
[Federal Register Volume 88, Number 171 (Wednesday, September 6, 2023)]
[Notices]
[Pages 61001-61004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19127]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98247; File No. SR-NYSEAMER-2023-42]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify Rule 
900.3NYP

August 30, 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 August 23, 2023, NYSE American LLC (``NYSE American'' 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 900.3NYP (Orders and 
Modifiers) regarding the handling of certain Market Orders subject to 
Trading Collars and conforming changes to Rule 952NYP (Auction 
Process). 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.

[[Page 61002]]

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 900.3NYP (Orders and 
Modifiers) regarding the handling of certain Market Orders subject to 
Trading Collars and conforming changes to Rule 952NYP (Auction 
Process).\4\ The Exchange notes that an identical rule change was 
recently adopted on its affiliated exchange, NYSE Arca, Inc. (``NYSE 
Arca'') and therefore this proposal raises no new or novel issues not 
previously considered by the Commission.\5\
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    \4\ The Exchange notes that this proposed change modifies a 
Pillar rule (i.e., with a ``P'' modifier) that has not yet been 
implemented. The Exchange anticipates migrating to its Pillar 
trading platform beginning on October 23, 2023. As is the case with 
all Pillar rules, this proposed rule change (as well as the entire 
Rule 900.3NYP) will not be implemented until all other Pillar-
related rule filings are approved or operative, as applicable, and 
the Exchange announces the migration of underlying symbols to Pillar 
by Trader Update.
    \5\ See Securities Exchange Act Release No. 98113 (August 11, 
2023), 88 FR 55791 (August 16, 2023) (SR-NYSEARCA-2023-54) 
(immediately effective rule change to allow market participants to 
reduce the time at which Market Orders are ``collared'' from 500 
milliseconds to zero, per Rule 6.62P-O).
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    The Exchange employs Trading Collar functionality that is designed 
to provide ATP Holders price protection for Market Orders and Limit 
Orders traded on the Exchange.\6\ In particular, the Trading Collar 
applies a static ceiling price (for a buy order) or floor price (for a 
sell order) at which such order may be traded or routed that is 
determined at the time of entry (or after a series opens or reopens) 
and which is applicable until the order is traded or cancelled.\7\ As 
described below, the Exchange proposes to modify the application of 
Trading Collars to Market Orders.
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    \6\ See Rules 900.3NYP(a)(1) (defining Market Order), (a)(2) 
(defining Limit Order).
    \7\ See Rule 900.3NYP(a)(4)(A)-(C) (describing Trading Collar 
functionality, including how such Collars are assigned and 
calculated).
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    Currently, Rule 900.3NYP(a)(4)(D) describes how the Trading Collar 
is applied and provides that if an order to buy (sell) would trade or 
route above (below) the Trading Collar or would have its working price 
repriced to a Trading Collar that is below (above) its limit price, the 
order will be added to the Consolidated Book at the Trading Collar for 
500 milliseconds and if not traded within that period, will be 
cancelled (each a ``collared'' order).\8\ Further, once the 500-
millisecond timer begins for a collared order (the ``collar timer''), 
such order will be cancelled at the end of the timer even if it 
repriced or was routed to an Away Market during that period, in which 
case any portion of the collared order that is returned unexecuted is 
cancelled.
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    \8\ See Rule 964NYP(a)(3) (providing that the ``working price'' 
of an order or quote means the price at which it is eligible to 
trade at any given time, which may be different from the limit price 
or display price of the order or quote). The ``display price'' means 
the price at which an order or quote ranked Priority 2--Display 
Orders or Market Order is displayed, which may be different from the 
limit price or working price of the order. See Rule 964NYP(a)(1).
