Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Notices 79231 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3An ‘‘Order Type’’ is a standardized set of 

instructions associated with an Order that define 

how it will behave with respect to pricing, 

execution, and/or posting to the Exchange Book 

when submitted to the Exchange. See Rule 3301(e). 

4An ‘‘Order Attribute’’ is a further set of variable 

instructions that may be associated with an Order 

to further define how it will behave with respect to 

pricing, execution, and/or posting to the Exchange 

Book when submitted to the Exchange. See id. 

5The RASH (Routing and Special Handling) 

Order entry protocol is a proprietary protocol that 

allows members to enter Orders, cancel existing 

Orders and receive executions. RASH allows 

participants to use advanced functionality, 

including discretion, random reserve, pegging and 

routing. See http://nasdaqtrader.com/content/ 

technicalsupport/specifications/TradingProducts/ 

rash_sb.pdf. 

6The OUCH Order entry protocol is a proprietary 

protocol that allows subscribers to quickly enter 

orders into the System and receive executions. 

OUCH accepts limit Orders from members, and if 

there are matching Orders, they will execute. Nonmatching Orders are added to the Limit Order Book, 

a database of available limit Orders, where they are 

matched in price-time priority. OUCH only 

provides a method for members to send Orders and 

receive status updates on those Orders. See https:// 

www.nasdaqtrader.com/Trader.aspx?id=OUCH. 

7The Exchange designed the OUCH protocol to 

enable members to enter Orders quickly into the 

System. As such, the Exchange developed OUCH 

with simplicity in mind, and it therefore lacks more 

complex order handling capabilities. By contrast, 

the Exchange specifically designed RASH to 

support advanced functionality, including 

discretion, random reserve, pegging and routing. 

Once the System upgrades occur, then the Exchange 

intends to propose further changes to its Rules to 

permit participants to utilize OUCH, in addition to 

RASH, to enter order types that require advanced 

functionality. 

8See Rule 3301A(b)(5). 

9See Rule 3301B(h). 

10See Securities Exchange Act Release No. 34– 

90389 (November 10, 2020), 85 FR 73304 

(November 17, 2020) (SR–NASDAQ–2020–71). 

11See Rule 3213(a)(2). 

12See Rule 3301A(b)(5). The ‘‘Designated 

Percentage’’ is (i) 8% for securities included in the 

S&P 500® Index, Russell 1000® Index, and a pilot 

list of Exchange Traded Products (‘‘Tier 1 

Securities’’); (ii) 28% for all NMS stocks that are not 

Tier 1 Securities with a price equal to or greater 

than $1 (‘‘Tier 2 Securities’’); (iii) 30% for all NMS 

stocks that are not Tier 1 Securities with a price less 

than $1 (‘‘Tier 3 Securities’’), except that between 

9:30 a.m. and 9:45 a.m. and between 3:35 p.m. and 

the close of trading, the Designated Percentage shall 

be 20% for Tier 1 Securities, 28% for Tier 2 

Securities, and 30% for Tier 3 Securities. The 

Designated Percentage for rights and warrants shall 

be 30%. See Rule 3213(a)(2)(D). As discussed 

below, the Exchange proposes to amend this 

definition. 

13The ‘‘Reference Price’’ for a Market Maker Peg 

Order to buy (sell) is the then-current National Best 

Bid (National Best Offer) (including the Exchange), 

or if no such National Best Bid or National Best 

Offer, the most recent reported last-sale eligible 

trade from the responsible single plan processor for 

that day, or if none, the previous closing price of 

the security as adjusted to reflect any corporate 

actions (e.g., dividends or stock splits) in the 

security. See Rule 3301A(b)(5). 

