[Federal Register Volume 86, Number 247 (Wednesday, December 29, 2021)]
[Notices]
[Pages 74119-74122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28245]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93850; File No. SR-NYSE-2021-75]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Rules To Add New Subparagraph (i)(6) to Rule 7.31

December 22, 2021.
    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 December 16, 2021, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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 to amend its rules to (1) add new 
subparagraph (i)(6) to Rule 7.31 (Orders and Modifiers) regarding 
orders designated with a ``retail'' modifier and (2) delete current 
Rule 13 (Retail Modifier). 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,

[[Page 74120]]

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 its rules to (1) add new 
subparagraph (i)(6) to Rule 7.31 (Orders and Modifiers) regarding 
orders designated with a ``retail'' modifier and (2) delete current 
Rule 13 (Retail Modifiers).
Proposed Rule Change
    Currently, the Exchange's Rule 13 (Retail Modifiers) permits member 
organizations to designate an order with a ``retail'' modifier. Such 
orders, if properly designated, are eligible for ``Retail Modifier'' 
rates available for such orders on the Exchange's Price List.\3\
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    \3\ These requirements are distinct from, but related to, the 
Exchange's requirements for a ``Retail Order'' under its Retail 
Liquidity Program pursuant to Rule 7.44.
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    The Exchange proposes to move the text of Rule 13 to the Exchange's 
Pillar rules, and specifically, to new subparagraph (i)(6) to Rule 7.31 
(Orders and Modifiers), and to make modifications to the rule text to 
conform it to rules currently in effect on its affiliate exchanges NYSE 
American LLC (``NYSE American'') \4\ and NYSE National, Inc. (``NYSE 
National'').\5\ The Exchange does not propose any changes to the fees 
applicable to orders designated with a ``retail'' modifier.
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    \4\ See Securities Exchange Act Release No. 92254 (June 24, 
2021), 86 FR 34819 (June 30, 2021) (SR-NYSEAMER-2021-31) (notice of 
filing and immediate effectiveness of proposed rule change to add 
the ``retail'' order modifier to NYSE American Rule 7.31E(i)(4)).
    \5\ See Securities Exchange Act Release No. 92446 (July 20, 
2021), 86 FR 40108 (July 26, 2021) (SR-NYSENAT-2021-15) (notice of 
filing and immediate effectiveness of proposed rule change to add 
the ``retail'' order modifier to NYSE National Rule 7.31(i)(4)).
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Proposed Rule 7.31(i)(6)
    Proposed Rule 7.31(i)(6)(A) would specify that an order designated 
with a ``retail'' modifier is an agency order or a riskless principal 
order that meets the criteria of FINRA Rule 5320.03 that originates 
from a natural person and is submitted to the Exchange by a member 
organization, provided that no change is made to the terms of the order 
with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. It would also specify that an order with a ``retail'' 
modifier is separate and distinct from a ``Retail Order'' under Rule 
7.44. This proposed rule is based on the Exchange's current Rule 
13(f)(2)(A) without any differences, except that the cross-reference in 
Rule 13 to former Rule 107C (Retail Liquidity Program) would be updated 
to instead cross-reference Rule 7.44 (Retail Liquidity Program).
    Proposed Rule 7.31(i)(6)(B) would specify that a member 
organization would be required to designate an order as ``retail'' in 
the form and/or manner prescribed by the Exchange. This proposed rule 
is based on the Exchange's current Rule 13(f)(2)(B) without any 
differences, except that the introductory language `` 'Retail' modifier 
designation'' would be deleted.
    Proposed Rule 7.31(i)(6)(C) would specify that in order to submit 
an order with a ``retail'' modifier, a member organization must submit 
an attestation, in a form prescribed by the Exchange, that 
substantially all orders designated as ``retail'' would meet the 
requirements set out in paragraph (A) above. This proposed rule is 
based on the Exchange's current Rule 13(f)(2)(C) without any 
differences, except that the Exchange proposes to change the phrase 
``submitted as `retail' '' to ``designated as `retail,' '' to conform 
the rule text to that of NYSE American Rule 7.31E(i)(4)(C) and NYSE 
National Rule 7.31(i)(4)(C).
    Proposed Rule 7.31(i)(6)(D) would specify that a member 
organization must have written policies and procedures reasonably 
designed to assure that it will only designate orders as ``retail'' if 
all requirements of Rule 7.31(i)(6)(A) are met. Such written policies 
and procedures must require the member organization to (i) exercise due 
diligence before entering a ``retail'' order to assure that entry as a 
``retail'' order is in compliance with the requirements specified by 
the Exchange, and (ii) monitor whether orders entered as ``retail'' 
orders meet the applicable requirements. If a member organization 
represents ``retail'' orders from another broker-dealer customer, the 
member organization's supervisory procedures must be reasonably 
designed to assure that the orders it receives from such broker-dealer 
customer that it designates as ``retail'' orders meet the definition of 
a ``retail'' order. The member organization must (i) obtain an annual 
written representation, in a form acceptable to the Exchange, from each 
broker-dealer customer that sends it orders to be designated as 
``retail'' orders'' that entry of such orders as ``retail'' orders will 
be in compliance with the requirements specified by the Exchange, and 
(ii) monitor whether its broker-dealer customer's ``retail'' order flow 
meets the applicable requirements. This proposed rule is based on the 
Exchange's current Rule 13(f)(2)(D) without any differences.
    Proposed Rule 7.31(i)(6)(E) would specify that a member 
organization that fails to abide by the requirements specified in 
paragraphs (i)(6)(A)-(D) of Rule 7.31 would not be eligible for the 
``Retail Modifier'' rates for orders it designates as ``retail'' 
orders. This proposed rule is based on NYSE American Rule 
7.31E(i)(4)(E) and NYSE National Rule 7.31(i)(4)(E) with the following 
non-substantive differences: The proposed rule (i) would use the term 
``member organization'' instead of ``ETP Holder,'' and, (ii) because 
the Exchange operates a Retail Liquidity Provider Program (``RLP'') 
pursuant to Rule 7.44 that separately defines the term ``Retail 
Order,'' the proposed rule would use the terms ``order designated as 
`retail'' or ``Retail Modifier'' instead of the term ``Retail Order.'' 
\6\
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    \6\ The Exchange does not propose to copy text from Rule 
13(f)(2)(E) or (F) into the Rule 7.31(i)(6) definition of ``Retail 
Modifier.'' Those sections provide that a member organization that 
fails to abide by the requirements pertaining to orders designated 
as ``retail'' will be ``disqualified'' from submitting ``retail'' 
orders, which disqualification the member organization may appeal. 
The Exchange believes that the appropriate consequence for 
incorrectly designating an order with a ``retail'' modifier would be 
that such orders would be ineligible for preferential ``retail'' 
fees, as proposed Rule 7.31(i)(6)(E) would provide. Such orders 
would still be eligible to trade pursuant to the non-``retail'' fees 
in the Exchange's Price List.
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Deletion of Rule 13
    Because the Exchange is relocating current Rule 13 to proposed Rule 
7.31(i)(6) and such subsection would define the term ``Retail 
Modifier'' and corresponding requirements, the Exchange proposes to 
delete Rule 13 in its entirety.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\8\ 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 mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the

