
[Federal Register Volume 88, Number 219 (Wednesday, November 15, 2023)]
[Notices]
[Pages 78401-78404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25203]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98893; File No. SR-NYSENAT-2023-25]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 7.31

November 9, 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 October 31, 2023, 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 amend Rule 7.31 to provide for the use of 
ALO Reserve 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 7.31 to provide for the use of 
ALO Reserve Orders.
ALO Orders
    Rule 7.31(e)(2) defines an ALO Order as a Non-Routable Limit Order 
that, unless it receives price improvement, will not remove liquidity 
from the Exchange Book. An ALO Order can be designated to be cancelled 
if it would be displayed at a price other than its limit price for any 
reason. An ALO Order can be designated as non-displayed.
    As described in Rule 7.31(e)(2)(A), an Aggressing ALO Order to buy 
(sell) will trade if its limit price crosses the working price of any 
displayed or non-displayed orders to sell (buy) on the Exchange Book 
priced equal to or below (above) the PBO (PBB) of an Away Market, in 
which case it will trade as the liquidity taker with such orders.
    As noted above, Rule 7.31(e)(2) provides that an ALO Order may be 
designated to cancel if it would be displayed at a price other than its 
limit price. If an ALO Order is not so designated, any untraded 
quantity of such order to buy (sell) is processed as follows (Rules 
7.31(e)(2)(B)(i) and (ii)):
     If the limit price of the ALO Order locks the display 
price of any order to sell (buy) ranked Priority 2--Display Orders on 
the Exchange Book, it will have a working price and display price (if 
designated to display) one MPV below (above) the price of the displayed 
order on the Exchange Book.
     If the limit price of the ALO Order locks or crosses the 
PBO (PBB) of an Away Market, it will have a working price equal to the 
PBO (PBB) of the Away Market and a display price (if designated to 
display) one MPV below (above) the PBO (PBB) of the Away Market.
    Rule 7.31(e)(2)(C) provides that any untraded quantity of an ALO 
Order to buy (sell) will have a working price and display price (if 
designated to display) equal to its limit price if it locks non-
displayed orders to sell (buy) on the Exchange Book. Rule 7.31(e)(2)(D) 
provides that an ALO Order to buy (sell) will not be assigned a working 
price or display price above (below) the limit price of such order.
    Once resting on the Exchange Book, ALO Orders may be re-priced or 
trade, or both, as described in Rule 7.31(e)(2)(E):
     If order(s) to sell (buy) ranked Priority 2--Display 
Orders or the PBO (PBB) of an Away Market re-prices higher (lower), an 
ALO Order to buy (sell) will trade or be priced, or both, consistent 
with Rules 7.31(e)(2)(A), (e)(2)(B)(i) and (ii), and (e)(2)(C).
     If the PBO (PBB) of an Away Market re-prices lower 
(higher) to be equal to or lower (higher) than its last display price

[[Page 78402]]

