three 
decimals. This proposed rule text is based on the second and third 
sentences of current Rule 107C(a)(4), which provide that an RPI may be 
adjusted by any offset subject to a ceiling or floor price and that the 
offset is non-displayed. Proposed Rule 7.44(a)(4)(C) uses Pillar 
terminology to describe this existing offset functionality, which the 
Exchange believes promotes transparency and clarity in its rules.
    The Exchange proposes to make a related change to Rule 
7.16(f)(5)(C) to specify that, like Pegged Orders and MPL Orders, RPIs 
with an offset would use the National Best Bid (``NBB'') instead of the 
PBB as the reference price when a Short Sale Price Test is triggered 
pursuant to Rule 201 of Regulation SHO.\9\
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    \9\ 17 CFR 242.201.
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    Proposed Rule 7.44(a)(4)(D) would provide that, for securities to 
which it is assigned, an RLP may only enter an RPI in its RLP capacity, 
and that an RLP would be permitted, but not required, to submit RPI 
Orders for securities to which it is not assigned, and would be treated 
as a non-RLP member organization for those particular securities. 
Additionally, the rule would provide that member organizations other 
than RLPs would be permitted, but not required, to submit RPI Orders. 
This proposed rule text is based on the fifth and sixth sentences of 
current Rule 107C(a)(4) without any substantive differences. This 
proposed rule text also uses Pillar terminology that is based on NYSE 
Arca Rule 7.44-E(a)(4)(C).
    Proposed Rule 7.44(a)(4)(E) would provide that an RPI may be an odd 
lot, round lot, or mixed lot and will interact with incoming Retail 
Orders only. This proposed text is based on the last sentence of Rule 
107C(a)(4), with the non-substantive difference described above to use 
the term ``mixed lot'' instead of ``PRL,'' as described above. The 
Exchange also proposes to provide greater specificity that RPIs would 
interact with incoming Retail Orders only, which is how RPIs currently 
function. This proposed rule text is based in part on NYSE Arca Rule 
7.44-E(a)(4)(D).
Retail Orders
    Pursuant to Rule 107C(k), Retail Orders may be designated as Type 
1, Type 2, or Type 3. Proposed Rule 7.44(k) would be based on Rule 
107C(k) with two substantive differences. The first substantive 
difference would be to remove unused functionality by eliminating the 
Type 2 and Type 3 Retail Orders. The second substantive difference 
would be to expand the scope of contra-side orders against which a 
Retail Order may trade to include all orders between the PBBO, not just 
RPI Orders and MPL Orders.
    To date, the Exchange has not received a Retail Order designated as 
Type 2 or Type 3 and, therefore, proposes to no longer support this 
functionality. On Pillar, the Exchange would offer a single category of 
Retail Orders under proposed Rule 7.44(k) that would operate in a 
substantially similar manner as the current Type 1 Retail Order, but 
would be described using Pillar terminology. The title of Rule 7.44 
would therefore differ from Rule 107C to replace the word 
``Designation'' with ``Operation'' to reflect the availability of a 
single type of Retail Order.
    As proposed, ``Retail Order,'' as defined in proposed Rule 7.44(k), 
would be described as:

    A Retail Order to buy (sell) is a Limit IOC Order that will 
trade only with available Retail Price Improvement Orders to sell 
(buy) and all other orders to sell (buy) with a working price below 
(above) the PBO (PBB) on the Exchange Book and will not route. The 
quantity of a Retail Order to buy (sell) that does not trade with 
eligible orders to sell (buy) will be immediately and automatically 
cancelled. A Retail Order will be rejected on arrival if the PBBO is 
locked or crossed. A Retail Order may not be designated with an MTS 
Modifier.

