39488 Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices 

20Section 19(b)(2) of the Act, as amended by the 

Securities Acts Amendments of 1975, Public Law 

94–29 (June 4, 1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Acts Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 

(1975). 

21 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3See NYSE Rule 7.31(d)(1). 4See NYSE Rule 7.31(h)(2). 5See NYSE Rule 7.36(h) for the rules concerning 

setter priority. 

6 In Amendment No. 1, among other changes, the 

Exchange revised proposed Section 7.31(d)(1)(B) to 

clarify that the term ‘‘child’’ order refers to each 

display quantity with a different working time. 

Amendment No. 1 was reflected in the notice of 

filing of proposed rule change that was published 

in the Federal Register. See infra note 7. 

7See Securities Exchange Act Release No. 83432 

(Jun. 14, 2018), 83 FR 28701 (Jun. 20, 2018) 

(‘‘Notice’’). 

8See Section II.C. infra for a description of the 

Exchange’s setter priority. 

9See NYSE Rule 7.31(d)(1). The term ‘‘Exchange 

Book’’ is defined in NYSE Rule 1.1(a) as the 

Exchange’s electronic file of orders, containing all 

orders on the Exchange. The term ‘‘Away Market’’ 

is defined in NYSE Rule 1.1(ff) as any exchange, 

alternative trading systems or other broker-dealer 

with which the Exchange maintains an electronic 

linkage and that provides instantaneous responses 

to orders routed from the Exchange. The Exchange 

will designate from time to time those ATSs or 

other broker-dealers that qualify as Away Markets. 

information provided in the proposed 

rule change is consistent with the 

requirements of Section 6(b)(5) of the 

Act. 

IV. Procedure: Request for Written 

Comments 

Interested persons are invited to 

submit written views, data, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with Section 6(b)(5) 

or any other provision of the Act, or the 

rules and regulations thereunder. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.20

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by August 30, 2018. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by September 13, 2018. 

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– 

CboeBZX–2018–018 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–CboeBZX–2018–018. 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–CboeBZX–2018–018 and 

should be submitted on or before 

August 30, 2018. Rebuttal comments 

should be submitted by September 13, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17008 Filed 8–8–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83768; File No. SR–NYSE– 

2018–26] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Approval of a Proposed Rule 

Change, as Modified by Amendment 

No. 1, Amending the Exchange’s Rules 

Relating to Reserve Orders, Primary 

Pegged Orders, and Setter Priority for 

UTP Securities Trading on the 

Exchange’s Pillar Platform 

August 3, 2018. 

I. Introduction 

On June 1, 2018, New York Stock 

Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend NYSE rules 

concerning Reserve Orders,3 Primary 

Pegged Orders,4 and setter priority.5 On 

June 8, 2018, the Exchange filed 

Amendment No. 1 to the proposed rule 

change, which replaced and superseded 

the proposed rule change in its 

entirety.6 The proposed rule change, as 

modified by Amendment No. 1, was 

published for comment in the Federal 

Register on June 20, 2018.7 The 

Commission has received no comments 

on the proposed rule change. This order 

approves the proposed rule change, as 

modified by Amendment No. 1. 

II. Description of the Proposed Rule 

Change, as Modified by Amendment 

No. 1 

The Exchange proposes several 

changes to the Reserve Order and the 

Primary Pegged Order, as set forth in 

NYSE Rule 7.31. The Exchange also 

proposes changes to the setter priority, 

as set forth in NYSE Rule 7.36(h). 

A. Reserve Orders 

The Exchange proposes several 

changes to the rules for Reserve Orders, 

in order to reduce the number of child 

orders associated with each Reserve 

Order, to codify existing functionality, 

and provide more clarity to existing 

Exchange rules. A ‘‘Reserve Order’’ is a 

limit order with a quantity displayed, 

ranked Priority 2—Display Orders, and 

a non-displayed quantity held in 

reserve, ranked Priority 3—NonDisplayed.8 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 an Away 

Market.9

First, the Exchange proposes to 

change how the displayed quantity is 

replenished. Currently, the display 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices 39489 