[[Page 74121]]

public interest and because it is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that moving the text described above from 
Rule 13 to new subparagraph (i)(6) of Rule 7.31 would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system by bringing the Exchange's rule for ``retail'' 
modifiers into Rule 7.31, the Exchange's Pillar rule regarding Orders 
and Modifiers. Relocating the rule text regarding ``retail'' modifiers 
into Rule 7.31 and deleting Rule 13 would eliminate any potential 
confusion among market participants regarding the availability of the 
``retail'' modifier for orders on the Exchange's Pillar trading system.
    The Exchange believes that the requirements specified in proposed 
Rule 7.31(i)(6) regarding the proposed designation of ``retail'' 
orders, along with the requirements for member organization 
attestations and written policies and procedures, would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because they are substantively identical to 
the requirements for designating orders as ``retail'' on NYSE American 
and NYSE National, and therefore would harmonize the requirements for 
designating orders as ``retail'' across the three affiliated exchanges. 
Such uniformity will enhance market participants' understanding of the 
process for designating orders as ``retail'' across the exchanges, and 
will minimize any potential confusion that could result from having 
slightly different programs on each exchange.
    The Exchange believes that it would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system to omit text from Rule 13(f)(2)(E) and (F) from proposed Rule 
7.31(i)(6). The Exchange believes that the proposed change providing 
that orders that fail to meet the ``retail'' modifier requirements 
would be ineligible for such preferential fees would remove impediments 
to and perfect the mechanism of a free and open market system, because 
orders failing to meet the requirements of ``retail'' orders would not 
receive the corresponding pricing benefits. Orders failing to meet the 
requirements of ``retail'' orders would still be eligible to trade 
pursuant to the non-``retail'' prices in the Exchange's Price List.

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

    In accordance with Section 6(b)(8) of the Act,\9\ 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 rule change is not intended to 
address competition at all, but merely moves, with minor changes, the 
Exchange's existing rule for designating orders as ``retail'' into the 
Exchange's Pillar rule regarding Orders and Modifiers.
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    \9\ 15 U.S.C. 78f(b)(8).
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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 proposed rule change (i) does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not 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 
\10\ and Rule 19b-4(f)(6) \11\ thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least give business days prior to the date of filing of the propose 
rule change, or such short time as designated by the Commission. The 
Exchange has satisfied this requirement.
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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) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2021-75 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-2021-75. 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 office 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-2021-75, and should be submitted on 
or before January 19, 2022.


[[Page 74122]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-28245 Filed 12-28-21; 8:45 am]
BILLING CODE 8011-01-P


