Federal Register / Vol. 87, No. 125 / Thursday, June 30, 2022 / Notices 39139 

15 17 CFR 200.30–3(a)(12), (59). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 94487 

(Mar. 22, 2022), 87 FR 17349 (Mar. 28, 2022) 

(‘‘Notice’’). The Commission has received one 

comment letter, which does not relate to the 

substance of the proposed rule change. The 

comment letter is available at https://www.sec.gov/ 

comments/sr-nyseamer-2022-15/srnyseamer202215-

20123731-279990.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 94865 

(May 6, 2022), 87 FR 29192 (May 12, 2022). The 

Commission designated June 26, 2022, as the date 

by which the Commission shall approve or 

disapprove, or institute proceedings to determine 

whether to disapprove, the proposed rule change. 

6Amendment No. 1 is available on the 

Commission’s website at https://www.sec.gov/ 

comments/sr-nyseamer-2022-15/srnyseamer202215- 

20128710-294076.pdf. 

7As defined in NYSE American Rule 1.1E(dd), 

‘‘PBBO’’ means the Best Protected Bid and the Best 

Protected Offer. Rule 1.1E(dd) also defines ‘‘PBB’’ 

as the highest Protected Bid and ‘‘PBO’’ as the 

lowest Protected Offer. 

8A Pegged Order is a Limit Order that does not 

route with a working price that is pegged to a 

dynamic reference price. If the designated reference 

price is higher (lower) than the limit price of a 

Pegged Order to buy (sell), the working price will 

be the limit price of the order. See Rule 7.31E(h). 

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–NYSECHX–2022–13 and 

should be submitted on or before July 

21, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13963 Filed 6–29–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95153; File No. SR– 

NYSEAMER–2022–15] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 2, To Amend Rule 

7.31–E(h)(3) Relating to Discretionary 

Pegged Orders 

June 24, 2022. 

I. Introduction 

On March 9, 2022, NYSE American 

LLC (‘‘NYSE American’’ or the 

‘‘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 American Rule 7.31– 

E(h)(3) to modify certain factors relevant 

to the quote instability calculation for 

Discretionary Pegged Orders. The 

proposed rule change was published for 

comment in the Federal Register on 

March 28, 2022.3 On May 6, 2022, 

pursuant to Section 19(b)(2) of the Act,4

the Commission designated a longer 

period within which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On May 13, 2022, the Exchange filed 

Amendment No. 1 to the proposed rule 

change,6 and on June 15, 2022, the 

Exchange filed Amendment No. 2 to the 

proposed rule change, which replaced 

and superseded in their entirety both 

the original filing and Amendment No. 

1. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change, as modified by 

Amendment No. 2, from interested 

persons and is approving the proposed 

rule change, as modified by Amendment 

No. 2, on an accelerated basis. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 7.31E(h)(3) to modify certain 

factors relevant to the quote instability 

calculation for Discretionary Pegged 

Orders. The Discretionary Pegged Order 

is a non-displayed order type that is 

pegged to same side of the PBBO.7 The 

price of a Discretionary Pegged Order 

automatically adjusts as the PBBO 

moves, and a Discretionary Pegged 

Order will exercise the least amount of 

discretion necessary to trade with 

contra-side interest. A Discretionary 

Pegged Order will not exercise 

discretion if the PBBO is determined to 

be unstable via a quote instability 

calculation that assesses the probability 

of a change to the PBB or PBO (as 

described in further detail below), 

thereby offering protection against 

unfavorable executions during periods 

of quote instability. 

Specifically, the Exchange proposes to 

amend Rule 7.31E(h)(3)(D)(i)(D)(1)(a), 

which sets forth the quote stability 

coefficients. Under Rule 

7.31E(h)(3)(D)(i)(D)(3), the Exchange 

may modify the quote stability 

coefficients at any time, subject to a 

filing of a proposed rule change. The 

Exchange proposes such changes in this 

rule filing. 

Discretionary Pegged Orders 

Rule 7.31E(h)(3) provides for 

Discretionary Pegged Orders, which are 

Pegged Orders 8 that may exercise price 

discretion from their working price to a 

discretionary price in order to trade 

with contra-side orders on the Exchange 

Book, except during periods of quote 

instability as defined in Rule 

7.31E(h)(3)(D). 

Rule 7.31E(h)(3)(D) provides that the 

Exchange uses a quote instability 

calculation to assess a security’s ‘‘quote 

instability factor,’’ or the probability of 

an imminent change to the current PBB 

to a lower price or PBO to a higher 

price. When quoting activity in a 

security meets predefined criteria and 

the quote instability factor calculated is 

greater than the Exchange’s defined 

‘‘quote instability threshold,’’ the 

Exchange treats the quote as unstable 

(‘‘quote instability’’ or a ‘‘crumbling 

quote’’). 