14The term ‘‘Defined Limit’’ means 9.5% for Tier 

1 Securities, 29.5% for Tier 2 Securities, and 31.5% 

for Tier 3 Securities, except that between 9:30 a.m. 

and 9:45 a.m. and between 3:35 p.m. and the close 

of trading, the Defined Limit shall be 21.5% for Tier 

Continued 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90558; File No. SR–Phlx– 

2020–51] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Nasdaq PSX 

Rules 3213, 3301A, and 3301B 

December 3, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

20, 2020, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Nasdaq PSX Rules 3213, 3301A, and 

3301B, as described further below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/rules, 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 

Exchange 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 these 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Presently, the Exchange is making 

functional enhancements and 

improvements to specific Order Types 3

and Order Attributes 4 that are currently 

only available via the RASH Order entry 

protocol.5 Specifically, the Exchange 

will be upgrading the logic and 

implementation of these Order Types 

and Order Attributes so that the features 

are more streamlined across the 

Exchange’s Systems and order entry 

protocols, and will enable the Exchange 

to process these Orders more quickly 

and efficiently. Additionally, this 

System upgrade will pave the way for 

the Exchange to enhance the OUCH 

Order entry protocol 6 so that 

Participants may enter such Order 

Types and Order Attributes via OUCH, 

in addition to the RASH Order entry 

protocols.7 The Exchange plans to 

implement its enhancement of the 

OUCH protocol sequentially, by Order 

Type and Order Attribute. 

To support and prepare for these 

upgrades and enhancements, the 

Exchange now proposes to amend its 

Rules governing Order Types and Order 

Attributes, at Rules 3301A and 3301B, 

respectively. In particular, the Exchange 

proposes to adjust the current 

functionality of the Market Maker Peg 

Order 8 and Reserve Size Order 

Attribute,9 as described below, so that 

they align with how the System, once 

upgraded, will handle these Orders 

going forward. The Exchange also 

proposes to make several associated 

clarifications and corrections to these 

Rules, and to Rule 3213, as it prepares 

to enhance its order handling processes. 

The Exchange notes that the 

Exchange’s affiliate, the Nasdaq Stock 

Market, LLC, recently filed a proposal 

for immediate effectiveness to make 

changes that are similar to those 

proposed herein.10

Changes to Market Maker Peg Order 

A Market Maker Peg Order is an Order 

Type that exists to help a Market Maker 

to meet its obligation to maintain 

continuous two-sided quotations (the 

‘‘Two-Sided Obligation’’), as set forth in 

Rule 3213(a)(2).11 The Exchange 

proposes to make three changes related 

to the Market Maker Peg Order. 

First, the Exchange proposes to 

amend Rule 3301A(b)(5) to correct the 

conditions under which a Market Maker 

Peg Order will be sent back to a 

Participant. Rule 3301A(b)(5) currently 

states that a Market Maker Peg Order 

will be sent back to the Participant if: (1) 

Upon entry of the Order, the limit price 

of the Order is not within the 

Designated Percentage; 12 or (2) after the 

Order has been posted to the Exchange 

Book, the Reference Price 13 shifts to 

reach the Defined Limit,14 such that the 


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1 Securities, 29.5% for Tier 2 Securities, and 31.5% 

for Tier 3 Securities. See Rule 3213(a)(2)(E). 15See Rule 3301A(b)(5). 16Rule 3213(a)(2) states that for a Market Maker 

to satisfy its Two-Sided Obligation, the Market 

Maker must price bid (offer) interest not more than 

the Designated Percentage away from the then 

current National Best Bid (Offer) (or if there is no 

National Best Bid (Offer), not more than the 

Designated Percentage away from the last reported 

sale from the responsible single plan processor). 

Moreover, Rule 3213(a)(2) states that if the National 

Best Bid (Offer) or reported sale increases 

(decreases) to a level that would cause the bid 

(offer) interest of the Two-Sided Obligation to be 

more than the Defined Limit away from the 

National Best Bid (offer) or last reported sale, or if 

the bid (offer) is executed or cancelled, then the 

Market Maker must enter new bid (offer) interest at 

a price not more than the Designated Percentage 

away from the then current National Best Bid 

(Offer) or last reported sale. 

