[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14414-14416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04687]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97026; File No. SR-NYSEARCA-2023-19]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Amend Rule 
6.76AP-O

March 2, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on February 23, 2023, NYSE Arca, Inc. (``NYSE Arca'' 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 amend Rule 6.76AP-O (Order Execution and 
Routing) regarding the treatment of routable orders. 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 amend Rule 6.76AP-O (Order Execution and 
Routing) regarding the treatment of routable orders.
Background
    Rule 6.76AP-O describes the Exchange's process for order execution 
and routing. First, subject to certain pricing parameters and 
allocation guarantees, the Exchange will match eligible interest (i.e., 
an Aggressing Order or Aggressing Quote) \4\ against contra-side 
interest according to the price-time priority ranking of the resting 
interest, per Rule 6.76P-O (Order Ranking and Display).\5\ Per Rule 
6.76AP-O(b), after being matched to the extent possible with local 
interest (on the Consolidated Book) per paragraph (a) of this Rule, 
routable orders (or portions thereof) may be routed to Away Market(s) 
if marketable.\6\ The Exchange proposes to amend Rule 6.76AP-O(b) to 
add new text regarding the handling of such orders as set forth below.
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    \4\ See Rule 6.76P-O(a)(5) defining ``Aggressing Order'' or 
``Aggressing Quote'' as referring to ``a buy (sell) order or quote 
that is or becomes marketable against sell (buy) interest on the 
Consolidated Book.''
    \5\ See Rule 6.76AP-O(a)(1)(A)-(D) (setting forth the criteria 
for executing incoming interest against the quote of an LMM, up to 
40% of the incoming interest, up to the size of the LMM's quote (the 
``LMM Guarantee'')).
    \6\ See Rule 6.76AP-O(b)(2) (providing that orders with an 
instruction not to route are processed per Rule 6.62P-O (Orders and 
Modifiers)).
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Proposed Rule Change
    The Exchange's current order handling and routing system was 
recently implemented in connection with the Exchange's migration to the 
Pillar trading platform in July 2022.\7\ The Exchange has been 
operating on Pillar for approximately six months and has identified a 
performance optimization that will reduce unnecessary processing by 
Pillar.
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    \7\ The Exchange announced the migration of the fifth and final 
tranche of symbols to the Pillar trading platform, via Trader 
Update, available here: https://www.nyse.com/trader-update/history#110000440092.
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    Specifically, the Exchange proposes that once an order needs to be 
routed to an Away Market, Pillar will then determine the venue(s) to 
which the order should be routed. Currently, this evaluation of 
price(s) and volume(s) on Away Markets is constantly available in

[[Page 14415]]

Pillar regardless of whether an order needs to be routed. The Exchange 
believes that limiting this evaluation solely to when Pillar determines 
that an order is eligible for routing would optimize Pillar performance 
because it would eliminate inefficient processing within Pillar. The 
Exchange believes that the proposed optimization change to process 
routing information more efficiently would result in faster order 
processing to the benefit of all market participants.
    To effect this change, the Exchange proposes to specify how it will 
handle marketable routable orders during the discrete period that such 
orders are being evaluated for routing.\8\ If such an order is deemed 
marketable against Away Market interest,\9\ Pillar will make a 
determination as to the destination, price and size for each routed 
portion of the order pursuant to Rule 6.94-O(a) (Order Protection).\10\ 
To clarify this proposed order handling, the Exchange proposes to add 
rule text to Rule 6.76AP-O(b), which would provide that ``[w]hile 
determining the venue(s) to which the order(s) will be routed, such 
order(s) may \11\ be held non-displayed at the contra-side ABBO \12\ 
and ranked in its respective priority category, per Rule 6.76P-O(e), 
behind any displayed interest at that price.\13\ The Exchange notes 
that such marketable orders remain executable against incoming interest 
and interest in the Consolidated Book.
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    \8\ The Exchange's routing determination typically takes a few 
microseconds.
    \9\ See Rule 1.1. (defining ``Away Market'' as referring to any 
Trading Center (1) with which the Exchange maintains an electronic 
linkage, and (2) that provides instantaneous responses to orders 
routed from the Exchange).
    \10\ See Rule 6.94-O(a) (providing that, subject to exceptions, 
``[m]embers shall not effect Trade-Throughs''.)
    \11\ To avoid creating a locked or crossed market, the Exchange 
will hold a routable order in a non-displayed state while making the 
routing determination. However, when a previously displayed order is 
to be routed, such order will remain displayed while Pillar makes 
its routing determination.
    \12\ See Rule 1.1. (defining ``ABBO'' (or ``Away Market BBO'') 
as referring to the best bid(s) or offer(s) disseminated by Away 
Markets and calculated by the Exchange based on market information 
the Exchange receives from OPRA).
    \13\ See Rule 6.76P-O(e) (providing that at each price, trading 
interest is assigned to one of three priority categories: Priority 
1--Market Orders; Priority 2--Display Orders; and Priority 3--Non-
Display Orders'').
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    Market participants have the option of designating their orders as 
non-routable (and executable solely against interest on the Exchange) 
or routable (and executable against interest available on the Exchange 
or an Away Market). For participants that choose the latter, proposed 
Rule 6.76AP-O(b) will clarify the status of such orders in the 
Consolidated Book during evaluation.
    The Exchange anticipates implementing the applicable technology 
changes in the second quarter of 2023 and will announce by Trader 
Update the implementation date of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\14\ in general, and 
furthers the objectives of Section 6(b)(5),\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it is designed to optimize performance 
on the Pillar trading platform, and would specify the Exchange's 
handling of marketable routable orders during the discrete period that 
such orders are being evaluated for routing. The Exchange believes that 
the proposed optimization change to process routing information more 
efficiently would result in faster order processing to the benefit of 
all market participants. In addition, the Exchange believes the 
proposed change would remove impediments to and perfect the mechanism 
of a free and open market and a national market system by adding 
clarity and transparency to Exchange rules that a routable order may 
\16\ be held non-displayed at the ABBO during the period that it is 
being evaluated for routing.
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    \16\ See supra note 11.
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    Further, the Exchange notes that market participants have the 
option of designating their orders as non-routable (and executable 
solely against interest on the Exchange) or routable (and executable 
against interest available on the Exchange or an Away Market). The 
proposed change would remove impediments to, and perfect the mechanism 
of, a free and open market and a national market system because it will 
clarify the status of such orders in the Consolidated Book during 
evaluation.

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 proposed change is not 
intended to address competition, but rather is being made in connection 
with technology changes designed to optimize performance on the Pillar 
trading platform. The proposed change would apply to all similarly-
situated market participants that trade on the Exchange.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) 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 and Rule 19b-
4(f)(6)(iii) thereunder.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii). 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 five business days prior to the date of filing of the proposed 
rule change, or such shorter 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

[[Page 14416]]

under Section 19(b)(2)(B) \20\ of the Act to determine whether the 
proposed rule change should be approved or disapproved.
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    \20\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2023-19 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-NYSEARCA-2023-19. 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-NYSEARCA-2023-19 and should be submitted 
on or before March 29, 2023.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04687 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P


