40808 Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices 

18 15 U.S.C. 78s(b)(3)(A)(ii). 

19 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. 

Orders, it would have no meaningful 

impact on competition as few 

transactions in Midpoint Extended Life 

Orders would occur. In sum, if the 

proposal to assess no fees for executions 

of Midpoint Extended Life Orders is 

unattractive to market participants, it is 

likely that the Exchange will not gain 

any market share as a result and 

therefore no competitive impact. 

Accordingly, the Exchange does not 

believe that the proposed changes will 

impair the ability of members or 

competing order execution venues to 

maintain their competitive standing in 

the financial markets. 

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.18

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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 

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– 

NASDAQ–2018–064 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2018–064. 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 such 

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–NASDAQ–2018–064, and 

should be submitted on or before 

September 6, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–17634 Filed 8–15–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83821; File No. SR–NYSE– 

2018–34] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend NYSE Rule 104 Governing 

Transactions by Designated Market 

Makers 

August 10, 2018. 

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 July 31, 

2018, New York Stock Exchange LLC 

(‘‘NYSE’’ 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 consolidate 

and restructure subsections (g), (h) and 

(i) of Rule 104 governing transactions by 

Designated Market Makers (‘‘DMM’’). 

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 consolidate 

and restructure subsections (g), (h) and 

(i) of Rule 104 governing DMM 

transactions. 

Background 

Rule 104 sets forth the obligations of 

Exchange DMMs. Under Rule 104(a), 

DMMs registered in one or more 

securities traded on the Exchange are 

required to engage in a course of 

dealings for their own account to assist 

in the maintenance of a fair and orderly 

market insofar as reasonably practicable. 

Rule 104(a) also enumerates the specific 

responsibilities and duties of a DMM, 

including: (1) Maintenance of a 

continuous two-sided quote, which 


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4See Rule 104(a)(1). 

5See Rule 104(a)(2)(3). Rule 104(e) further 

provides that DMM units must provide contra-side 

liquidity as needed for the execution of odd-lot 

quantities eligible to be executed as part of the 

opening, reopening, and closing transactions but 

that remain unpaired after the DMM has paired all 

other eligible round lot sized interest. 

6Rule 104(g)(i)(A)(III) contains two exceptions to 

Prohibited Transactions: (1) Matching another 

market’s better bid or offer price, and (2) bringing 

the price of a security into parity with an 

underlying or related security or asset. 

7A DMM reaches across the market when the 

DMM buys from the NYSE offer or sells to the NYSE 

bid. 

8For purposes of subsections (h)(iii)(C)(I) and 

(h)(iii)(C)(II), a Sweep is viewed as a transaction 

with the published bid or offer. 

mandates that each DMM maintain a bid 

or an offer at the National Best Bid 

(‘‘NBB’’) and National Best Offer 

(‘‘NBO,’’ together the ‘‘NBBO’’) for a 

certain percentage of the trading day,4

and (2) the facilitation of, among other 

things, openings, re-openings, and the 

close of trading for the DMM’s assigned 

securities, all of which may include 

supplying liquidity as needed.5 Rule 

104(f) imposes an affirmative obligation 

on DMMs to maintain, insofar as 

reasonably practicable, a fair and 

orderly market on the Exchange in 

assigned securities, including 

maintaining price continuity with 

reasonable depth and trading for the 

DMM’s own account when lack of price 

continuity, lack of depth, or disparity 

between supply and demand exists or is 

reasonably to be anticipated. 

Rule 104(g) provides that transactions 

on the Exchange by a DMM for the 

DMM’s account must be effected in a 

reasonable and orderly manner in 

relation to the condition of the general 

market and the market in the particular 

stock. More particularly, Rule 104(g) 

describes certain transactions that are 

permitted to render the DMM’s position 

adequate to the market’s needs, 

including Neutral and Non-Conditional 

Transactions, and certain DMM 

transactions that are prohibited. 

Rule 104(g)(i)(A)(I) defines Neutral 

Transactions as a purchase or sale by 

which a DMM liquidates or decreases a 

position. Neutral Transactions may be 

made without restriction as to price. 

However, the DMM’s obligation to 

maintain a fair and orderly market may 

require re-entry on the opposite side of 

the market trend after effecting one or 

more Neutral Transactions. Such reentry transactions should be in 

accordance with the immediate and 

anticipated needs of the market. 