17The Exchange also proposes to amend this 

condition to state that repricing will occur when the 

difference between the displayed price of a Market 

Maker Peg Order and the Reference Price exceeds, 

rather than merely reaches, the Defined Limit. 

Currently, the Rule uses the term ‘‘reaches,’’ but 

this is inconsistent with the example that follows 

it (‘‘In the foregoing example, if the Defined Limit 

is 9.5% and the National Best Bid increases to 

$10.17, such that the displayed price of the Market 

Maker Peg Order would be more than 9.5% away, 

the Order will be repriced to $9.36, or 8% away 

from the National Best Bid.’’) (emphasis added). 

The Exchange proposes to reconcile this 

inconsistency in a manner that reflects the stated 

example as well as the manner in which the 

Exchange’s System presently applies the Rule. It 

would also render the Rule consistent with Market 

Maker obligations under Rule 3213. 

18Tier 1 NMS Stocks under the LULD Plan 

comprise all NMS Stocks included in the S&P 500®

Index, Russell 1000® Index, and a list of Exchange 

Traded Products identified as Schedule 1 to the 

Plan to Address Extraordinary Market Volatility 

Submitted to the Securities and Exchange 

Commission Pursuant to Rule 608 of Regulation 

NMS Under the Securities Exchange Act of 1934 

(the ‘‘LULD Plan’’). 

Order is subject to re-pricing at the 

Designated Percentage away from the 

shifted Reference Price, but the limit 

price of the Order would then fall 

outside of the Defined Limit (which 

would now be measured by the 

difference between the re-priced Order 

and the shifted Reference Price).15

The Exchange proposes to correct the 

second of these two conditions because 

it inadvertently allows for a 

circumstance in which a Market Maker 

Peg Order will be automatically repriced by the System to a limit price 

that is outside of the Designated 

Percentage but inside of the Defined 

Limit. Such an outcome is inconsistent 

with a Market Maker’s obligations to 

price or reprice its bid (offer) quotations 

not more than the Designated 

Percentage away from the then National 

Best Bid (Offer), as set forth in Rule 

3213(a)(2).16 In order for Rule 

3301A(b)(5) to be consistent with Rule 

3213(a)(2), Rule 3301A(b)(5) cannot 

permit the System to re-price a Market 

Maker Peg Order to a limit price that is 

outside of the Designated Percentage. In 

any circumstance in which the Order 

would be re-priced to a limit that is 

outside of the Designated Percentage, 

the Rule must require the System to 

return the Order to the Participant. The 

Exchange proposes to amend Rule 

3301A(b)(5) accordingly.17

Second, the Exchange proposes to 

amend Rule 3301A(b)(5) to no longer 

allow entry of a Market Maker Peg Order 

entered with an offset. The Rule 

presently permits a Market Maker to 

enter a Market Maker Peg Order with a 

more aggressive offset than the 

Designated Percentage, but not a less 

aggressive offset. The Exchange has 

reviewed usage of offsets with Market 

Maker Peg Orders and found that no 

Market Maker assigned an offset to their 

Market Maker Peg Orders since January 

2019. The Exchange does not believe 

that there is value in keeping offsets as 

an option for Market Maker Peg Orders. 

Eliminating this option will also 

facilitate the System upgrades and ease 

the import of RASH functionality to 

OUCH. Accordingly, the Exchange 

proposes to delete text from Rule 

3301A(b)(5)(A) that discusses offsets 

and replace it with text stating that 

Market Maker Peg Orders entered with 

pegging offsets will not be accepted. The 

Exchange also makes conforming 

changes to Rule 3301A(b)(5)(B) where 

the text refers to offsets. 

