[Federal Register Volume 85, Number 156 (Wednesday, August 12, 2020)]
[Notices]
[Pages 48746-48747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17562]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89499; File No. SR-NYSE-2020-55]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of a Proposed Rule Change To Amend Rules 7.36 and 
7.37 Relating to Setter Priority and Allocation

August 6, 2020.

I. Introduction

    On June 24, 2020, New York Stock Exchange, Inc. (``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 Rules 7.36 and 7.37 relating to 
Setter Priority and Allocation. The proposed rule change was published 
for comment in the Federal Register on June 30, 2020.\3\ The Commission 
has received no comments on the proposed rule changes. The Commission 
is approving the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 89205 (June 30, 
2020), 85 FR 40715 (June 30, 2020) (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to modify the current operation of Setter 
Priority on the Exchange by changing the definition of orders eligible 
for Setter Priority and by changing the allocation that orders Setting 
Priority of contra-side Aggressing Orders.\4\
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    \4\ An ``Aggressing Order'' is defined as a buy (sell) order 
that is or becomes marketable against a sell (buy) interest on the 
Exchange Book. See NYSE Rule 7.36(a)(6).
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    Currently, NYSE Rule 7.36(h) provides that an order may be assigned 
Setter Priority by (1) setting a new Best Bid or Offer (``BBO'') on the 
Exchange and (2) joining or setting the National Best Bid or Offer 
(``NBBO''), provided that such an order will not be eligible for Setter 
Priority if there is an odd-lot sized order with Setter Priority at 
that price.\5\ Proposed NYSE Rule 7.36(h) would be amended to provide 
that an order is eligible for Setter Priority only if it sets a new 
NBBO.\6\
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    \5\ See Notice, supra note 3, 85 FR at 40716.
    \6\ See id. at 40715-16.
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    Currently, under NYSE Rule 7.37(b)(1), an order with Setter 
Priority equal to the BBO is eligible for a 15% allocation of an 
Aggressing Order

[[Page 48747]]

(rounded up to the next round lot size, or the full quantity of the 
Aggressing Order). Proposed NYSE Rule 7.37(b)(1) would be amended to 
provide that an order with Setter Priority equal to the BBO would be 
eligible to trade in full with the contra-side Aggressing Order.\7\ The 
Exchange also represents that under the proposal, (1) if an Aggressing 
Order is greater in size than an order with Setter Priority, the order 
with Setter Priority would be executed in full and the remainder of the 
Aggressing Order would be allocated pursuant to NYSE Rule 7.37; and (2) 
if an Aggressing Order is smaller in size than an order with Setter 
Priority, the Aggressing Order would be executed in full, and the 
remainder of the order with Setter Priority would retain its Setter 
Priority status.\8\
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    \7\ The Exchange also proposes to delete existing text in NYSE 
Rule 7.37(b)(1)(C) pertaining to allocation when there are remaining 
quantities of an Aggressing Order and an order with Setter Priority. 
Under the proposal, either the order with Setter Priority, the 
Aggressing Order, or both orders would execute in full; thus, such 
an order book scenario would no longer be possible. See id. at 
40716.
    \8\ See id. at 40715-16.
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III. Discussion and Commission Findings

    After careful consideration, the Commission finds that the 
Exchange's proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to national 
securities exchanges. In particular, the Commission finds that the 
Exchange's proposed rule change is consistent with Section 6(b)(5) of 
the Act,\9\ which requires that the rules of an exchange be designed, 
among other things, 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \9\ 17 U.S.C. 78f(b)(5).
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    The Exchange asserts that assigning Setter Priority only to orders 
that establish a new NBBO, and allowing such orders to execute in full 
against incoming Aggressing Orders, would allow orders with Setter 
Priority to operate similarly to top-of-book orders at national 
securities exchanges with a price-time priority execution model and 
would thereby incentivize member organizations to route price-forming, 
liquidity-providing orders to the Exchange to the benefit of all market 
participants.\10\ Because the Exchange's proposal would, unlike the 
current rule, require Setter Priority orders to set a new NBBO to be 
eligible for Setter Priority, and because the proposal would reward 
Setter Priority orders with a greater opportunity to trade against 
Aggressing Orders, the Commission believes that the proposed rule 
change is reasonably designed to incentivize member organizations to 
quote aggressively and improve the NBBO.
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    \10\ See Notice, supra note 3, at 40717.
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    Based on the foregoing, the Commission therefore finds that the 
proposed rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NYSE-2020-55) be, and hereby 
is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17562 Filed 8-11-20; 8:45 am]
BILLING CODE 8011-01-P