Rule 104(g)(i)(A)(II) defines NonConditional Transactions as a DMM’s 

bid or purchase and offer or sale that 

establishes or increases a position, other 

than a transaction that reaches across 

the market to trade with the Exchange 

BBO. Non-Conditional Transactions 

may be made without restriction as to 

price in order to (i) match another 

market’s better bid or offer price; (ii) 

bring the price of a security into parity 

with an underlying or related security or 

asset; (iii) add size to an independently 

established bid or offer on the Exchange; 

(iv) purchase at the published bid price 

on the Exchange; (v) sell at the 

published offer price on the Exchange; 

(vi) purchase or sell at a price between 

the Exchange BBO; and (vii) purchase 

below the published bid or sell above 

the published offer on the Exchange. As 

with Neutral Transactions, the DMM’s 

obligation to maintain a fair and orderly 

market may also require re-entry on the 

opposite side of the market trend after 

effecting one or more Non-Conditional 

Transactions. Such re-entry transactions 

should be commensurate with the size 

of the Non-Conditional Transactions 

and the immediate and anticipated 

needs of the market. 

Rule 104(g)(i)(A)(III) provides that, 

except as otherwise permitted by Rule 

104, during the last ten minutes prior to 

the close of trading, a DMM with a long 

or short position in a security is 

prohibited from making a purchase or 

sale in such security that results in a 

new high or low price, respectively, on 

the Exchange for the day at the time of 

the DMM’s transaction (‘‘Prohibited 

Transactions’’).6

Finally, Rule 104(h) addresses DMM 

transactions in securities that establish 

or increase the DMM’s position. Rule 

104(h)(i) defines a Conditional 

Transaction as a DMM transaction in a 

security that establishes or increases a 

position and reaches across the market 

to trade as the contra-side to the 

Exchange published bid or offer.7

Rule 104(h)(ii) permits ‘‘Conditional 

Transactions’’ without restriction as to 

price if they are followed by appropriate 

re-entry on the opposite side of the 

market commensurate with the size of 

the DMM’s transaction. Thus, if a DMM 

establishes or increases a long position 

by buying from the Exchange best offer, 

or establishes or increases a short 

position by selling to the Exchange best 

bid, such transaction would be followed 

by the DMM quoting on the opposite 

side of the last transaction in order to 

dampen the impact of that transaction 

on the market. 

The re-entry obligations for 

Conditional Transactions are set forth in 

Rule 104(h)(iii). Under Rule 

104(h)(iii)(A), DMMs must re-enter 

within certain Exchange issued 

guidelines, called price participation 

points (‘‘PPP’’), that identify the price at 

or before which a DMM is expected to 

re-enter the market after effecting a 

Conditional Transaction. PPPs are only 

minimum guidelines and compliance 

with them does not guarantee that a 

DMM is meeting its obligations. 

Notwithstanding that a security may 

not have reached the PPP, the DMM 

may be required to re-enter the market 

immediately after a Conditional 

Transaction based on the price and/or 

volume of the DMM’s trading in 

reference to the market in the security 

at the time of such trading. In such 

situations DMMs may or may not rely 

on the fact and circumstance that there 

may have been one or more 

independent trades following the 

DMM’s trading to justify a failure to reenter the market. As set forth in Rule 

104(h)(iii)(C)(I) and (II), immediate reentry is required after the following 

Conditional Transactions: 

• A purchase that (1) reaches across 

the market to trade with an Exchange 

published offer that is above the last 

differently priced trade on the Exchange 

and above the last differently priced 

published offer on the Exchange, (2) is 

10,000 shares or more or has a market 

value of $200,000 or more, and (3) 

exceeds 50% of the published offer size; 

and 

• a sale that (1) reaches across the 

market to trade with an Exchange 

published bid that is below the last 

differently priced trade on the Exchange 

and below the last differently priced 

published bid on the Exchange, (2) is 

10,000 shares or more or has a market 

value of $200,000 or more, and (3) 

exceeds 50% of the published bid size.8

Rule 104(h)(iv) permits certain other 

Conditional Transactions without 

restriction as to price. Specifically, 

under subsection (h)(iv)(A), a DMM’s 

purchase from the Exchange published 

offer that is priced above the last 

differently-priced trade on the Exchange 

or above the last differently-priced 

published offer on the Exchange. 

