[Federal Register Volume 87, Number 90 (Tuesday, May 10, 2022)]
[Notices]
[Pages 28041-28043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09955]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94842; File No. SR-NYSENAT-2022-06]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing of Proposed Rule Change To Modify Rule 7.31 To Add Subparagraph 
(f)(4) Regarding Directed Orders

May 4, 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, NYSE National, Inc. (``NYSE National'' 
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)(4) 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 
add new subparagraph (f)(4) to provide for Directed Orders and 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 an ETP 
Holder.
    The Exchange proposes to add Rule 7.31(f)(4), 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)(4) would also provide that 
Directed Orders would be available for all securities eligible to trade 
on the Exchange and 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)(4) 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

[[Page 28042]]

determines to reject the order, the order would be cancelled.
    Proposed Rule 7.31(f)(4)(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 modify Rule 7.34(c)(1)(E) to 
provide that Directed Orders designated for the Early Trading 
Session would be rejected and Rule 7.34(c)(3)(C) to provide that 
Directed Orders designated for the Late Trading Session would be 
rejected.
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    Proposed Rule 7.31(f)(4)(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 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)(4)(B) would provide that, during a trading 
halt or pause, an incoming Directed Order would be rejected.
    Proposed Rule 7.31(f)(4)(C) 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 a conforming change to Rule 7.19 (Pre-
Trade Risk Controls). 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)(4) would also be included 
for purposes of the Gross Credit Risk Limit calculation.
    The Exchange believes that the proposed rule change would 
facilitate additional trading opportunities by offering ETP Holders 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 ETP Holders to utilize the Exchange as 
a venue for order entry and further believes that the proposed change 
could create efficiencies for ETP Holders 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 
the Exchange, which 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 Exchange Book.\7\ The Exchange also 
believes that the Directed Order would offer ETP Holders functionality 
akin to order types and routing options that currently exist on other 
equities exchanges.\8\
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    \7\ See Rule 7.31(f)(1). NYSE National also offers 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 Rules 7.31(f)(2) and (f)(3). The 
Exchange's affiliated exchanges NYSE American LLC (``NYSE 
American''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE Chicago, Inc. 
(``NYSE Chicago'') (collectively, the ``Affiliated Exchanges'') also 
offer the Primary Only Order and variations thereof. See NYSE 
American Rules 7.31E(f)(1)-(f)(3); NYSE Arca Rules 7.31-E(f)(1)--
(f)(3); NYSE Chicago Rules 7.31(f)(1)--(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 ETP Holders 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 ETP Holders 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

[[Page 28043]]

ETP Holders are able to leverage existing protocols and specifications. 
Finally, the Exchange notes that the proposed functionality is not 
novel, as both the Exchange and other exchanges offer their members 
functionality whereby an exchange 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 ETP Holders 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-NYSENAT-2022-06 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-NYSENAT-2022-06. 
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-NYSENAT-2022-06 and should 
be submitted on or before May 31, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09955 Filed 5-9-22; 8:45 am]
BILLING CODE 8011-01-P