10See Proposed NYSE Rule 7.31(d)(1)(A). This 

language replaces the current text that states ‘‘[t]he 

Exchange will display the full size of the Reserve 

Order when the unfilled quantity is less than the 

minimum display size for the order,’’ which the 

Exchange proposes to delete. 11See Notice, supra note 7, at 28702. The 

Exchange proposes to define the term ‘‘child order’’ 

in proposed NYSE Rule 7.31(d)(1)(B). A ‘‘child’’ 

order would be each display quantity of a Reserve 

Order with a different working time. 12See Notice, supra note 7, at 28702. 13See Notice, supra note 7, at 28704. 14See Proposed NYSE Rule 7.31(d)(1)(B)(i). The 

Exchange proposes to amend NYSE Rule 

7.36(h)(3)(C) to treat child orders that fall under this 

provision consistent with the current NYSE rules 

which provide that odd-lot orders that are assigned 

new working times lose Setter Priority. See 

Proposed NYSE Rule 7.36(h)(3)(C). 15See Notice, supra note 7, at 28704. 16See Proposed NYSE Rule 7.31(d)(1)(B)(ii). 

17See Notice, supra note 7, at 28702. 

18See Proposed NYSE Rule 7.31(d)(1)(D). 

19See Proposed NYSE Rule 7.31(d)(1)(D)(i). 

20 Id. 

21See Notice, supra note 7, at 28702. 

22See Notice, supra note 7, at 28703. 

23See Proposed NYSE Rule 7.31(d)(1)(D)(ii). 

24 Id. 

25See Notice, supra note 7, at 28703. 

26See Proposed NYSE Rule 7.31(d)(1)(D)(ii). 

27See Proposed NYSE Rule 7.31(d)(1)(E). 

28 Id. 

29The terms ‘‘PBB’’ and ‘‘PBO’’ are defined in 

NYSE Rule 1.1(dd) as highest protected bid or best 

protected bid and lowest protected offer or best 

protected offer, respectively. 

30See NYSE Rule 7.31(h)(2). 

31See Proposed NYSE Rule 7.31(h)(2)(B). 

32See NYSE Rule 1.1(dd). The term ‘‘NBBO’’ 

means the national best bid or offer. 

33See id. for definition of ‘‘NBBO.’’ See NYSE 

Rule 1.1(ff) for a definition of ‘‘Away Market.’’ 

34See NYSE Rules 7.36(h) and 7.37(b). 

35See NYSE Rules 7.36(h) 

36See NYSE Rule 7.36(e) (stating that unexecuted 

market orders have first priority (Orders ranked 

Priority 1—Market Orders), non-marketable limit 

orders with a displayed working price have second 

priority (Orders ranked Priority 2—Display Orders), 

and non-marketable limit orders with no displayed 

working price have third priority (Orders ranked 

Priority 3—Non-Display Orders). Setter priority 

would be assigned to an order with second priority 

(Priority 2—Display Orders). See NYSE Rule 

7.36(h). 

37See NYSE Rule 7.37(b) for order allocation, 

including, but not limited to, the Exchange’s 

allocation wheel, parity allocation, and Exchange 

book participant allocation, and floor broker 

participation. 

38See Proposed NYSE Rule 7.36(h). 

39See Notice, supra note 7, at 28703. 

portion is replenished following any 

execution. Under the proposed rule 

change, the displayed portion of a 

Reserve Order would be replenished 

only when the display quantity has been 

decremented to below one round lot. 

The replenish quantity would 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.10 According to the 

