Document ID: SEC-2018-0121-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-01-22T05:00Z

[Federal Register Volume 83, Number 14 (Monday, January 22, 2018)]
[Notices]
[Pages 3038-3043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00975]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82504; File No. SR-NYSEArca-2018-01]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-
E Relating to Mid-Point Liquidity Orders and the Minimum Trade Size 
Modifier and Rule 7.36-E To Add a Definition of ``Aggressing Order''

January 16, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 3, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7.31-E relating to Mid-Point 
Liquidity Orders and the Minimum Trade Size modifier and Rule 7.36-E to 
add a definition of ``Aggressing Order.'' 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.

[[Page 3039]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Mid-Point Liquidity (``MPL'') Orders and the Minimum Trade Size 
(``MTS'') modifier and Rule 7.36-E (Order Ranking and Display) to add a 
definition of ``Aggressing Order.'' [sic] For MPL Orders, the Exchange 
proposes to amend the price at which a marketable MPL Order would trade 
when there are resting orders priced better than the midpoint. The 
Exchange further proposes to amend functionality related to MPL-ALO 
Orders to describe how orders would trade if an MPL-ALO Order locks 
contra-side same-priced interest on the NYSE Arca Book. For MTS, the 
Exchange proposes to move all discussion relating to the MTS modifier 
to new sub-paragraph (i)(3) of Rule 7.31-E and in so doing, amend how 
resting orders with an MTS modifier would trade in specified 
circumstances.
Background
    As provided for in current Rule 7.31-E(d)(3)(C), on arrival, an MPL 
Order to buy (sell) that is eligible to trade will trade with resting 
orders to sell (buy) with a working price at or below (above) the 
midpoint of the PBBO (i.e., priced better than the midpoint of the 
PBBO). The rule further provides that resting MPL Orders to buy (sell) 
will trade at the midpoint of the PBBO against all incoming orders to 
sell (buy) priced at or below (above) the midpoint of the PBBO (i.e., 
priced better than the midpoint of the PBBO).
    Current Rule 7.31-E(d)(3)(F) provides that an MPL Order may be 
designated with an ALO Modifier (an ``MPL-ALO Order'') and that on 
arrival, an MPL-ALO Order to buy (sell) will trade with resting orders 
to sell (buy) with a working price below (above) the midpoint of the 
PBBO, but will not trade with resting orders to sell (buy) priced at 
the midpoint of the PBBO. The rule further provides that a resting MPL-
ALO Order to buy (sell) will trade with an arriving order to sell (buy) 
that is eligible to trade at the midpoint of the PBBO.
    The MTS modifier is currently available for Limit IOC Orders,\4\ 
MPL Orders,\5\ and Tracking Orders.\6\ As such, the MTS modifier is 
currently available only for orders that are not displayed and do not 
route. On arrival, both Limit IOC Orders and MPL Orders with an MTS 
modifier will trade against contra-side orders in the NYSE Arca Book 
that in the aggregate, meet the MTS.\7\ Once resting, MPL Orders and 
Tracking Orders with an MTS modifier function similarly: If a contra-
side order does not meet the MTS, the incoming order will not trade 
with and may trade through the resting order with the MTS modifier. In 
addition, both MPL Orders and Tracking Orders with an MTS modifier will 
be cancelled if such orders are traded in part or reduced in size and 
the remaining quantity is less than the MTS.
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    \4\ See Rule 7.31-E(b)(2)(A) (``A Limit IOC Order to buy (sell) 
may be designated with a minimum trade size (``MTS''), which will 
trade against sell (buy) orders in the NYSE Arca Book that in the 
aggregate, meets its MTS. On entry, a Limit IOC Order with an MTS 
must have a minimum of one round lot and will be rejected on arrival 
if the MTS is larger than the size of the Limit IOC Order. A Limit 
IOC Order with an MTS that cannot be immediately traded at its 
minimum size will be cancelled in its entirety.'')
    \5\ See Rule 7.31-E(d)(3)(D) (``An MPL Order may be designated 
with an MTS of a minimum of one round lot and will be rejected on 
arrival if the MTS is larger than the size of the MPL Order. On 
arrival, an MPL Order to buy (sell) with an MTS will trade with sell 
(buy) orders in the NYSE Arca Book that in the aggregate, meets its 
MTS. If the sell (buy) orders do not meet the MTS, the MPL Order to 
buy (sell) will not trade on arrival and will be ranked in the NYSE 
Arca Book. Once resting, an MPL Order to buy (sell) with an MTS will 
trade with an order to sell (buy) that meets the MTS and is priced 
at or below (above) the midpoint of the PBBO. If an order does not 
meet an MPL Order's MTS, the order will not trade with and may trade 
through such MPL Order. If an MPL Order with an MTS is traded in 
part or reduced in size and the remaining quantity of the order is 
less than the MTS, the MPL Order will be cancelled.'')
    \6\ See Rule 7.31-E(d)(4)(C) (``A Tracking Order may be 
designated with an MTS of one round lot or more. If an incoming 
order cannot meet the MTS, a Tracking Order with a later working 
time will trade ahead of the Tracking Order designated with an MTS 
with an earlier working time. If a Tracking Order with an MTS is 
traded in part or reduced in size and the remaining quantity is less 
than the MTS, the Tracking Order will be cancelled.'')
    \7\ Tracking Orders, including Tracking Orders with an MTS 
modifier, are passive orders that do not trade on arrival. See Rule 
7.31-E(d)(4)(A).
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Proposed Definition of ``Aggressing Order''
    The Exchange proposes to amend Rule 7.36-E to add a definition that 
would be used for purposes of Rule 7-E. Proposed Rule 7.36-E(a)(5) 
would define the term ``Aggressing Order'' to mean a buy (sell) order 
that is or becomes marketable against sell (buy) interest on the NYSE 
Arca Book.\8\ This term would therefore refer to orders that are 
marketable against other orders on the NYSE Arca Book, such as incoming 
orders and orders that have returned unexecuted after routing.
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    \8\ The term ``marketable'' is defined in Rule 1.1(y) to mean 
for a Limit Order, an order than [sic] can be immediately executed 
or routed.
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    This term would also be applicable to resting orders that become 
marketable due to one or more events. For the most part, resting orders 
will have already traded with contra-side orders against which they are 
marketable. However, there are circumstances when a resting order may 
become marketable, such as orders that become eligible to trade when a 
PBBO unlocks or uncrosses (e.g., MPL and Pegged Orders) or orders that 
have a trading restriction at specified prices (e.g., as discussed in 
greater detail below, MPL-ALO Orders or orders with an MTS Modifier). 
To maximize the potential for orders to trade, the Exchange continually 
evaluates whether resting orders may become marketable. Events that 
could trigger a resting order to become marketable include updates to 
the working price of such order, updates to the PBBO or NBBO, changes 
to other orders on the NYSE Arca Book, or processing of inbound 
messages (e.g., an update to Price Bands under the Regulation NMS Plan 
to Address Extraordinary Market Volatility). To address such 
circumstances, the Exchange proposes to include in proposed Rule 7.36-
E(a)(5) that a resting order may become an Aggressing Order if its 
working price changes, if the PBBO or NBBO is updated, because of 
changes to other orders on the NYSE Arca Book, or when processing 
inbound messages.
    The order that becomes the Aggressing Order is the liquidity-taking 
order. Generally, if resting orders on both sides are determined to be 
an Aggressing Order, e.g., a locked PBBO becomes unlocked and as a 
result, MPL Orders are repriced, the later-arriving order will be the 
liquidity-taking order.\9\ However, if the evaluation results in only 
one side becoming an Aggressing Order, e.g., an order with an MTS 
Modifier becomes eligible to trade and the contra-side order(s) have no 
working price changes, the order with the MTS Modifier would become the 
liquidity-taking Aggressing Order. As described below, the Exchange 
proposes to use the term ``Aggressing Order'' in the rule text relating 
to the MTS Modifier and the MPL-ALO Order. Because an Aggressing Order 
becomes a liquidity taker, such term could be applicable to other 
circumstances. For example, an order with a Non-Display Remove Modifier 
that trades as a liquidity taker would also be considered an Aggressing 
Order. However, at this time, the Exchange does not propose to amend 
its rules to use the term ``Aggressing Order'' because the rule already 
specifies which order is the liquidity taker.
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    \9\ See, e.g., Rule 7.31-E(d)(3)(B).