Third, the Exchange proposes to 

amend Rule 3301A(b)(5) to account for 

a scenario where, after entry of a Market 

Maker Peg Order whose initial 

displayed price was set with reference 

to the National Best Bid or Offer, the 

National Best Bid or Offer shifts such 

that the displayed price of the Order to 

buy (sell) is equal to or greater (less 

than) the National Best Bid (Offer). The 

Exchange proposes to state that the 

Exchange will not reprice the Market 

Maker Peg Order in this scenario until 

a new Reference Price is established that 

is more aggressive than the displayed 

price of the Order. By specifying that 

the Exchange will not reprice Market 

Maker Peg Orders in this scenario until 

a new, more aggressive Reference Price 

is established, the Exchange will ensure 

that it does not engage in a potential 

cycle of pegging against a Reference 

Price established by the Order itself. 

Change to Rule 3213 

Next, the Exchange proposes to clarify 

the definitions of ‘‘Designated 

Percentage’’ in Rule 3213(a)(2)(D) and 

‘‘Defined Limit’’ in Rule 3213(a)(2)(E), 

which presently are as follows: 

(D) For purposes of this Rule, the 

‘‘Designated Percentage’’ shall be: (i) 8% 

for securities included in the S&P 500®

Index, Russell 1000® Index, and a pilot 

list of Exchange Traded Products (‘‘Tier 

1 Securities’’); (ii) 28% for all NMS 

stocks that are not Tier 1 Securities with 

a price equal to or greater than $1 (‘‘Tier 

2 Securities’’); (iii) 30% for all NMS 

stocks that are not Tier 1 Securities with 

a price less than $1 (‘‘Tier 3 

Securities’’), except that between 9:30 

a.m. and 9:45 a.m. and between 3:35 

p.m. and the close of trading, the 

Designated Percentage shall be 20% for 

Tier 1 Securities, 28% for Tier 2 

Securities, and 30% for Tier 3 

Securities. The Designated Percentage 

for rights and warrants shall be 30%. 

(E) For purposes of this Rule, the 

‘‘Defined Limit’’ shall be 9.5% for Tier 

1 Securities, 29.5% for Tier 2 Securities, 

and 31.5% for Tier 3 Securities, except 

that between 9:30 a.m. and 9:45 a.m. 

and between 3:35 p.m. and the close of 

trading, the Defined Limit shall be 

21.5% for Tier 1 Securities, 29.5% for 

Tier 2 Securities, and 31.5% for Tier 3 

Securities. 

The Exchange is concerned that these 

two provisions could be misinterpreted 

to suggest that prior to 9:30 a.m., the 

Exchange applies a narrower Designated 

Percentage and Defined Limit than it 

does between 9:30 and 9:45 a.m., under 

the same conditions. In fact, the 

Exchange applies the same wider 

Designated Percentage and Defined 

Limit prior to 9:30 a.m. as it does 

between 9:30 and 9:45 a.m. To avoid 

confusion (and without changing 

existing market maker obligations), the 

Exchange therefore proposes to clarify 

both of these provisions of Rule 

3213(a)(2) to state that ‘‘prior to 9:45 

a.m.’’ and between 3:35 p.m. and the 

close of trading, the Designated 

Percentage and Defined Limit (including 

for Market Maker Peg Orders) shall be 

as stated. Furthermore, throughout Rule 

3213(a)(2)(D), in defining the term 

‘‘Designated Percentage,’’ the Exchange 

proposes to replace references to Tier 1, 

2, and 3 NMS Securities with the 

following: (i) The Designated Percentage 

shall be 8% for all Tier 1 NMS Stocks 

under the LULD Plan,18 28% for all Tier 

2 NMS Stocks under the LULD Plan 

with a price equal to or greater than $1), 

and 30% for all Tier 2 NMS Stocks 

under the LULD Plan with a price less 

than $1, except that prior to 9:45 a.m. 

and between 3:35 p.m. and the close of 

trading, the Designated Percentage shall 

be: (i) 20% for Tier 1 NMS Stocks under 

the LULD Plan; (ii) 28% for all Tier 2 

NMS Stocks under the LULD Plan with 

a price equal to or greater than $1; and 

(iii) 30% for all Tier 2 NMS Stocks 

under the LULD Plan with a price less 

than $1. Similarly, in Rule 3213(a)(2)(E), 


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19See Securities Exchange Act Release No. 34– 

69194 (March 20, 2013), 78 FR 18386 (March 26, 

2013) (SR–Phlx–2013–24). 20An Order with Reserve Size may be referred to 

as a ‘‘Reserve Order.’’ 