Rule 7.31E(h)(3)(D)(i) provides that 

the Exchange determines a quote to be 

unstable when, among other factors, the 

quote instability factor result from the 

quote stability calculation is greater 

than the quote instability threshold. To 

perform the quote stability calculation 

and determine the quote instability 


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39140 Federal Register / Vol. 87, No. 125 / Thursday, June 30, 2022 / Notices 

9The Exchange eliminated the Delay Mechanism, 

which added a delay of 350 microseconds of 

latency to specified order processing, in 2019. See 

Securities Exchange Act Release No. 87550 

(November 15, 2019), 84 FR 64359 (November 21, 

2019) (SR–NYSEAMER–2019–48) (Notice of Filing 

and Immediate Effectiveness of Proposed Rule 

Change to Amend Exchange Rules 1.1E and 7.29E 

to Eliminate the Delay Mechanism and Amend 

Exchange Rule 7.31E and Related Exchange Rules 

to Re-Introduce Previously-Approved Order Types 

and Modifiers). 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

factor, the Exchange employs a fixed 

formula utilizing the quote stability 

coefficients and quote stability variables 

set forth in Rule 

7.31E(h)(3)(D)(i)(D)(1)(a) and Rule 

7.31E(h)(3)(D)(i)(D)(1)(b), respectively. 

Proposed Rule Change 

The Exchange proposes to update the 

quote stability coefficients used in the 

quote instability calculation, which 

have not been modified since Rule 

7.31E(h)(3) was adopted. The proposed 

changes are intended to update the 

quote stability coefficients to be based 

on more current market data and 

activity on the Exchange, including to 

reflect the Exchange’s elimination of a 

delay mechanism that previously added 

latency to certain order processing (the 

‘‘Delay Mechanism’’).9

The Exchange reviewed NYSE 

American market data from randomly 

selected days in the fourth quarter of 

2021 to analyze the effectiveness of the 

quote stability coefficients in predicting 

changes to the PBBO. Specifically, the 

Exchange reviewed PBBO data, on a 

nanosecond level, for certain intervals 

throughout each randomly selected day 

to track changes to quotes on NYSE 

American and away markets. The 

Exchange used this data to generate and 

then test the effectiveness of the 

proposed quote stability coefficients, 

and based on its analysis, believes that 

modifying the quote stability 

coefficients would enable the Exchange 

to evaluate the quality of the PBBO 

more effectively. Specifically, the 

Exchange sampled market activity from 

randomly selected days in the fourth 

quarter of 2021 to simulate the 

performance of the quote instability 

calculation using both the current quote 

stability coefficients and the proposed 

quote stability coefficients. The 

Exchange observed that, in situations 

where the market price moved against 

the same side of the quote (i.e., the PBB 

fell or the PBO rose) 10 milliseconds 

later, the proposed quote stability 

coefficients, when incorporated into the 

quote instability calculation, correctly 

predicted the price change 

approximately 13% more often than the 

current quote stability coefficients were 

able to predict the price change (i.e., the 

current quote stability coefficients 

under-predicted when a price change 

would occur). 

Accordingly, the Exchange believes 

that the proposed quote stability 

coefficients would be more accurate 

than the current quote stability 

coefficients in identifying changes to the 

PBBO and thus more effective in 

protecting Discretionary Pegged Orders 

from unfavorable executions. The 

Exchange thus proposes to modify the 

quote stability coefficients set forth in 

Rule 7.31E(h)(3)(D)(i)(D)(1)(a)(i) through 

(v) as follows: 

Quote stability 

coefficient 

Current 

value 

Proposed 

value 

C0 ....................... ¥2.39515 ¥2.174901 

C1 ....................... ¥0.76504 ¥0.561555 

C2 ....................... 0.07599 0.077739 

C3 ....................... 0.38374 0.4860265 

C4 ....................... 0.14466 0.1627735 

The Exchange believes that its 

proposed modification of the quote 

stability coefficients, based on the 

market data analysis described above, 

would improve the accuracy of the fixed 

formula used to perform the quote 

instability calculation. Specifically, the 

Exchange believes that the proposed 

quote stability coefficients, which have 

been adjusted to reflect more recent 

activity on the Exchange (including the 

elimination of the Delay Mechanism), 

would improve the calibration of the 

quote instability calculation to activity 

on the Exchange, thereby enhancing the 

Exchange’s ability to predict whether 

there is quote instability and protect 

Discretionary Pegged Orders from 

exercising discretion when the PBBO is 

unstable. 