    This proposed functionality is based on the Type-1 designated 
Retail Order, as described in Rule 107C(k)(1), with a substantive 
difference that Retail Orders would no longer be limited to interact 
only with contra-side RPI and MPL Orders. The Exchange believes that 
this proposed difference would increase the potential for a Retail 
Order to receive an execution as such orders would be eligible to trade 
with any orders between the PBBO. The Exchange further proposes to 
specify that a Retail Order may not be designated with an MTS 
Modifier.\10\ This proposed rule text uses Pillar terminology to 
describe current functionality. The proposed text of Rule 7.44(k) is 
otherwise substantially similar to current Rule 107C(k)(1) with minor 
changes to confirm to Pillar terminology and to remove references to 
``Type 1.''
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    \10\ Pursuant to Rule 7.31(i)(3), a Limit IOC Order may be 
designated with an MTS Modifier. Because a Retail Order is a type of 
Limit IOC Order, the Exchange proposes to specify that, unlike a 
Limit IOC Order, Retail Orders may not be designated with an MTS 
Modifier.
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Rule 7.44(l), Priority and Order Allocation
    Similar to Rule 107C(l), proposed Rule 7.44(l) would set forth the 
priority and allocation rules for the Program. With Pillar, the 
Exchange proposes to simplify the operation of the Program and rank and 
allocate RPIs with all other interest at the same price as Priority 3--
Non-Display Orders. In addition, incoming Retail Orders would trade 
with contra-side interest between the PBBO at each price point, rather 
than at a single clean-up price. At each price point between the PBBO, 
resting orders would be allocated consistent with Rule 7.37(b) 
(including, for example, odd lot orders ranked Priority 2--Display 
Orders). With these proposed changes, the allocation of Retail Orders 
in the Program would be aligned with the allocation of orders outside 
of the Program under the Exchange's established Pillar allocation 
process.\11\
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    \11\ See Rule 7.37(b), Allocation.
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    To effect these differences, proposed Rule 7.44(l) would provide 
that RPIs in the same security would be ranked together with all other 
interest at that price ranked as Priority 3--Non-Display Orders and 
would be allocated with other resting orders at that price pursuant to 
Rule 7.37(b). This would be new functionality for the Program and is 
consistent with how all other orders are allocated on the Exchange. The 
Exchange believes that the proposed substantive difference to the 
priority and allocation of orders in the Program would reduce potential 
confusion because the Program would no longer have different allocation 
rules as compared to how orders trade outside the Program.
    The Exchange proposes to make a related amendment to Rule 
7.37(b)(2)(D), which describes the circumstances when a Participant 
would be moved to the last position on an allocation wheel.\12\ Because 
RPIs are only eligible to trade with Retail Orders,

[[Page 25103]]

they would be skipped on an allocation wheel for the allocation of an 
Aggressing Order that is not a Retail Order. The Exchange proposes that 
if an RPI has been skipped in an allocation because it was not eligible 
to trade, the Participant that entered such order would be moved to the 
last position on an allocation wheel if such Participant has no other 
orders at that price. This proposed rule change would be applicable to 
RPIs that are priced the same as other Priority 3--Non-Display Orders 
and have been skipped in an allocation. This proposed rule text is 
consistent with how Rule 7.37(b)(2)(D) currently operates with respect 
to a Participant that has an order that receives a new working time or 
cancels and replaces an order, and such Participant does not have any 
other orders at that price.
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    \12\ Rule 7.37(b)(2)(D) provides that if an order receives a new 
working time or is cancelled and replaced at the same working price, 
the Participant that entered such order will be moved to the last 
position on an allocation wheel if that Participant has no other 
orders at that price.
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    Proposed Rule 7.44(l) would further provide that any remaining 
unexecuted RPI interest would remain available to trade with other 
incoming Retail Orders and that any remaining unfilled quantity of the 
Retail Order would cancel in accordance with proposed Rule 7.44(k). 
This proposed rule text is based in part on Rule Arca Rule 7.44-E(l). 
This proposed rule text is also consistent with the proposed change, 
described above, that Retail Orders would, by definition, have an IOC 
time-in-force condition.
    Because the Exchange proposes that allocations in the Program would 
not differ from how orders are allocated outside the Program, the 
Exchange proposes that unlike Rule 107C(l), proposed Rule 7.44(l) no 
longer needs to include examples of how executions in the Program would 
operate. The Exchange included those examples in Rule 107C because 
allocations in that version of the Program differed from the Exchange's 
regular allocation process. Those concerns are now moot.
Implementation of Proposed Rule Change
    Subject to effectiveness of this proposed rule change, the Exchange 
proposes to implement this proposed change when the Exchange 
transitions NYSE-listed securities to its Pillar trading platform.\13\ 
To promote transparency of which rule relating to the Program would 
govern trading on the Exchange both before and after the Pillar 
transition, the Exchange proposes to amend the preamble to Rule 107C to 
provide that such rule would not be applicable to trading on the Pillar 
trading platform, and delete the reference to UTP Securities in that 
preamble.
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    \13\ The Exchange has announced that, subject to rule approvals, 
the Exchange will begin transitioning Exchange-listed securities to 
Pillar on August 5, 2019, available here: https://www.nyse.com/publicdocs/nyse/markets/nyse/Revised_Pillar_Migration_Timeline.pdf. 
The Exchange will publish by separate Trader Update a complete 
symbol migration schedule.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of 
Sections 6(b)(5) of the Act,\15\ in particular, because it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to, and perfect the mechanisms of, 
a free and open market and a national market system and, in general, to 
protect investors and the public interest and because it is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change seeks to provide for the Program on 
Pillar, the Exchange's new technology trading platform. The proposed 
non-substantive differences between proposed Rule 7.44 and Rule 107C to 
use Pillar terminology would remove impediments to and perfect the 
mechanism of a fair and orderly market because the proposed differences 
would promote transparency through the use of consistent terminology in 
Pillar rules. The Exchange believes that proposed Rule 7.44(a)(4), 
describing RPIs, would remove impediments to and perfect the mechanism 
of a free and open market and a national market system because the 
proposed rule text would use Pillar terminology to describe existing 
functionality. The Exchange believes that the use of Pillar terminology 
promotes transparency and clarity in Exchange rules.
    The Exchange believes that the proposed Commentary .01 to Rule 7.44 
to reject RPIs in securities that are priced at $100,000 or above if 
not entered with an MPV of $0.01 would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it provides transparency of the circumstances when an 
RPI would be rejected depending on the communication protocol used by 
the member organization and the MPV in which it is entered.
    The Exchange believes that its proposal to eliminate the Type 2 and 
Type 3 Retail Orders would remove impediments to, and perfect the 
mechanisms of, a free and open market and a national market system by 
simplifying and streamlining the operation of Retail Orders. To date, 
the Exchange has not received a Retail Order designated as Type 2 or 
Type 3 for participation in the Program. Therefore, no longer offering 
the Type 2 or Type 3 Retail Orders should not impact market 
participants' trading activity and would serve to remove unused 
functionality from the Program and the Exchange's rules. The Proposal 
would also simplify the operation of the Program and allow the Exchange 
to no longer support functionality that is not utilized. The Exchange 
further believes that the proposed substantive difference that Type 1 
Retail Orders, which would simply be referred to as ``Retail Orders,'' 
would be eligible to trade with all contra-side orders on the Exchange 
Book would remove impediments to and perfect the mechanism of a free 
and open market and a national market system because it would increase 
the potential that a Retail Order would receive an execution on the 
Exchange.
    The proposed substantive difference to allow Retail Orders to 
execute at the best available prices under proposed Rule 7.44(l) rather 
than a single clean-up price would remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because it would align how a Retail Order would trade under the Program 
with how incoming orders outside of the Program trade on the Exchange. 
In addition, the proposed substantive difference that RPIs would be 
ranked Priority 3--Non-Display Orders, and all resting orders at a 
price would be allocated on parity pursuant to Rule 7.37(b), would 
remove impediments to and perfect the mechanism of a fair and orderly 
market because it would align the allocation of orders in the Program 
with the allocation of orders outside of the Program. This proposed 
substantive difference would therefore promote transparency in Exchange 
rules and reduce potential confusion because the Program would no 
longer operate differently from the allocation of orders outside the 
Program.
    The Exchange further believes that the proposed amendment to Rule 
7.37(b)(2)(D) to specify that the Participant that entered an order 
that is skipped in an allocation because it would not be eligible to 
trade would be