21This clarification is needed due to the fact that 

pursuant to Rule 3301A(b)(2)(A), a Price to Display 

Order would automatically reprice upon entry if its 

entered limit price would lock or cross a protected 

quotation, = . 

22The Exchange proposes to clarify a portion of 

Rule 3301B(h) which states that if an execution 

against a Displayed Order causes its size to decrease 

below a normal unit of trading, another Displayed 

Order will be entered at the ‘‘level’’ stipulated by 

the Participant while the size of the Non-Displayed 

Order will be reduced by the same amount. In 

describing the entry of the new Displayed Order in 

this instance, the Exchange proposes to replace the 

word ‘‘level’’ with ‘‘limit price and size,’’ which is 

a more precise phrase. 

23 15 U.S.C. 78f(b). 

24 15 U.S.C. 78f(b)(5). 

in defining the term ‘‘Defined Limit,’’ 

the Exchange proposes to replace 

references to securities subject to Rule 

4120(a)(11)(A), (B), and (C) [sic] with 

the following: (i) 9.5% for all Tier 1 

NMS Stocks under the LULD Plan; (ii) 

29.5% for all Tier 2 NMS Stocks under 

the LULD Plan with a price equal to or 

greater than $1; and (iii) 31.5% for all 

Tier 2 NMS Stocks under the LULD Plan 

with a price less than $1, except that 

prior to 9:45 a.m. and between 3:35 p.m. 

and the close of trading, the Defined 

Limit shall be: (i) 21.5% all Tier 1 NMS 

Stocks under the LULD Plan; (ii) 29.5% 

for all Tier 2 NMS Stocks under the 

LULD Plan with a price equal to or 

greater than $1; and (iii) 31.5% for all 

Tier 2 NMS Stocks under the LULD Plan 

with a price less than $1. The Exchange 

proposes this change because the 

existing references are obsolete. 

The Exchange also proposes to add to 

Rule 3213(a)(2)(E) the fact that the 

Defined Limit for rights and warrants 

shall be 31.5%. The Exchange 

mistakenly omitted the Defined Limit 

for such securities from prior filings.19

Changes to Reserve Size 

As set forth in Rule 3301B(h), 

‘‘Reserve Size’’ is an Order Attribute 

that permits a Participant to stipulate 

that an Order Type that is Displayed 

may have its displayed size replenished 

from additional non-displayed size.20

The Exchange proposes three changes to 

the rule text describing the Reserve Size 

Order Attribute. 

First, the Exchange proposes to 

amend a paragraph of Rule 3301B(h) 