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    Pursuant to the proposed rule change, Market Orders that are 
collared would no longer be held for the duration of the collar time 
(i.e., for 500 milliseconds). Instead, as proposed, if a Market Order 
to buy (sell) would trade or route above (below) the Trading Collar, 
such Market Orders would be cancelled.\9\ Thus, a collared Market Order 
that can trade within the Trading Collar will trade on the Exchange or 
route. Collared Market Orders will no longer be held and displayed on 
the Consolidated Book for the duration of the collar timer.
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    \9\ See proposed Rule 900.3NYP(a)(4)(D)(i). The Exchange notes 
that once an order has been cancelled, the Exchange will likewise 
cancel any unexecuted portion of the cancelled order that returns to 
the Exchange after having been routed away.
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    The Exchange is not proposing to modify the handling of Limit 
Orders and such collared orders would continue to be subject to the 
above-described handling, per Rule 900.3NYP(a)(4)(D)(i).\10\ The 
current rule treats collared Market Orders and collared Limit Orders 
the same whereas the Exchange proposes to alter only the handling of 
collared Market Orders. Unlike Market Orders, Limit Orders include a 
specific price at which an ATP Holder is willing to trade (i.e., the 
limit price). Market Orders do not include a price and tend to be 
utilized to access liquidity. As such, the Exchange believes that the 
proposal to cancel back those Market Orders that have been collared 
would benefit ATP Holders because it would enable the order sender to 
reevaluate, on a timelier basis how best to handle this trading 
interest.
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    \10\ See proposed Rule 900.3NYP(a)(4)(D)(i).
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    The Exchange notes that it proposes to make this change in response 
to ATP Holders' preference to have Market Orders for which they are 
agent immediately cancel back for handling--rather than have such 
collared Market Orders first post at aggressive prices for 500 
milliseconds.
Conforming Changes
    Consistent with the proposed change to the handling of collared 
Market Orders--i.e., that such orders will not be held and displayed on 
the Consolidated Book for the duration of the collar timer, the 
Exchange proposes the following conforming changes.
     First, the Exchange proposes to modify Rule 
900.3NYP(a)(1)(A)(ii), which provides, in relevant part, that ``[a] 
Market Order to sell will be cancelled if it was assigned a Trading 
Collar, routed, and when it returns unexecuted, it has no resting 
portion to join and there is no NBB, regardless of the price of the 
NBO.'' The Exchange proposes to modify this provision to instead 
provide that ``[a] Market Order to sell that was assigned a Trading 
Collar, routed, and returned unexecuted, will be cancelled if there is 
no NBB, regardless of the price of the NBO.'' \11\
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    \11\ See proposed Rule 900.3NYP(a)(1)(A)(ii). See also Rule 
900.3NYP(a)(1)(A)(i)-(iv) (setting forth pricing validations that a 
Market Order that arrives during continuous trading or that was 
routed, returns unexecuted, and has no resting quantity to join must 
pass to prevent being rejected or cancelled, as applicable).
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     Next, the Exchange proposes to modify Rule 
900.3NYP(a)(1)(B), which provides, in relevant part, that ``[a]fter 
trading or routing, or both, the Market Order will be displayed at the 
Trading Collar, subject to paragraph (a)(1)(C),'' which provision 
provides that a Market Order will be cancelled before being displayed 
if there are no remaining contra-side Market Maker quotes on the 
Exchange or contra-side ABBO.\12\ Proposed Rule 900.3NYP(a)(1)(B) would 
provide that ``[a]fter trading or routing, or both, the Market Order 
will be cancelled.''
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    \12\ See Rule 900.3NYP(a)(1)(C).
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     In addition, the Exchange also proposes to delete as 
inapplicable Rule 900.3NYP(a)(1)(C).\13\ The Exchange proposes to 
modify Rule

[[Page 61003]]