Exchange, this proposed change would 

reduce the number of child orders.11

The Exchange asserts that minimizing 

the number of child orders for a Reserve 

Order would reduce the potential for 

market participants to detect that a child 

order that appears on the Exchange’s 

proprietary market data feeds is 

associated with a Reserve Order,12 and 

the Exchange further notes that the 

proposed change would be consistent 

with the functioning of reserve orders 

on other national securities 

exchanges.13

Second, the Exchange proposes that 

when a Reserve Order is replenished 

from reserve interest and already has 

two child orders that, if combined, 

would equal less than one round lot, the 

child order with the later working time 

would rejoin the reserve interest and be 

assigned the new working time assigned 

to the next replenished quantity.14

According to the Exchange, the 

proposed addition would reduce the 

potential for market participants to 

detect that a child order is associated 

with a Reserve Order.15

Third, the Exchange proposes to 

amend its rules to reflect that, if a 

Reserve Order is not routable, the 

replenish quantity will be assigned a 

display and working price consistent 

with the instructions of the order.16 The 

Exchange asserts that the proposed rule 

text represents current functionality and 

would add transparency and clarity to 

the Exchange’s rules.17

Fourth, the Exchange proposes new 

rules concerning routable Reserve 

Orders. Under the proposed rules, the 

Exchange would evaluate a routable 

Reserve Order for routing both on 

arrival and each time the displayed 

quantity is replenished.18 In cases 

where an order is required to be routed, 

the Exchange proposes that the routing 

quantity would route from the reserve 

interest before the display quantity is 

published.19 Further, if after routing 

from the reserve interest, less than one 

round lot remains that is available to 

display, the Exchange proposes to wait 

until the routed quantity returns 

(executed or unexecuted) before 

publishing the display quantity.20

According to the Exchange, this 

functionality would reduce the 

possibility of having multiple child 

orders.21

Fifth, the Exchange proposes to 

amend its rules to reflect how it 

currently treats the quantity of a routed 

Reserve Order that is returned 

unexecuted.22 According to the 

Exchange, such interest joins the 

working time of the existing reserve 

interest.23 If there is no reserve interest, 

the returned quantity is assigned a new 

working time as reserve interest.24 The 

Exchange asserts that this treatment is 

appropriate because at the time the 

unexecuted routed interest returns to 

the Exchange, the order may not be 

eligible to replenish the display 

quantity.25 In either case, the reserve 

interest would replenish the display 

quantity under the circumstances 

described above.26

Finally, the Exchange proposes to add 

rule text specifying that requests to 

reduce the size of a Reserve Order will 

result in the cancellation of the reserve 

interest before the cancellation of the 

display quantity.27 The Exchange also 

proposed that, if there is more than one 

child order, the child order with the 

later working time will be canceled 

first.28

B. Primary Pegged Order 

A ‘‘Primary Pegged Order’’ is a pegged 

order to buy (sell) with a working price 

that is pegged to the PBB (PBO),29 with 

no offset allowed.30 These orders are 

rejected on arrival, or canceled when 

resting, if there is no PBB (PBO) against 

which to peg. Current NYSE Rule 

7.31(h)(2)(B) provides that a Primary 

Pegged Order will be rejected when the 

PBBO is locked or crossed. The 

Exchange proposes that, in addition, if 

the PBBO is locked or crossed when the 

display quantity of the Primary Pegged 

Reserve Order is to be replenished, the 

entire order will be canceled.31

C. Setter Priority 

On the Exchange, setter priority 

means that the market participant that 

sets the best bid or offer on the 

Exchange while either establishing a 

new NBBO 32 or joining an Away Market 

NBBO 33 receives priority in the 

allocation of executions over other 

interest at the same price level.34 On the 

Exchange, only one order is eligible for 

setter priority at each price.35 The 

market participant with the setter 

priority receives 15% of each trade at 

that price (after unexecuted market 

orders with the same working price 

have executed),36 plus its parity share, 

until the setter’s order is filled.37

The Exchange proposes to amend the 

setter priority rule to reflect the existing 

operation of this function, under which 

an order is not eligible for setter priority 

if there is an odd-lot sized order with 

setter priority at that price.38 The 

Exchange states that this change is 

consistent with current functionality 

and asserts that the change would add 

transparency and clarity to its rules.39

The Exchange proposes to add similar 

language to NYSE Rule 7.36(h)(1)(D) to 

specify that, during a Short Sale Period, 

if an odd-lot child of a short sale 


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39490 Federal Register / Vol. 83, No. 154 / Thursday, August 9, 2018 / Notices 

40See Proposed NYSE Rule 7.36(h)(1)(D). 41See NYSE Rule 7.36(h)(1)(A)–(B). 42See Proposed NYSE Rule 7.36(h)(1)(C). 43 Id. 44See Proposed NYSE Rule 7.36(h)(1)(D). In 

connection with this proposed change, the 

Exchange also proposed to delete current NYSE 

Rule 7.36(h)(4)(B), which states that setter priority 

is not available when the reserve quantity 

replenishes the display quantity of a Reserve Order. 45The requirements for an order to achieve setter 

priority are that it is an order ranked Priority 2— 

Display Orders with a display quantity of at least 

one round lot, that it establishes a new BBO, and 

that it either establishes a new NBBO or joins an 

Away Market NBBO. See NYSE Rule 7.36(h). 46See Notice, supra note 7, at 28704–05. 47 15 U.S.C. 78f. 48 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 49 15 U.S.C. 78f(b)(5). 50See Notice, supra note 7, at 28704. 