[[Page 25104]]

moved to the last position on the allocation wheel if such Participant 
has no other orders at that price 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 
regarding how the Exchange determines the position of a Participant on 
an allocation wheel. The Exchange further believes it would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system to move a Participant to the last position on 
the allocation wheel because it would simplify how such orders are 
processed; if an order is skipped, other orders at that price may be 
fully executed or cancelled or new orders may be added and it would be 
difficult to assess in such fluid circumstances the exact position of 
that Participant on the allocation wheel if that Participant does not 
have any other orders at that price. Moving such Participant to the 
last position on the wheel also promotes consistency with current Rule 
7.37(b)(2)(D) regarding how a Participant is moved on an allocation 
wheel if its order receives a new working time or is cancelled and 
replaced at the same working price and such Participant does not have 
any other orders at that price.
    The Exchange believes that the proposed amendment to Rule 
7.16(f)(5)(C) to specify that during a Short Sale Period, RPIs with an 
offset would use the NBBO rather than the PBBO as the reference price 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because it would ensure 
compliance with Rule 201 of Regulation SHO.

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

    In accordance with Section 6(b)(8) of the Act,\16\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed change is to adopt new rules to 
support continuity of the Program when Exchange-listed securities 
transition to the Exchange's new Pillar trading platform. As discussed 
in detail above, the Exchange proposes to adopt rules for Pillar 
relating to the Retail Liquidity Program that are be based on current 
rules, with both substantive and non-substantive differences. The 
proposed substantive differences proposed for Rule 7.44 as compared to 
Rule 107C would promote competition because they streamline the 
operation of the Program by eliminating unused order types and aligning 
the allocation of orders in the Program with the allocation of orders 
outside of the Program. The proposed non-substantive differences 
include using new Pillar terminology to describe the Program and are 
based on NYSE Arca Rule 7.44-E. The Exchange believes that the proposed 
rule change would promote consistent use of terminology to support the 
Pillar trading platform, making the Exchange's rules easier to 
navigate.
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    \16\ 15 U.S.C. 78f(b)(8).
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    The proposal to eliminate Type 2 and Type 3 Retail Orders are not 
intended to have a competitive impact. These changes simply remove 
functionality from the Program that has not been used at all to date.

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 \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
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.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
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    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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2019-26 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2019-26. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal offices of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2019-26, and should be submitted on 
or before June 20, 2019.


[[Page 25105]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11237 Filed 5-29-19; 8:45 am]
 BILLING CODE 8011-01-P


