[Federal Register Volume 87, Number 89 (Monday, May 9, 2022)]
[Notices]
[Pages 27679-27681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09856]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94839; File No. SR-NYSE-2022-20]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Modify Rule 7.31 To Add 
Subparagraph (f)(1) Regarding Directed Orders

May 3, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 20, 2022, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify Rule 7.31 to add subparagraph 
(f)(1) regarding Directed Orders and make other conforming changes. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to modify Rule 7.31 (Orders and Modifiers) to 
designate subparagraph (f) as describing orders with specific routing 
instructions and to add new subparagraph (f)(1) to provide for Directed 
Orders. The Exchange also proposes to make other conforming changes to 
its Rules in connection with the addition of this new order type on the 
Exchange. The Directed Order, as further defined below, would be an 
order sent to the Exchange to be routed directly to an alternative 
trading system (``ATS'') specified by a member organization.
    The Exchange proposes to rename Rule 7.31(f), which is currently 
designated as Reserved, to ``Orders with Specific Routing 
Instructions.'' The Exchange also proposes to add Rule 7.31(f)(1), 
which would define a Directed Order as a Limit Order with instructions 
to route on arrival at its limit price to a specified ATS with which 
the Exchange maintains an electronic linkage. Proposed Rule 7.31(f)(1) 
would further provide that Directed Orders would be available for all 
securities eligible to trade on the Exchange. Proposed Rule 7.31(f)(1) 
would also provide that a Directed Order would not be assigned a 
working time or interact with interest on the Exchange Book. The 
Exchange also proposes to provide in Rule 7.31(f)(1) that the ATS to 
which a Directed Order is routed would be responsible for validating 
whether the order is eligible to be accepted, and if such ATS 
determines to reject the order, the order would be cancelled.
    Proposed Rule 7.31(f)(1)(A) would provide that a Directed Order 
must be designated for the Exchange's Core Trading Session, as defined 
in Rule 7.34(a)(2).\4\
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    \4\ Because the Exchange proposes that Directed Orders may only 
be designated for the Core Trading Session, the Exchange also 
proposes conforming changes to Rule 7.34 (Trading Sessions). 
Specifically, the Exchange proposes to add Rule 7.34(c)(1)(E) to 
provide that Directed Orders designated for the Early Trading 
Session would be rejected. The Exchange also proposes to update Rule 
7.34(c)(1) to refer to ``paragraphs (c)(1)(A)-(E)'' to reflect the 
addition of subparagraph (E).
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    Proposed Rule 7.31(f)(1)(A) would further provide that a Directed 
Order must be designated with a Time in Force modifier of IOC \5\ or 
Day \6\ and would be routed to the specified ATS with such modifier. 
The Exchange proposes that a Directed Order designated IOC would be 
traded in whole or in part on the ATS to which

[[Page 27680]]