Similarly, under subsection (h)(iv)(B), a 

DMM’s sale to the Exchange published 

bid that is priced below the last 

differently-priced trade on the Exchange 

or below the last differently-priced 

published bid on the Exchange. 

Finally, Rule 104(i) provides that reentry obligations following such 

Conditional Transactions would be the 

same as the re-entry obligations for NonConditional Transactions pursuant to 

Rule 104(g). 

Proposed Rule Change 

The Exchange proposes to consolidate 

and restructure current Rules 104(g), (h) 


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9The Exchange proposes the following technical 

and conforming changes: (1) Romanettes (i) through 

(vi) in Rule 104(b) and (i) through (iv) in Rule 104(f) 

would be replaced with numbers 1 through 6 and 

1 through 4, respectively; (2) current subsection (j) 

would become new subsection (h); and (3) current 

subsection (k) would become new subsection (i). 

10As discussed below, the re-entry obligations for 

Neutral and Non-Conditional Transactions would 

be retained and incorporated into proposed 

subsection (g)(2). 

11See Rule 104(g)(i)(A)(III) and note 16, infra. 12This exception would continue to be 

appropriate because an independent party and not 

the DMM would set the price. See Securities 

Exchange Act Release No. 54860 (December 1, 

2006), 71 FR 71221, 71229 (December 8, 2006) (SR– 

NYSE–2006–76) (‘‘Release No. 54860’’). The 

Exchange does not propose to incorporate the other 

current exception permitting transactions during 

the last ten minutes of trading that result in a new 

Exchange high or low for the day in order to match 

another market’s better bid or offer because a DMM 

could not create a new consolidated high or low 

price by matching a better away bid or offer. 

13See Rule 104(g)(i)(A)(III). 

14 During the first quarter of 2018, the Exchange 

traded on average in excess of 1% of the total NYSE 

daily volume in the last 10 seconds of the trading 

day. 

15Currently, during the last ten minutes of 

trading, DMMs are not prohibited from engaging in 

transactions that create a new high or low on the 

Exchange and are also a liquidating transaction. As 

proposed, Aggressing Transactions resulting in a 

new consolidated high or low prior to the final ten 

seconds of trading would be permitted but would 

be subject to the re-entry obligations contained in 

proposed Rule104(g)(2), discussed below. 

and (i), which would be deleted and 

incorporated as modified into a new 

subsection (g) titled ‘‘Transactions by 

DMMs.’’ The Exchange also proposes 

certain technical and conforming 

changes.9

As discussed below, proposed Rule 

104(g) would revise the requirements for 

DMM transactions based on the type of 

trading by the DMM, rather than by 

reference to the DMM’s position. As 

restructured, the proposed rule would 

replace the four current types of DMM 

transactions based on the DMM’s 

position (Neutral, Non-conditional, 

Conditional and Prohibited) with a 

single, enhanced DMM transaction 

called an ‘‘Aggressing Transaction’’ that 

would retain existing re-entry 

requirements. During the final seconds 

of trading before the close of trading, 

Aggressing Transactions that would 

result in a new consolidated high (low) 

price for a security during that trading 

day would be prohibited with one 

exception discussed below. 

Proposed Rule 104(g)(1) 

Proposed Rule 104(g)(1) would be 

based on current Rule104(g)(i). Like 

current Rule 104(g)(i), proposed Rule 

104(g)(1) would specify that 

transactions on the Exchange by a DMM 

unit for the DMM unit’s account are to 

be effected in a reasonable and orderly 

manner in relation to the condition of 

the general market and the market in the 

particular stock. Proposed Rule 

104(g)(1) would eliminate the 

definitions of Neutral and NonConditional Transactions 10 and retain 

Conditional Transactions, which would 

be enhanced and renamed ‘‘Aggressing 

Transactions.’’ 

In proposed Rule 104(g)(1)(A), the 

Exchange would define an Aggressing 

Transaction as a DMM unit transaction 

that: 

(i) Is a purchase (sale) that reaches across 

the market to trade as the contra-side to the 

Exchange published offer (bid); and 

(ii) is priced above (below) the last 

differently-priced trade on the Exchange and 

above (below) the last differently-priced 

published offer (bid) on the Exchange. 