or if its limit price no longer locks or crosses the PBO (PBB) of the 
Away Market, an ALO Order to buy (sell) will be priced pursuant to 
Rules 7.31(e)(1)(A)(ii)(c) and (d). If the PBO (PBB) of an Away Market 
re-prices lower (higher) than the working price of a non-displayed ALO 
Order to buy (sell), such order will have a working price equal to the 
PBO (PBB) of the Away Market.
Reserve Orders
    Rule 7.31(d)(1) provides for Reserve Orders, which are Limit or 
Inside Limit Orders with a quantity of the size displayed and with a 
reserve quantity (``reserve interest'') of the size that is not 
displayed. The displayed quantity of a Reserve Order is ranked Priority 
2--Display Orders, and the reserve interest is ranked Priority 3--Non-
Display Orders. Both the display quantity and the reserve interest of 
an arriving marketable Reserve Order are eligible to trade with resting 
interest in the Exchange Book or to route to Away Markets. The working 
price of the reserve interest of a resting Reserve Order will be 
adjusted in the same manner as a Non-Displayed Limit Order, as provided 
for in Rule 7.31(d)(2)(A).
    As described in Rule 7.31(d)(1)(A), the display quantity of a 
Reserve Order must be entered in round lots, and the displayed portion 
of a Reserve Order will be replenished when the display quantity is 
decremented to below a round lot. The replenish quantity will be the 
minimum display size of the order or the remaining quantity of the 
reserve interest if it is less than the minimum display quantity.
    Rule 7.31(d)(1)(B) provides that each time the display quantity of 
a Reserve Order is replenished from reserve interest, a new working 
time is assigned to the replenished quantity (each display quantity 
with a different time is referred to as a ``child'' order), while the 
reserve interest retains the working time of the original order entry. 
In addition, when a Reserve Order is replenished from reserve interest 
and already has two child orders that equal less than a round lot, the 
child order with the later working time will rejoin the reserve 
interest and be assigned the new working time assigned to the next 
replenished quantity. If a Reserve Order is not routable, the replenish 
quantity will be assigned a display and working price consistent with 
the instructions for the order.
    Rule 7.31(d)(1)(C) provides that a Reserve Order must be designated 
Day and may only be combined with a Non-Routable Limit Order or Primary 
Pegged Order. Rule 7.31(d)(1)(C) also currently provides that a Reserve 
Order may not be designated as an ALO Order.
    Rule 7.31(d)(1)(D) provides that routable Reserve Orders will be 
evaluated for routing both on arrival and each time their display 
quantity is replenished.
    Rule 7.31(d)(1)(E) provides that a request to reduce the size of a 
Reserve Order will cancel the reserve interest before cancelling the 
display quantity, and, if the Reserve Order has more than one child 
order, the child order with the latest working time will be cancelled 
first.
    Rule 7.31(d)(1)(F) provides that, if the PBBO is crossed and the 
display quantity of a Reserve Order to buy (sell) that is a Non-
Routable Limit Order is decremented to less than a round lot, the 
display price and working price of such Reserve Order will not change 
and the reserve interest that replenishes the display quantity will be 
assigned a display price one MPV below (above) the PBO (PBB) and a 
working price equal to the PBO (PBB). Rule 7.31(d)(1)(F) further 
provides that, when the PBBO uncrosses, the display price and working 
price will be adjusted as provided for under Rule 7.31(e)(1) relating 
to Non-Routable Limit Orders.
ALO Reserve Orders
    The Exchange proposes to amend Rule 7.31 to provide for the use of 
ALO Reserve Orders. The proposed change is not intended to introduce 
any new functionality or modify any current functionality, but rather 
to facilitate the combination of two order types currently offered by 
the Exchange. As proposed, ALO Reserve Orders would, except as 
otherwise noted, operate consistent with current Rule 7.31(d)(1) 
regarding Reserve Orders and current Rule 7.31(e)(2) regarding ALO 
Orders. To allow for the use of ALO Reserve Orders, the Exchange first 
proposes to amend Rule 7.31(d)(1)(C) to delete the last sentence of 
such rule, which currently provides that a Reserve Order may not be 
designated as an ALO Order.
    The proposed change is intended to allow ALO Orders, as described 
in Rule 7.31(e)(2) and the paragraphs thereunder,\4\ to have a 
displayed quantity, along with non-displayed reserve interest, as 
described in Rule 7.31(d)(1). The display quantity of an ALO Reserve 
Order would be replenished as provided in Rules 7.31(d)(1)(A) and (B). 
As ALO Reserve Orders are non-routable, under Rule 7.31(d)(1)(B)(ii), 
the replenish quantity of an ALO Reserve Order would be assigned a 
display price and working price consistent with the behavior of ALO 
Orders as described in current Exchange rules.
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    \4\ The Exchange does not propose to allow non-displayed ALO 
Orders to be designated as Reserve Orders, given that a Reserve 
Order must have both displayed and non-displayed portions, and thus 
proposes to amend Rule 7.31(e)(2) to specify accordingly.
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    Aggressing ALO Reserve Orders would trade in accordance with 
current Rule 7.31(e)(2)(A). If an ALO Reserve Order is designated to 
cancel, it will cancel if it would be displayed at a price other than 
its limit price for any reason, as described in Rule 7.31(e)(2). 
Otherwise, any untraded quantity of an ALO Reserve Order would continue 
to be processed as ALO Orders are currently, as described in Rules 
7.31(e)(2)(B) and (C). Similarly, the working price of the reserve 
interest of a resting ALO Reserve Order would be adjusted as provided 
for in Rule 7.31(d)(1) (i.e., in accordance with Rule 7.31(d)(2)(A)). 
Rule 7.31(d)(1)(E) would also apply to requests to reduce the size of 
ALO Reserve Orders.
    As described in Rule 7.31(d)(1)(F), when the PBBO is crossed and 
the display quantity of an ALO Reserve Order to buy (sell) is 
decremented to less than a round lot, the display price and working 
price of the order would not change, but the reserve interest that 
replenishes the display quantity would be assigned a display price one 
MPV below (above) the PBO (PBB) and a working price equal to the PBO 
(PBB). The Exchange proposes to amend Rule 7.31(d)(1)(F) to add new 
rule text describing how the display price and working price of an ALO 
Reserve Order would be adjusted when a previously crossed PBBO 
uncrosses. Specifically, the Exchange proposes to add text to the last 
sentence of Rule 7.31(d)(1)(F) providing that the display price and 
working price of an ALO Reserve Order would be adjusted in accordance 
with Rule 7.31(e)(2)(E), which describes how ALO Orders resting on the 
Exchange Book are repriced and/or traded. Because ALO Orders behave 
differently from other Non-Routable Limit Orders and may only trade 
when they receive price improvement, the Exchange proposes to add text 
to Rule 7.31(e)(2)(F) clarifying that ALO Reserve Orders would have 
their display price and working price adjusted consistent with the 
rules applicable to ALO Orders when the PBBO uncrosses.
    The proposed change is intended to facilitate the combined use of 
two existing order types available on the Exchange, thereby providing 
ETP Holders with enhanced flexibility and optionality when trading on 
the Exchange. The proposed change could also promote increased 
liquidity and