51 15 U.S.C. 78s(b)(2). 

52 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Reserve Order has setter priority, and 

the Permitted Price at which the order 

would be replenished would be a 

different price, the replenish quantity 

would not be eligible for setter 

priority.40

The Exchange also proposes to add 

two circumstances in which an order 

would be evaluated for setter priority. 

Currently, an order will be evaluated for 

setter priority on arrival (including any 

portion that has been routed and returns 

unexecuted) and when the order 

becomes eligible to trade for the first 

time upon transitioning to a new trading 

session.41 First, NYSE proposes that an 

order would be evaluated for setter 

priority when resting and assigned a 

new display price.42 If multiple orders 

reprice at the same time, none of the 

orders would be eligible for setter 

priority unless one order is equal to or 

greater than a round lot and the sum of 

the other orders at the same price is less 

than one round lot.43 Second, the 

Exchange proposes that an order would 

be evaluated for setter priority when the 

display quantity of a Reserve Order is 

replenished.44 The Exchange asserts 

that, if a repriced resting or replenished 

Reserve Order meets the conditions for 

establishing setter priority,45 then that 

order is aggressively displaying 

liquidity on the Exchange, which the 

Exchange seeks to encourage by 

providing a setter priority allocation.46

III. Discussion and Commission 

Findings 

After careful review of the proposal, 

as modified by Amendment No. 1, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act 47 and the rules 

and regulations thereunder applicable to 

a national securities exchange.48 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,49 which 

requires that the rules of an exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

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. 

The proposal would alter how UTP 

Securities trade on the Exchange’s Pillar 

trading platform with respect to two 

order types—reserve orders and primary 

pegged orders—and would also amend 

the rules that determine when orders are 

eligible for setter priority. The proposed 

changes relating to Reserve Orders 

would seek to reduce the quantity of 

child orders and the potential for 

information leakage. The Commission 

believes that the proposal to replenish 

the displayed quantity when it falls 

below one round lot is consistent with 

reserve order functioning on other 

national securities exchanges that the 

Commission has found to be consistent 

with the Exchange Act.50 The 

Commission also believes that the 

proposal is consistent with Section 

6(b)(5)—with respect to replenishing a 

Reserve Order that has two existing 

child orders totaling less than one round 

lot, routing from reserve interest before 

publishing the display quantity, and 

aligning the Exchange’s rule text to the 

existing treatment of Reserve Orders 

that are not routable and of routed 

Reserve Orders that return 

unexecuted—because the proposed 

changes are reasonably designed to 

encourage the provision of liquidity on 

the exchange by reducing the likelihood 

of adverse selection against liquidity 

providers through information leakage 

and providing clarity to market 

participants, while not permitting unfair 

discrimination on the exchange. 

The proposed changes relating to 

Primary Pegged Reserve Orders would 

provide that, if the PBBO is locked or 

crossed when the display quantity of the 

order is to be replenished, the entire 

order would be canceled. The 

Commission believes that the proposal 

is reasonably designed to prevent the 

display of locked or crossed quotations 

in NMS securities. 

The rules relating to the setter priority 

would change in two ways. First, the 

rules would be amended to reflect that, 

under existing order function, an order 

is not eligible for setter priority if there 

is an odd-lot sized order with setter 

priority at that price. Second, orders 

would be evaluated for setter priority 

under two additional circumstances— 

when an order is resting and assigned a 

new display price, and when the 

display quantity of a Reserve Order is 

replenished. The Commission believes 

that these proposed changes are 

reasonably designed to provide 

incentives for market participants to 

display liquidity on the Exchange. 

Accordingly, the Commission finds 

that the proposal is consistent with the 

requirements of the Act, and 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. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,51 that the 

proposed rule change (SR–NYSE–2018– 

26), as modified by Amendment No. 1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17004 Filed 8–8–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83771; File No. SR– 

NASDAQ–2018–060] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend 

Certain Terms Under Chapter I, Section 

1 of the Options Rules 

August 3, 2018. 

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 July 20, 

2018, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 


sradovich on DSK3GMQ082PROD with NOTICES