it is routed after receipt of the order, and any untraded quantity 
would be cancelled. The Exchange proposes that a Directed Order 
designated Day would expire at the end of the Core Trading Session on 
the day it is entered. Proposed Rule 7.31(f)(1)(A) would also provide 
that a Directed Order may not be designated with any other modifiers 
defined in Rule 7.31.
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    \5\ See Rule 7.31(b)(2), which provides that a Limit Order may 
be designated with an Immediate-or-Cancel (``IOC'') modifier.
    \6\ See Rule 7.31(b)(1), which provides that orders may be 
designated with a Day modifier, and that an order to buy or sell 
designated Day, if not traded, will expire at the end of the 
designated session on the day on which it was entered.
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    Proposed Rule 7.31(f)(1)(B) would provide that a Directed Order in 
a security to be opened in an initial public offering (``IPO'') or a 
Direct Listing would be rejected if received before the IPO Auction or 
Direct Listing Auction concludes.
    Proposed Rule 7.31(f)(1)(C) would provide that, during a trading 
halt or pause, an incoming Directed Order would be rejected.
    Proposed Rule 7.31(f)(1)(D) would provide that a request to cancel 
a Directed Order designated Day would be routed to the ATS to which the 
order was routed.
    The Exchange also proposes the following conforming changes to Rule 
7.19 (Pre-Trade Risk Controls) and Rule 104 (Dealings and 
Responsibilities of DMMs):
     The Exchange proposes to modify Rule 7.19(a)(5), which 
sets forth the definition of Gross Credit Risk Limit and currently 
provides that unexecuted orders in the Exchange Book, orders routed on 
arrival pursuant to Rule 7.37(a)(1), and executed orders are included 
for purposes of calculating the Gross Credit Risk Limit. The Exchange 
proposes to modify Rule 7.19(a)(5) to specify that orders routed on 
arrival pursuant to Rule 7.31(f)(1) would also be included for purposes 
of the Gross Credit Risk Limit calculation.
     The Exchange proposes to modify Rule 104(b)(6), which 
specifies the orders and modifiers that DMM units are not permitted to 
enter. The Exchange proposes to add Directed Orders to Rule 104(b)(6) 
as an order type that DMM units may not enter.
    The Exchange believes that the proposed rule change would 
facilitate additional trading opportunities by offering member 
organizations the ability to designate orders submitted to the Exchange 
to be routed to an ATS of their choosing for execution. The Exchange 
believes the proposed change would encourage member organizations to 
utilize the Exchange as a venue for order entry and further believes 
that the proposed change could create efficiencies for member 
organizations by enabling them to send orders that they wish to route 
to an alternate destination through the Exchange, thereby enabling them 
to leverage order entry protocols and specifications already configured 
for their interactions with the Exchange. The Exchange notes that the 
Directed Order, as proposed, would operate similarly to the Primary 
Only Order already offered by NYSE American LLC (``NYSE American''), 
NYSE Arca, Inc. (``NYSE Arca''), NYSE Chicago, Inc. (``NYSE Chicago''), 
and NYSE National, Inc. (``NYSE National'') (collectively, the 
``Affiliated Exchanges''). On the Affiliated Exchanges, a Primary Only 
Order is an order that is routed directly to the primary listing market 
on arrival, without being assigned a working time or interacting with 
interest on the order book of the exchange to which it was 
submitted.\7\ The Exchange also believes that the Directed Order would 
offer member organizations functionality akin to order types and 
routing options that currently exist on other equities exchanges.\8\
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    \7\ See NYSE American Rule 7.31-E(f)(1); NYSE Arca Rule 7.31-
E(f)(1); NYSE Chicago Rule 7.31(f)(1); NYSE National Rule 
7.31(f)(1). The Affiliated Exchanges also offer variations of the 
Primary Only Order, including the Primary Only Until 9:45 Order, 
which is a Limit or Inside Limit Order that, on arrival and until 
9:45 a.m. Eastern Time, routes to the primary listing market, and 
the Primary Only Until 3:55 Order, which is a Limit or Inside Limit 
Order entered on the Exchange until 3:55 p.m. Eastern Time, after 
which time the order is cancelled on the Exchange and routed to the 
primary listing market. See NYSE American Rules 7.31-E(f)(2) and 
(f)(3); NYSE Arca Rules 7.31-E(f)(2) and (f)(3); NYSE Chicago Rules 
7.31(f)(2) and (f)(3); NYSE National Rules 7.31(f)(2) and (f)(3).
    \8\ See, e.g., Nasdaq Stock Market LLC (``Nasdaq''), Equity 4, 
Equity Trading Rules, Rule 4758(a)(ix) (defining the Nasdaq Directed 
Order as an order designed to use a routing strategy under which the 
order is directed to an automated trading center other than Nasdaq, 