[[Page 78403]]

trading opportunities on the Exchange, to the benefit of all market 
participants. The Exchange also believes the proposed change would 
permit the Exchange to offer functionality already available on at 
least one other equities exchange, thereby promoting competition among 
equities exchanges.\5\
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    \5\ See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing that a 
Limit Order may include a reserve quantity and may be designated 
with a Post Only instruction); see also MEMX User Manual, available 
at https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf, at 9 (providing that a Limit Order 
designated Day may have both reserve quantity and Post Only 
instructions).
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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, which, subject to effectiveness of this proposed rule 
change, will be in the fourth quarter of 2023.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\ 
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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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 because it would allow for the combined use of two existing 
order types available on the Exchange and permit the Exchange to offer 
functionality similar to that already available on at least one other 
equities exchange.\8\ ETP Holders would be free to choose to use the 
proposed ALO Reserve Order type or not, and the proposed change would 
not otherwise impact the operation of the Reserve Order or ALO Order as 
described in current Exchange rules. The Exchange also believes that 
the proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market, as well as protect investors and 
the public interest, by expanding the options available to ETP Holders 
when trading on the Exchange and promoting increased liquidity and 
additional trading opportunities for all market participants.
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    \8\ See note 5, 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. In addition, as noted above, 
Exchange believes the proposed rule change would allow the Exchange to 
offer functionality already available on at least one other equities 
exchange \9\ and thus would promote competition among equities 
exchanges. The Exchange also believes that, to the extent the proposed 
change increases opportunities for order execution, the proposed change 
would promote competition by making the Exchange a more attractive 
venue for order flow and enhancing market quality for all market 
participants.
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    \9\ See id.
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 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) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 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
     Send an email to [email protected]. Please include 
file number SR-NYSENAT-2023-25 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-2023-25. 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

[[Page 78404]]

withhold entirely from publication submitted material that is obscene 
or subject to copyright protection. All submissions should refer to 
file number SR-NYSENAT-2023-25 and should be submitted on or before 
December 6, 2023.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25203 Filed 11-14-23; 8:45 am]
BILLING CODE 8011-01-P