The proposed definition of Aggressing 

Transaction would be the same as the 

current definition of Conditional 

Transaction in Rule 104(h)(i) and (ii), 

except that Aggressing Transaction 

would not be defined by reference to 

whether the transaction increases or 

decreases the DMM’s position. 

Accordingly, a DMM unit Aggressing 

Transaction would be any trade where 

the DMM is both reaching across the 

market and aggressively moves the price 

of the security. 

Prohibited Transactions 

The Exchange proposes to retain the 

existing prohibition on certain DMM 

transactions at the end of the trading 

day and to modify Prohibited 

Transactions in three ways.11

First, the Exchange proposes to 

modify the types of transactions that 

would be prohibited. Currently, the rule 

prohibits transactions by a DMM that 

create a new high or low price on the 

Exchange. The Exchange proposes 

instead to prohibit Aggressing 

Transactions that create a new 

consolidated high or low price. The 

Exchange believes that this proposed 

change would allow a DMM to quote 

aggressively in assigned securities 

without the risk of trading at a price that 

could create a new Exchange high or 

low price. For example, if the Exchange 

bid is $10.10, the Exchange offer is 

$10.12 and the last Exchange sale was 

$10.10, and the DMM unit is long and 

is seeking to narrow the spread by 

posting a bid at $10.11. Under the 

Exchange’s current rule, if there were 

dark sell interest at $10.11, a DMM with 

a long position would be prohibited 

from attempting to post a bid at $10.11 

because it could trade at that price and 

create a new high price on the 

Exchange. The current rule thus thwarts 

the ability of the DMM to meet their 

affirmative obligations to quote 

aggressively in assigned securities. 

Moreover, the Exchange proposes to 

permit, consistent with the current 

exception in Rule 104(g)(i)(A)(III), 

Aggressing Transactions in the final ten 

seconds that would result in a new 

consolidated high (low) price for a 

security in order to bring the price of 

that security into parity with an 

underlying or related security or asset.12

Second, the Exchange proposes to 

eliminate the reliance on the DMM’s 

position to determine whether to 

prohibit a transaction. The Exchange 

does not believe that the position of the 

DMM should be the defining feature of 

whether a trade is prohibited. Rather, as 

described above, the Exchange believes 

that whether a trade is prohibited 

should be based on whether the trade 

both aggressively takes liquidity and 

creates a new consolidated high or low 

price for the day. By eliminating 

reliance on position information, the 

proposed prohibited transaction would 

be more restrictive than the current rule 

because a DMM could not reach across 

the market to liquidate a position. 

However, the Exchange believes that 

this proposed change would support 

DMMs in meeting their affirmative 

obligations while at the same time 

preventing DMMs from aggressively 

taking liquidity and moving prices on 

the Exchange immediately before the 

closing auction. 

Finally, the Exchange proposes to 

modify the period during which such 

transactions are prohibited.13 To reflect 

the increased transparency regarding 

closing imbalances leading into the 

close and the speed and volume of 

transactions in today’s electronic 

marketplace, the Exchange proposes to 

shorten the period during which certain 

transactions are prohibited to the final 

ten seconds of trading before the 

scheduled close of trading. The 

Exchange believes that limiting the 

period for Prohibited Transactions, as 

amended, is appropriate for a highspeed trading environment where trade 

speed is measured in microseconds and 

the final ten seconds of trading is an 

active trading period.14 Moreover, as 

noted above, the transactions proposed 

to be prohibited would include 

liquidating transactions. Therefore, by 

shortening the time period restricting 

such trading, the DMMs would have 

more time to engage in liquidating 

transactions before the prohibition 

begins.15

The current rule prohibiting certain 

transactions in the last ten minutes of 

trading was adopted before the advent 

of rapid electronic trading and before 

the Exchange began disseminating 


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16The rule on Prohibited Transactions was 

adopted in 2006. See note 19, infra. In 2010, the 

Exchange enhanced the transparency of its 

marketplace and improved the quality of the closing 

auctions by modifying the dissemination of Order 

Imbalance Information pursuant to Rule 123C(6) to 

commence at 3:45 p.m. and including indicative 

closing price information and updated imbalance 

information in the pre-closing Order Imbalance data 

feeds. See Securities Exchange Act Release No. 