952NYP(f)(3)(A)(vi), which cross references the to-be-deleted 
provision, and to provide that ``[u]nexecuted Market Orders will be 
cancelled.'' \14\
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    \13\ See Rule 900.3NYP(a)(1)(C) (providing that a Market Order 
will be cancelled before being displayed if there are no remaining 
contra-side Market Maker quotes on the Exchange or contra-side 
ABBO).
    \14\ Compare proposed Rule 952NYP(f)(3)(A)(vi) with Rule 
952NYP(f)(3)(A)(vi) (providing that Market Orders received during a 
pre-open state will be subject to the validation specified in Rule 
900.3NYP(a)(1)(C)).
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     Finally, the Exchange also proposes to delete as 
inapplicable Rule 900.3NYP(a)(1)(D).\15\
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    \15\ See Rule 900.3NYP(a)(1)(D) (providing that after being 
displayed at its Trading Collar, a Market Order will be cancelled if 
there ceases to be a contra-side NBBO). The Exchange proposes the 
non-substantive change to re-number current paragraph (a)(1)(E) of 
the Rule to new paragraph (a)(1)(C) to account for the 
aforementioned deletions.
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    The Exchange believes that the proposed functionality would provide 
greater determinism for Market Orders that have been collared, which 
would provide ATP Holders that send Market Orders as agent greater 
control over, and more certainty regarding, the Exchange's handling of 
such orders.
Implementation
    This proposed change modifies a Pillar rule (i.e., with a ``P'' 
modifier). As is the case with all Pillar rules, this proposed rule 
change (as well as the entire Rule 900.3NYP) will not be implemented 
until all other Pillar-related rule filings are approved or operative, 
as applicable, and the Exchange announces the migration of underlying 
symbols to Pillar by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\16\ in general, and 
furthers the objectives of section 6(b)(5),\17\ 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed change to modify the handling of 
collared Market Orders, which is being made in response to ATP Holders' 
preference to have Market Orders for which they are agent immediately 
cancel back for handling--rather than have such collared Market Orders 
first post at aggressive prices for 500 milliseconds, would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed handling would refine the 
Trading Collar functionality in a manner that would enable ATP Holders 
to have more certainty regarding, and more control over, the handling 
of their Market Orders.\18\
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    \18\ As discussed supra, the proposal would alter the handling 
of collared Market Orders (but not collared Limit Orders) because 
Market Orders (unlike Limit Orders) do not include a price and tend 
to be utilized to access liquidity. Thus, the proposal to cancel 
back collared Market Orders would benefit ATP Holders because it 
would enable the order sender to reevaluate, on a timelier basis how 
best to handle this trading interest.
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    The proposed conforming changes would remove impediments to, and 
perfect the mechanism of, a free and open market and a national market 
system and, in general, would protect investors and the public interest 
because such changes would add clarity, transparency, and internal 
consistency to Exchange rules.

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 is proposing a 
market enhancement that would provide ATP Holders with greater control 
over, and more certainty regarding, collared Market Orders that such 
ATP Holders have submitted as agent. The proposal would apply to all 
similarly-situated ATP Holders and would not impose a competitive 
burden on any participant. The Exchange does not believe that the 
proposed change to the Trading Collar functionality would impose a 
burden on competing options exchanges. Rather, the availability of the 
modified Trading Collar functionality may foster more competition. 
Specifically, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. When an exchange offers enhanced functionality that 
distinguishes it from the competition and participants find it useful, 
it has been the Exchange's experience that competing exchanges will 
move to adopt similar functionality. Thus, the Exchange believes that 
this type of competition amongst exchanges is beneficial to the 
marketplace as it can result in enhanced processes, functionality, and 
technologies.

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 \19\ and Rule 19b-4(f)(6) thereunder.\20\ 
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.\21\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 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 under 
section 19(b)(2)(B) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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

[[Page 61004]]

     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2023-42 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-NYSEAMER-2023-42. 
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 (https://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 a.m. and 3 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NYSEAMER-2023-42 and 
should be submitted on or before September 27, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19127 Filed 9-5-23; 8:45 am]
BILLING CODE 8011-01-P


