[Federal Register Volume 87, Number 153 (Wednesday, August 10, 2022)]
[Notices]
[Pages 48718-48721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17102]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95426; File No. SR-NYSENAT-2022-06]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
Proposed Rule Change, as Modified by Amendment No. 1, To Add 
Subparagraph (f)(4) Regarding Directed Orders to NYSE National Rule 
7.31

August 4, 2022.

I. Introduction

    On April 20, 2022, NYSE National, Inc. (``NYSE National'' 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 introduce Directed Orders. The proposed rule 
change was published for comment in the Federal Register on May 4, 
2022.\3\ On June 16, 2022, the Commission extended to August 8, 2022, 
the time period in which to approve the proposal, disapprove the 
proposal, or institute proceedings to determine whether to approve or 
disapprove the proposal.\4\ On July 28, 2022, the Exchange filed 
Amendment No. 1 to the proposed rule change with the Commission and 
submitted Amendment No. 1 for inclusion in the public comment file.\5\

[[Page 48719]]

The Commission has received no comment letters on the proposed rule 
change. The Commission is publishing notice of the filing of Amendment 
No. 1 to solicit comment from interested persons, and is approving the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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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. 94842 (May 4, 2022), 
87 FR 28041 (May 10, 2022) (SR-NYSENAT-2022-06) (``Notice'').
    \4\ See Securities Exchange Act Release No. 95114 (June 16, 
2022), 87 FR 37538 (June 23, 2022).
    \5\ In Amendment No. 1, the Exchange: (i) represents that 
Directed Orders will not be routed to an ATS with which the Exchange 
has a financial arrangement; and (ii) updates the anticipated 
implementation date of the proposed rule change from the second 
quarter to the third quarter of 2022. See Letter from Martha 
Redding, Associate General Counsel, NYSE National, Inc., to 
Secretary, Commission (July 28, 2022). Amendment No. 1 is available 
at https://www.sec.gov/comments/sr-nysenat-2022-06/srnysenat202206-20135098-306078.pdf.
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II. Self-Regulatory Organization's Description of the Proposal, as 
Modified by Amendment No. 1

    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.\6\
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    \6\ Directed Orders will not be routed to an ATS with which the 
Exchange has a financial arrangement.
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    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 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).\7\
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    \7\ 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 \8\ or 
Day \9\ 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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    \8\ See Rule 7.31(b)(2), which provides that a Limit Order may 
be designated with an Immediate-or-Cancel (``IOC'') modifier.
    \9\ 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.\10\ 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.\11\
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    \10\ 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).
    \11\ 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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[[Page 48720]]

    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update.\12\ Subject to effectiveness of this proposed rule 
change, the Exchange anticipates that the proposed change will be 
implemented in the third quarter of 2022.
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    \12\ 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,\13\ in general, and furthers the 
objectives of Section 6(b)(5),\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 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.\15\
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    \15\ See notes 10 & 11, 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.\16\
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    \16\ See note 11, 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. Discussion and Commission Findings

    After careful review of the proposal, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\17\ In 
particular, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the 
Act,\18\ which requires, among other things, that the rules of a 
national securities exchange be 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, and that the rules of a national securities exchange 
not be designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposed rule change is reasonably 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system because it would provide 
Participants with additional trading opportunities by providing them 
with the option to designate orders to be routed by the Exchange 
directly to a specified ATS for execution. The use of Directed Orders 
would be voluntary, and the Exchange represents that it would not 
direct orders to any ATSs with which the Exchange has a financial 
relationship. The Commission also believes that the proposed rule 
change would not permit unfair discrimination among customers, brokers, 
or dealers because Directed Orders will be available to all ETP Holders 
on an equal basis. Finally, the Commission believes that the proposed 
changes to Exchange Rule 7.19(a)(5) will ensure that Directed Orders 
are included in the calculation of Gross Credit Risk Limit.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
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

[[Page 48721]]

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 August 31, 2022.

V. Accelerated Approval of Amendment No. 1

    As noted above,\19\ in Amendment No. 1, as compared to the original 
proposal,\20\ the Exchange: (i) represents that Directed Orders will 
not be routed to an ATS with which the Exchange has a financial 
arrangement; and (ii) updates the anticipated implementation date of 
the proposed rule change from the second quarter to the third quarter 
of 2022. The Commission finds that Amendment No. 1 to the proposal 
raises no novel regulatory issues, that it is reasonably designed to 
protect investors and the public interest, and that it is consistent 
with the requirements of the Act. Accordingly, the Commission finds 
good cause, pursuant to Section 19(b)(2) of the Act,\21\ to approve the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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    \19\ See supra note 5.
    \20\ See Notice, supra note 3.
    \21\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NYSENAT-2022-06), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).
    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17102 Filed 8-9-22; 8:45 am]
BILLING CODE 8011-01-P