61233 (December 23, 2009), 74 FR 69169 (December 

30, 2009) (SR–NYSE–2009–111) (Approval Order) 

(‘‘Closing Filing’’). See also Securities Exchange Act 

Release No. 61616 (March 1, 2010), 75 FR 10533 

(March 8, 2010) (SR–NYSE–2010–12) (Notice of 

Filing of Extension of Implementation Date of the 

Closing Filing). 

17The Order Imbalance Information data feed 

provides automated, streaming information about 

real-time order imbalances that accumulate prior to 

the close of trading on the Exchange, and also 

includes the mandatory market-on-close (‘‘MOC’’) 

and limit-on-close (‘‘LOC’’) imbalance information 

that the Exchange is required to disseminate under 

NYSE Rule 123C(5). Order Imbalance Information is 

published every five seconds between 3:45 p.m. and 

4:00 p.m. During this period, all market participants 

have access to the same imbalance information. 

18For instance, in the first quarter of 2018, there 

were only 275 manual DMM trades that occurred 

in the last 9 minutes, 50 seconds of trading, 

representing just .0001% of the total shares traded 

on the NYSE in that time period. 

19See Release No. 54860, 71 FR at 71221. When 

the prohibition was adopted in 2006, Prohibited 

Transactions were set forth in Supplementary 

Material .10 of Rule 104. The rationale behind 

preventing specialists from setting the price of a 

security on the Exchange in the final ten minutes 

of trading was to prevent specialists from 

inappropriately influencing the price of a security 

at the close to advantage a specialist’s proprietary 

position. See id., 71 FR at 71229. The rule was 

retained in 2008 when the Exchange’s New Market 

Model transformed specialists into DMMs, who are 

no longer agents for the Exchange’s limit order book 

and whose trading activity on the Exchange is 

limited to proprietary trading. See Securities 

Exchange Act Release No. 58845 (October 24, 2008), 

73 FR 64379, 64381 (October 29, 2008) (SR–NYSE– 

2008–46). 

20 In general, as noted above, transactions on the 

Exchange by a DMM for the DMM’s account must 

be effected in a reasonable and orderly manner in 

relation to the condition of the general market and 

the market in the particular stock, and DMMs must 

refrain from causing or exacerbating excessive price 

movements. DMMs have affirmative obligations 

under Rule 104(a) to engage in a course of dealings 

for their own account to assist in the maintenance 

of a fair and orderly market insofar as reasonably 

practicable. Specifically, Rule 104(f)(ii) sets forth 

the DMM’s obligation to act as reasonably necessary 

to ensure appropriate depth and maintain 

reasonable price variations between transactions 

(also known as price continuity) and prevent 

unexpected variations in trading. Further, under 

Rule 123D(a), openings and reopenings must be fair 

and orderly, reflecting the DMM’s professional 

assessment of market conditions at the time, and 

appropriate consideration of the balance of supply 

and demand as reflected by orders represented in 

the market. The Exchange supplies DMMs with 

suggested Depth Guidelines for each security in 

which a DMM is registered, and DMMs are 

expected to quote and trade with reference to the 

Depth Guidelines. See Rule 104(f)(iii). 

21Current Rule 104(h)(iv) provides that two types 

of Conditional Transactions may be made without 

restriction as to price: (1) A DMM’s purchase from 

the Exchange published offer that is priced above 

the last differently-priced trade on the Exchange or 

above the last differently-priced published offer on 

the Exchange ((h)(iv)(A)); and (2) a DMM’s sale to 

the Exchange published bid that is priced below the 

last differently-priced trade on the Exchange or 

below the last differently-priced published bid on 

the Exchange ((h)(iv)(B)). Current Rule 104(i) 

provides that the re-entry obligations following 

transactions defined in Rule 104(h)(iv)(A) and 

(h)(iv)(B) are the same as for Non-Conditional 

Transactions pursuant to Rule 104(g)(i)(A)(3). 

Order Imbalance Information in its 

current form, as described in Rule 

123C(6).16 The Exchange believes that 

the availability of order imbalance 

information before the close of trading 

provides the public with updated 

trading information that was previously 

available only to DMMs. As a result, 

although the public now has 

significantly greater imbalance 

information leading into the close,17

there has been no commensurate 

modernization of when the period for 

DMM prohibited transactions begins. 