Because of the technology changes 

associated with this proposed rule 

change, the Exchange will announce the 

implementation date by Trader Update. 

Subject to approval of this proposed 

rule change, the Exchange anticipates 

that it will implement the proposed 

quote stability coefficients no later than 

in the third quarter of 2022. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,10 in general, and furthers the 

objectives of Section 6(b)(5),11 in 

particular, because it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. 

The Exchange believes that the 

proposed change would 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 

because it is designed to increase the 

effectiveness of the quote instability 

calculation used to determine whether a 

crumbling quote exists. As discussed 

above, the proposed change is based on 

the Exchange’s analysis of market data, 

which supports that the proposed quote 

stability coefficients would accurately 

identify changes to the PBBO more 

frequently than the current quote 

stability coefficients and, accordingly, 

that the proposed change would 

improve the accuracy of the Exchange’s 

quote instability calculation. 

Accordingly, the Exchange believes that 

the proposed change would remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, as well as 

protect investors and the public interest, 

by enhancing the Exchange’s protection 

of Discretionary Pegged Orders. 

Specifically, because the proposed 

quote stability coefficients were derived 

through an analysis of more recent 

market data and are calibrated to reflect 

current activity on the Exchange 

(including to account for the fact that 

the Exchange no longer operates with 

the Delay Mechanism), the Exchange 

believes that the proposed change 

would improve the effectiveness of the 

quote instability calculation in 

predicting periods of quote instability 

and thus enhance the extent to which 

Discretionary Pegged Orders would be 

protected from unfavorable executions. 

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 believes that the proposed 

change would promote competition by 

improving the accuracy of the quote 

instability calculation, thereby 

enhancing the protection of 

Discretionary Pegged Orders from 

unfavorable executions during periods 

of quote instability. 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 125 / Thursday, June 30, 2022 / Notices 39141 

12 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). 

13 15 U.S.C. 78f(b)(5). 

14 15 U.S.C. 78s(b)(2). 

15 Id. 

16 17 CFR 200.30–3(a)(12). 

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. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 2, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.12 In particular, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,13 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. 

As described above, the Exchange 

represents that the proposed coefficients 

were calibrated to reflect the Exchange’s 

current activity and market structure 

and are based on an analysis of recent 

market data and on backtesting that 

indicates that the proposed quote 

stability coefficients and resulting 

updated quote stability formula and 

would more accurately identify if the 

PBBO is ‘‘crumbling’’ compared to the 

current quote stability coefficients. The 

Commission finds that the proposed 

rule change is consistent with the 

protection of investors and the public 

interest because it will modify the 

coefficients of the quote instability 

formula in a way that is reasonably 

designed to improve the effectiveness of 

the quote instability calculation in 

predicting periods of quote instability 

and to thereby enhance the effectiveness 

of Discretionary Pegged Orders against 

unfavorable executions during periods 

of quote instability. 

For the reasons discussed above, the 

Commission finds that this proposed 

rule change, as modified by Amendment 

No. 2, is consistent with the 

requirements of the Act. 

IV. Solicitation of Comments on 

Amendment No. 2 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether Amendment No. 2 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 No. SR– 

NYSEAMER–2022–15 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 No. 

SR–NYSEAMER–2022–15. The file 

numbers 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 will also 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 publicly available. All 

submissions should refer to File No. 

SR–NYSEAMER–2022–15 and should 

be submitted on or before July 21, 2022. 

V. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 2 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment No. 2, prior to 

the thirtieth day after the date of 

publication of notice of the amended 

proposal in the Federal Register. In 

Amendment No. 2, the Exchange 

amended the proposal to: (1) provide 

additional explanation of and rationale 

for using Discretionary Pegged Orders; 

(2) provide additional explanation of the 

purpose of the proposed rule change; 

and (3) provide additional explanation 

regarding how the proposed quote 

instability coefficients were formulated 

and tested; and (4) state when the 

Exchange expects to implement the 

proposed change to the quote instability 

coefficients. Amendment No. 2 adds 

clarity and justification to the proposal 

and does not substantively alter the 

proposed rule change as described in 

the Notice. Accordingly, the 

Commission finds good cause, pursuant 

to Section 19(b)(2) of the Act,14 to 

approve the proposed rule change, as 

modified by Amendment No. 2, on an 

accelerated basis. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,15 that the 

proposed rule change (SR–NYSEAMER– 

2022–15), as modified by Amendment 

No. 2, be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–13961 Filed 6–29–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95150; File No. SR– 

NYSEArca–2022–31] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Designation of a 

Longer Period for Commission Action 

on a Proposed Rule Change To Amend 

Rule 6.64P–O 

June 24, 2022. 

On May 20, 2022, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 


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