which begins as follows: ‘‘Whenever a 

Participant enters an Order with Reserve 

Size, PSX will process the Order as two 

Orders: A Displayed Order (with the 

characteristics of its selected Order 

Type) and a Non-Displayed Order. Upon 

entry, the full size of each such Order 

will be processed for potential 

execution in accordance with the 

parameters applicable to the Order 

Type.’’ The Exchange proposes to 

amend this language because it does not 

describe precisely how the Exchange 

processes Orders with Reserve Size. The 

Exchange proposes to state instead that 

whenever a Participant enters an Order 

with Reserve Size, the full size of the 

Order will be presented for potential 

execution in compliance with 

Regulation NMS and that thereafter, 

unexecuted portions of the Order will 

be processed as two Orders: A 

Displayed Order (with the 

characteristics of its selected Order 

Type) and a Non-Displayed Order. The 

Exchange also proposes to delete the 

following sentence: ‘‘Upon entry, the 

full size of each such Order will be 

processed for potential execution in 

accordance with the parameters 

applicable to the Order Type.’’ The 

proposed re-formulation reflects that it 

is possible that the Order with Reserve 

Size will be executed immediately in 

full and without needing to place 

unexecuted portions of the Order in 

reserve. Furthermore, it clarifies that the 

System will present the Order for 

immediate execution (provided that it 

does not trade through a protected 

quotation, in accordance with 

Regulation NMS) without complying 

with underlying characteristics of the 

Order Type that might otherwise require 

an adjustment to the price of the Order 

before the System attempts to execute 

it.21 The proposed language is 

consistent with the following example 

set forth in the existing rule text: 

For example, a Participant might enter a 

Price to Display Order with 200 shares 

displayed and an additional 3,000 shares 

non-displayed. Upon entry, the Order would 

attempt to execute against available liquidity 

on the PSX Book, up to 3,200 shares. 

Thereafter, unexecuted portions of the Order 

would post to the PSX Book as a Displayed 

Price to Display Order and a Non-Displayed 

Order; provided, however, that if the 

remaining total size is less than the display 

size stipulated by the Participant, the 

Displayed Order will post without Reserve 

Size. Thus, if 3,050 shares executed upon 

entry, the Price to Display Order would post 

with a size of 150 shares and no Reserve Size. 

The proposed language eliminates 

confusion that might otherwise arise 

from perceived inconsistencies between 

the above example and existing rule 

text. Again, the existing rule text states 

that whenever a participant enters an 

Order with Reserve Size, the System 

will process the Reserve Order as two 

orders upon entry and also, upon entry, 

the full size of an Order with Reserve 

will be presented for potential execution 

in accordance with the parameters 

applicable to the Order Type. 

When there is, in fact, an unexecuted 

portion of the Order, then the Exchange 

will continue to process the unexecuted 

portion as two Orders: A Displayed 

Order and a Non-Displayed Order. 

Second, the Exchange proposes to 

delete text from Rule 3301B(h) which 

states that ‘‘[a] Participant may stipulate 

that the Displayed Order should be 

replenished to its original size.’’ The 

Exchange proposes to delete this text 

because it is redundant of text 

elsewhere in the Rule that describes 

how a Displayed Order with Reserve 

Size replenishes.22

Third, the Exchange proposes to 

amend text from Rule 3301B(h) that 

allows the original and subsequent 

displayed sizes of the Displayed Order 

to be amounts randomly determined 

based upon factors they select 

(‘‘Random Reserve’’). The amendments 

also state that when Participants 

stipulate use of a Random Reserve, they 

would select a nominal (rather than a 

‘‘theoretical’’) displayed size, which is a 

more precise term. Furthermore, the 

amendment adds a reminder that the 

actual displayed size will be randomly 

determined by the System from a range 

of ‘‘normal trading units.’’ Lastly, the 

amendments include other changes that 

do not change the substantive meaning 

of the text, but simply improve its 

readability. 

The Exchange intends to implement 

the foregoing changes during the First 

Quarter of 2021. The Exchange will 

issue an Equity Trader Alert at least 30 

days in advance of implementing the 

changes. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,23 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,24

in particular, in that it is designed to 

promote just and equitable principles of 

trade, 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. 

The Exchange believes that it is 

consistent with the Act to amend Rule 

3301A(b)(5), which describes the Market 

Maker Peg Order Type, to correct one of 

the stated conditions under which a 

Market Maker Peg Order will be sent 

back to a Participant. As presently 

stated, this condition provides for 

Market Maker Peg Orders to be repriced 

automatically at limit prices that are 

within the Defined Limit, but outside of 

the Designated Percentage, which places 


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them in conflict with Rule 3213(a)(2), 

which requires Market Makers to price 

and re-price bid and offer interest at the 

Designated Percentage. It is just and in 

the interests of the investors and the 

public for the Exchange to correct Rule 

3301A(b)(5) to ensure that Market Maker 

Peg Orders operate in a manner that 

helps rather than hinders Market 

Makers from complying with Rule 3213. 