Moreover, there is limited information 

asymmetry leading into the close; DMM 

algorithms only have access to the same 

data feeds that are available to the 

public. While Floor-based DMMs have 

access to additional non-public 

information, there is almost no manual 

trading 18 between 3:50 p.m. and 3:59:50 

p.m., and thus limited opportunity for 

the Floor-based DMMs to act on that 

information. For example, Floor broker 

crowd interest is not revealed until 4:00 

p.m. Further, DMMs do not determine 

their level of participation in the close 

until all interest has been entered for the 

close, including such Floor broker 

crowd interest, which is after 4:00 p.m. 

The Exchange accordingly believes that 

prohibiting transactions during the last 

ten seconds of trading would provide 

the same level of protection as intended 

by the current rule prohibiting certain 

transactions in the last ten minutes of 

trading. 

To effect these changes, proposed 

Rule 104(g)(1)(B) would prohibit any 

Aggressing Transaction during the final 

ten seconds of trading before the 

scheduled close of trading that would 

result in a new consolidated high (low) 

price for a security during that trading 

day, except for Aggressing Transactions 

that would result in a new consolidated 

high (low) price for a security in order 

to bring the price of that security into 

parity with an underlying or related 

security or asset. Proposed Rule 

104(g)(1)(B) would thus replace the 

current rule on Prohibited Transactions, 

a rule originally designed to prevent 

specialists from setting a price in the 

final ten minutes of trading in a security 

in which the specialist had a position.19

Finally, the Exchange notes that the 

proposal is consistent with, and in no 

way diminishes or relieves the DMM of, 

the other obligations regarding the 

quality of the markets in securities to 

which DMMs are assigned under Rule 

104.20

Proposed Rule 104(g)(2) 

Proposed subsection (g)(2) would set 

forth the re-entry obligations for DMM 

transactions, which would be based on 

the current rule’s re-entry obligations. 

Specifically, proposed Rule 104(g)(2) 

would provide that a DMM unit’s 

obligation to maintain a fair and orderly 

market may require re-entry on the 

opposite side of the market after 

effecting one or more transactions. The 

proposed rule would provide that such 

re-entry should be commensurate with 

the size of the transaction(s) and the 

immediate and anticipated needs of the 

market, which are the same re-entry 

requirements specified in current Rules 

104(g)(i)(A)(I)(3) and 104(g)(i)(A)(II)(3) 

for Neutral and Non-Conditional 

Transactions, respectively, as well as 

the types of Conditional Transactions 

referenced in current Rules 104(h)(iv) 

and 104(i).21 Accordingly, these re-entry 

obligations would be applicable to 

DMM transactions other than 

Aggressing Transactions. 

Proposed Rule 104(g)(2)(A) and (B) 

would specify the re-entry obligations 

for Aggressing Transactions. Following 

an Aggressing Transaction, proposed 

Rule 104(g)(2)(A) would require the 

DMM unit to re-enter the opposite side 

of the market at or before the applicable 

PPP for that security commensurate 

with the size of the Aggressing 

Transaction. The re-entry requirement 

for Aggressing Transactions set forth in 

proposed Rule 104(g)(2)(A) is based on 

the current re-entry requirements for 

certain Conditional Transactions set 

forth in current Rule 104(h)(iii). 

Under proposed Rule 104(g)(2)(B), if 

the Aggressing transaction (i) is 10,000 

shares or more or has a market value of 

$200,000 or more, and (ii) exceeds 50% 

of the published offer (bid) size, 

immediate re-entry on the opposite side 

of the market at or before the applicable 

PPP for the security commensurate with 

the size of the Aggressing Transaction 

would be required. The re-entry 

requirement for block-sized Aggressing 

Transactions set forth in proposed Rule 

104(g)(2)(B) is based the current re-entry 

requirements for block-sized 

Conditional Transactions under Rule 

104(h)(iii)(C). The Exchange proposes a 

clarifying amendment in proposed Rule 

104(g)(2)(B), as compared to current 

Rule 104(h)(iii)(C), to provide that such 

re-entry must be at or before the 

applicable PPP for that security. The 

Exchange believes that this proposed 

change will provide greater detail in the 


sradovich on DSK3GMQ082PROD with NOTICES
40812 Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices 

22 15 U.S.C. 78f(b). 