as directed by the entering party, without checking the Nasdaq 
Book); Cboe EDGX Exchange, Inc. (``EDGX'') Rules 11.8(c)(7) 
(defining the Routing/Directed ISO order type as an ISO that 
bypasses the EDGX system and is immediately routed by EDGX to a 
specified away trading center for execution) and 11.11(g)(2) 
(providing for the DRT routing option, in which an order is routed 
to an alternative trading system as instructed); Cboe EDGA Exchange, 
Inc. (``EDGA'') Rules 11.8(c)(7) (defining the Routing/Directed ISO 
order type as an ISO that bypasses the EDGA system and is 
immediately routed by EDGA to a specified away trading center for 
execution) and 11.11(g)(2) (providing for the DRT routing option, in 
which an order is routed to an alternative trading system as 
instructed); Cboe BZX Exchange, Inc. (``BZX'') Rules 11.13(b)(3)(D) 
(providing for the DRT routing option, in which an order is routed 
to an alternative trading system as instructed) and 11.13(b)(3)(F) 
(defining the Directed ISO routing option, under which an ISO order 
would bypass the BZX system and be sent to a specified away trading 
center); Cboe BYX Exchange, Inc. (``BYX'') Rules 11.13(b)(3)(D) 
(providing for the DRT routing option, in which an order is routed 
to an alternative trading system as instructed) and 11.13(b)(3)(F) 
(defining the Directed ISO routing option, under which an ISO order 
would bypass the BYX system and be sent to a specified away trading 
center). The Exchange also believes that the Directed Order would 
provide functionality similar to the C-LNK routing strategy formerly 
offered by EDGA, in which C-LNK orders bypassed EDGA's local book 
and routed directly to a specified Single Dealer Platform 
destination. See Securities Exchange Act Release No. 82904 (March 
20, 2018), 83 FR 12995 (March 26, 2018) (SR-CboeEDGA-2018-004) 
(Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Expand an Offering Known a Cboe Connect To Provide 
Connectivity to Single-Dealer Platforms Connected to the Exchange's 
Network and To Propose a Per Share Executed Fee for Such Service).
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    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update.\9\ Subject to effectiveness of this proposed rule 
change, the Exchange anticipates that the proposed change will be 
implemented in the second quarter of 2022.
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    \9\ The Exchange will also provide information regarding the 
ATS(s) to which a Directed Order may be designated to route by 
Trader Update.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934,\10\ in general, and furthers the 
objectives of Section 6(b)(5),\11\ in particular, because it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to, and perfect the mechanism of, a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
remove impediments to and perfect the mechanism of a free and open 
market and promote just and equitable principles of trade because the 
Directed Order would offer member organizations access to additional 
trading opportunities by permitting them to designate orders submitted 
to the Exchange to be routed directly to a specified ATS for execution. 
The Exchange further believes that the proposed change would remove 
impediments to and perfect the mechanism of a free and open market by 
offering member organizations the option to send orders that they wish 
to route to an alternate destination for execution through the 
Exchange, which would create efficiencies to the extent member 
organizations are able to leverage existing protocols and 
specifications. Finally, the Exchange notes that the proposed 
functionality is not novel as the Affiliated Exchanges and other 
exchanges offer their members functionality whereby an exchange

[[Page 27681]]

routes orders on behalf of a member to a specified trading center 
without such order interacting with the Exchange's book.\12\
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    \12\ See notes 7 & 8, supra.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rules governing Directed Orders would promote competition 
because they would provide for an order type on the Exchange that would 
facilitate additional trading opportunities for market participants. 
The Exchange further believes that the proposed rules would allow it to 
offer its member organizations functionality similar to order types and 
routing options that exist on other equities exchanges, thereby 
enabling the Exchange to compete with such exchanges.\13\
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    \13\ See note 8, supra.
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2022-20 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-2022-20. 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-2022-20 and should be submitted on 
or before May 31, 2022.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09856 Filed 5-6-22; 8:45 am]
BILLING CODE 8011-01-P