It is also consistent with the Act for 

the Exchange to amend Rule 

3301A(b)(5) to clarify that repricing will 

occur when the difference between the 

displayed price of a Market Maker Peg 

Order and the Reference Price 

‘‘exceeds,’’ rather than merely 

‘‘reaches,’’ the Defined Limit, as the 

Rule states presently. The proposed 

change would ensure that the Rule text 

is internally consistent, as the example 

set forth in the text suggests that the 

Rule should be read to mean exceeds. It 

would also render the Rule consistent 

with Market Maker obligations under 

Rule 3213. The Exchange believes that 

it is in the interest of investors and the 

public to eliminate such 

inconsistencies. 

Meanwhile, the Exchange believes 

that it is consistent with the Act to 

eliminate the option for Participants to 

enter offsets from the Market Maker Peg 

Orders. The proposal is consistent with 

the Act because Market Makers do not 

actively employ such offsets. As noted 

above, the Exchange has reviewed usage 

of offsets with Market Maker Peg Orders 

and found that no Market Maker has 

assigned an offset with their Market 

Maker Peg Orders since January 2019. 

Moreover, elimination of the option to 

enter offsets would simplify the 

Exchange’s efforts to improve 

processing. 

The Exchange believes that it is 

consistent with the Act to clarify Rule 

3301A(b)(5) so that it specifies how the 

System will react when, after entry of a 

Market Maker Peg Order whose initial 

displayed price was set with reference 

to the National Best Bid or Offer, the 

National Best Bid or Offer shifts such 

that the displayed price of the Order to 

buy (sell) is equal to or greater (less) 

than the National Best Bid (National 

Best Offer). Specifically, the Exchange 

believes that it is just and in the 

interests of investors to specify that the 

Exchange will not reprice Market Maker 

Peg Orders in this scenario until a new, 

more aggressive Reference Price is 

established, because doing so ensures 

that the Exchange will not engage in a 

potential cycle of pegging against a 

Reference Price established by the Order 

itself. 

The Exchange’s proposal to amend 

the definitions of ‘‘Designated 

Percentage’’ and ‘‘Defined Limit,’’ as set 

forth in Rule 3213(a)(2)(D) and (E), is 

consistent with the Act because the 

amendment is necessary to correct 

obsolete references and to avoid 

confusion about which particular 

percentage or limit will apply to orders 

prior to 9:30 a.m. The proposal clarifies 

the Rule by stating expressly that the 

same sets of bands that apply between 

9:30–9:45 a.m. and between 3:35 p.m. 

and the close of trading also apply prior 

to 9:30 a.m. The proposal also specifies 

a Defined Limit for rights and warrants, 

which was mistakenly omitted from 

prior filings and which relates to the 

Designated Percentage for rights and 

warrants, which is set forth already at 

Rule 3213(a)(2)(D). 

It is also consistent with the Act to 

amend Rule 3301B(h) to clarify that 

when a Participant enters an Order with 

Reserve Size, the full size of the Order 

will first be presented for potential 

execution in compliance with 

Regulation NMS, and only if there is an 

unexecuted portion of the Order will it 

be processed as a Displayed Order and 

a Non-Displayed Order. This 

clarification describes the behavior of 

the System more precisely than the 

existing Rule language. It also reflects 

the possibility that the Order with 

Reserve Size will be executed 

immediately in full and without 

needing to place unexecuted portions of 

the Order in reserve. Furthermore, it 

eliminates inconsistency between rule 

text which presently suggests that the 

System will process the Order with 

Reserve Size for potential immediate 

execution consistent with the 

characteristics of its underlying Order 

Type, and an example in the rule text 

in which the Exchange provides that the 

System will process the Order for 

potential immediate execution 

regardless of the parameters applicable 

to the Order Type. The proposed 

amendment will resolve this 

inconsistency by making clear that the 

System will present an order for 

potential immediate execution 

regardless of the characteristics of the 

underlying Order Type, with the caveat 

that the Order will not trade-through a 

protected quotation as required by 

Regulation NMS. 