23 15 U.S.C. 78f(b)(5). 

rule regarding the price at which the reentry would be required. 

Proposed Rule 104(g)(3) 

Finally, proposed Rule 104(g)(3)(A) 

would provide that the Exchange would 

periodically issue PPP Guidelines that 

identify the price at or before which a 

DMM unit is expected to re-enter the 

market following an Aggressing 

Transaction. PPPs are only minimum 

guidelines and compliance with them 

does not guarantee that a DMM unit is 

meeting its obligations. This portion of 

the proposed Rule is based on Rule 

104(h)(iii)(A) without any differences. 

Proposed Rule 104(g)(3)(B) would 

provide that, notwithstanding that a 

security may not have reached the PPP, 

the DMM unit may be required to reenter the market immediately after an 

Aggressing Transaction based on the 

price and/or volume of the DMM unit’s 

trading in reference to the market in the 

security at the time of such trading. In 

such situations, DMM units may or may 

not rely on the fact and circumstance 

that there may have been one or more 

independent trades following the DMM 

unit’s trading to justify a failure to reenter the market. Subsection (B) of the 

proposed rule is based on current Rule 

104(h)(iii)(B). 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,22 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act,23 in particular, because it is 

designed to prevent fraudulent and 

manipulative acts and practices, 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. 

In particular, the Exchange believes 

that revising the requirements for DMM 

transactions based on the type of DMM 

trading rather than the DMM’s position 

and introducing a new, enhanced DMM 

transaction called an ‘‘Aggressing 

Transaction’’ would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system by 

simplifying and streamlining the 

requirements for DMM transactions. The 

proposal would eliminate four separate 

types of DMM transactions and 

introduce a simplified framework 

whereby all DMM transactions would be 

subject to general re-entry requirements 

based on the current re-entry obligations 

for Neutral, Non-Conditional and 

Conditional transactions, and specific 

re-entry requirements for Aggressing 

Transactions, except for Aggressing 

Transactions during the final ten 

seconds of trading that result in a new 

consolidated high or low, which would 

be prohibited. 

The Exchange believes that the 

proposal would not be inconsistent with 

the public interest and the protection of 

investors. As noted, the proposed rule 

would carry over the requirement that 

all DMM transactions be effected in a 

reasonable and orderly manner in 

relation to the condition of the general 

market and the market in the particular 

stock. Further, DMM Aggressing 

Transactions would continue to require 

re-entry on the opposite side of the 

market at or before the applicable PPP 

for the security as warranted. Aggressing 

Transactions in the final ten seconds of 

trading that result in a new consolidated 

high (low) price for a security during 

that trading day would continue to be 

prohibited. These safeguards would 

reasonably ensure that DMM 

transactions bear a reasonable 

relationship to overall market 

conditions and that DMMs cannot 

destabilize, inappropriately influence or 

manipulate a security going into the 

close. In addition, the prohibition on 

Aggressing Transactions that would 

create a new consolidated high or low 

price of the trading day would maintain 

a bright-line rule that prohibits DMM 

transactions that aggressively take 

liquidity leading into the close. While 

the period during which such 

Aggressing Transactions would be 

shorter than under the current rule, the 

Exchange believes that the shorter time 

period reflects today’s faster, more 

electronic markets, where trades and 

quotes are measured in microseconds, 

not minutes. Further, the proposed 

prohibition would be stricter than under 

current rules because DMMs would be 

prohibited from engaging in any 

Aggressing Transaction that creates a 

new consolidated high or low price for 

the day, even if such trade were a 

liquidating transaction. 

Accordingly, the proposed rule 

change is designed to address the 

potential risk of DMM trading 

destabilizing the market leading into the 

close in today’s market conditions, 

while at the same time revising which 

transactions would be prohibited to 

promote DMMs quoting more 

aggressively in their assigned securities. 

The Exchange therefore believes that the 

proposed amendments to the types of 

transactions that would be prohibited 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system because DMMs would now be 

able to quote more aggressively in their 

assigned securities during the period for 

prohibited transactions. 

Moreover, the numerous obligations 

currently imposed by Rule 104 would in 

no way be altered or diminished by the 

proposal. The Exchange does not 

believe that the balance of benefits and 

obligations under Rule 104 would be 

impacted by this proposed rule change. 

DMMs would continue to be prohibited 

from engaging in specified transactions 

leading into the close. The Exchange is 

simply proposing to modernize this 

obligation to reflect the realities of 

today’s trading environment. Moreover, 

the proposed rule would carry over the 

requirement that all DMM transactions 

be effected in a reasonable and orderly 

manner in relation to the condition of 

the general market and the market in the 

particular stock. These safeguards 

would reasonably ensure that DMM 

transactions bear a reasonable 

relationship to overall market 

conditions and that DMMs cannot 

destabilize, inappropriately influence or 

manipulate a security going into the 

close. For the same reasons, the 

proposed prohibition would not alter or 

disrupt the balance between DMM 

benefits and obligations of being an 

Exchange DMM. 

Finally, revising the requirements for 

DMM transactions based on the type of 

DMM trading rather than the DMM’s 

position would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system by simplifying and streamlining 

the requirements for DMM transactions. 

For the foregoing reasons, the 

Exchange believes that the proposal is 

consistent with the Act. 

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 proposes amendments to the 

rule governing DMM obligations to 

simplify and streamline the 

requirements for DMM transactions. The 

Exchange believes that the proposal 

would promote competition by allowing 

DMMs to quote more aggressively in the 

final minutes of trading, thereby 

permitting DMMs to remain competitive 

with other traders both on the Exchange 

and on other trading venues. Without 

the proposed change, the Exchange 

believes that in the final ten minutes of 

trading, DMMs are at a competitive 

disadvantage because they are restricted 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices 40813 

24 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

from engaging in quoting activity that 

does not reach across the market, but 

that could result in a transaction that is 

a new high or low on the Exchange, but 

is not a new consolidated high or low 

price. The Exchange believes that the 

proposal is pro-competitive because 

revising which transactions would be 

prohibited would promote DMM 

quoting more aggressively in their 

assigned securities, thereby enhancing 

the ability of DMMs to meet their 

affirmative obligation under Rule 104. 

Similarly, shortening the time period 

restricting DMM trading, in addition to 

being more appropriate for the current 

high-speed trading environment, would 

provide DMMs with more time to 

engage in liquidating transactions before 

the prohibition begins, thereby 

enhancing DMM market making in the 

final minutes of trading. The Exchange 

further believes that its proposed rules 

governing DMMs would not impose any 

burden on competition that is not 

necessary or appropriate because the 

proposed rules are designed to foster a 

fair and orderly marketplace without 

diminishing the balance of benefits and 

obligations under Rule 104 or altering or 

diminishing the numerous obligations 

currently imposed by Rule 104 on 

DMMs. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or up to 90 days (i) as the 

Commission may designate if it finds 

such longer period to be appropriate 

and publishes its reasons for so finding 

or (ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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– 

NYSE–2018–34 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–NYSE–2018–34. 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–NYSE–2018–34 and should 

be submitted on or before September 6, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–17630 Filed 8–15–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83819; File No. SR–ICC– 

2018–009] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to 

ICC’s Treasury Operations Policies 

and Procedures 

August 10, 2018. 

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

Securities Exchange Act of 1934,1 and 

Rule 19b–4,2 notice is hereby given that 

on July 31, 2018, ICE Clear Credit LLC 

(‘‘ICC’’) 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 ICC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change, Security-Based Swap 

Submission, or Advance Notice 

The principal purpose of the 

proposed rule change is to revise the 

ICC Treasury Operations Policies and 

Procedures (‘‘Treasury Policy’’). These 

revisions do not require any changes to 

the ICC Clearing Rules (‘‘Rules’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, Security-Based 

Swap Submission, or Advance Notice 

In its filing with the Commission, ICC 

included statements concerning the 

purpose of and basis for the proposed 

rule change, security-based swap 

submission, or advance notice and 

discussed any comments it received on 

the proposed rule change, securitybased swap submission, or advance 

notice. The text of these statements may 

be examined at the places specified in 

Item IV below. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, Security-Based 

Swap Submission, or Advance Notice 

(a) Purpose 

ICC proposes revisions to its Treasury 

Policy. ICC believes such revisions will 

facilitate the prompt and accurate 

clearance and settlement of securities 

transactions and derivative agreements, 

contracts, and transactions for which it 


sradovich on DSK3GMQ082PROD with NOTICES