It is consistent with the Act to amend 

Rule 3301B(h) to state that when 

participants stipulate use of a Random 

Reserve, they would select a 

‘‘nominal’’—rather than a ‘‘theoretical’’ 

displayed size. The proposed term 

‘‘nominal’’ is more precise than the 

existing Rule text. Improving the 

precision of the Exchange’s Rules 

improves the ability of the public and 

investors to comprehend them and 

account for and comply with them. For 

similar reasons, proposed nonsubstantive amendments to other text in 

Rule 3301B(h) are consistent with the 

Act because they would improve the 

readability of the Rule. 

Finally, the Exchange believes that 

various proposed non-substantive 

clarifications and corrections to the text 

of the Rule will improve its readability, 

which is in the interests of market 

participants and investors, and would 

promote a more orderly market. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that its 

proposed rule changes will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. As a general 

principle, the proposed changes are 

reflective of the significant competition 

among exchanges and non-exchange 

venues for order flow. In this regard, 

proposed changes that facilitate 

enhancements to the Exchange’s System 

and order entry protocols as well as 

those that clarify and correct the 

Exchange’s Rules regarding its Order 

Types and Attributes, are procompetitive because they bolster the 

efficiency, integrity, and overall 

attractiveness of the Exchange in an 

absolute sense and relative to its peers. 

Moreover, none of the proposed 

changes will burden intra-market 

competition among various Exchange 

Participants. Proposed changes to the 

Market Maker Peg Order Type, at Rule 

3301A(b)(5), and to Rule 3213, will 

apply equally to all Market Makers. 

Market Makers will experience no 

competitive impact from proposals to 

eliminate their ability to use offsets with 

Market Maker Peg Orders because 

Market Makers do not actually utilize 

offsets. Likewise, Market Makers will 

feel no competitive effects from 

proposed corrections and clarifications 

to the manner in which the Exchange 

prices and re-prices their Market Maker 

Peg Orders, except that the changes will 

benefit Market Makers by ensuring that 

the Exchange always processes those 

Orders in a manner that complies with 

their Market Maker pricing obligations 

under Rule 3213. Proposed 

clarifications to the Reserve Order 

Attribute Rule, at Rule 3301B(h), will 

have no substantive impact on 

participants. 

Proposed changes to Rule 3213 are 

intended to correct inadvertent errors 

and should have no competitive impact 

on Market Makers. Proposed 

clarifications and amendments to the 

Reserve Order Attribute Rule, at Rule 

3301B(h), are intended to improve the 


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Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Notices 79235 

25 15 U.S.C. 78s(b)(3)(A). 

26 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of 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. 27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

precision and readability of the Rule 

text and will not have any competitive 

impact on participants. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing 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 for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 25 and Rule 19b– 

4(f)(6) thereunder.26

At any time within 60 days of the 

filing of the 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 

to determine whether the proposed rule 

change should be approved or 

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 rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2020–51 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–Phlx–2020–51. 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–Phlx–2020–51 and should 

be submitted on or before December 30, 

2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26991 Filed 12–8–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90556; File No. SR– 

NYSEArca–2020–101] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Streamline the NYSE 

Arca Equities Fees and Charges 

December 3, 2020 

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 November 

23, 2020, NYSE Arca, Inc. (‘‘NYSE 

Arca’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to streamline 

the NYSE Arca Equities Fees and 

Charges (‘‘Fee Schedule’’) by deleting 

redundant rule text from Tier 1, Tier 2 

and Tier 3 pricing tiers. The Exchange 

proposes to implement the fee changes 

effective November 23, 2020. 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. 


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