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[[Page 3040]]

Proposed Amendments Relating to MPL and MPL-ALO Orders
    The Exchange proposes to amend the first sentence of current Rule 
7.31-E(d)(3)(C) to make this text applicable to any marketable MPL 
Order, and not just an arriving MPL Order. To effect this change, the 
Exchange proposes to use the term ``Aggressing Order'' and replace the 
phrase ``[o]n arrival, an MPL Order to buy (sell) that is eligible to 
trade'' with the phrase, ``[a]n Aggressing MPL Order to buy (sell).''
    The Exchange also proposes to amend the first sentence of current 
Rule 7.31-E(d)(3)(C) to describe at what price an Aggressing MPL Order 
would trade with contra-side resting orders that are priced better than 
the midpoint. The rule currently provides that an arriving MPL Order to 
buy (sell) would trade with resting orders to sell (buy) with a working 
price at or below (above) the midpoint of the PBBO. The Exchange 
proposes to specify that when an Aggressing MPL Order trades with 
resting orders priced better than the midpoint, it will trade at the 
working price of the resting orders, which is current functionality. 
For example, if the PBB is 10.10 and the midpoint is 10.13, and there 
are non-displayed sell orders of 100 shares with working prices of 
10.11 and 10.12, an Aggressing MPL Order to buy with a limit of 10.13 
for 200 shares would trade with such non-displayed sell orders at 10.11 
and 10.12, respectively. The Exchange believes that this proposed 
amendment would promote transparency in Exchange rules regarding at 
what price an Aggressing MPL Order would trade.
    By using the term ``Aggressing Order,'' this rule would be 
applicable to a resting MPL Order that becomes marketable, such as 
after a PBBO unlocks or uncrosses. In the above example, if the MPL 
Order to buy is ineligible to trade because of a crossed PBBO, and 
while the PBBO is crossed, the Exchange receives the two non-displayed 
sell orders, when the PBBO uncrosses and the new midpoint is 10.13, the 
resting MPL Order would become an Aggressing Order and would trade with 
the non-displayed sell orders at 10.11 and 10.12, respectively.
    The Exchange also proposes to amend the second sentence of Rule 
7.31-E(d)(3)(C) to replace the term ``incoming orders'' with the term 
``Aggressing Orders.'' This proposed rule change would provide greater 
specificity that any contra-side order that is an Aggressing Order, as 
defined in proposed Rule 7.36-E(a)(5), would trade with a resting MPL 
Order at the midpoint of the PBBO.
    The Exchange also proposes to amend the rule governing MPL-ALO 
Orders to make similar changes. Currently, MPL-ALO Orders are described 
in Rule 7.31-E(d)(3)(F). Because of changes described below relating to 
MTS, as proposed, MPL-ALO Orders would be described in Rule 7.31-
E(d)(3)(E).
    In amending proposed Rule 7.31-E(d)(3)(E), the Exchange proposes to 
break the current rule text into three sub-paragraphs. The first 
sentence of current Rule 7.31-E(d)(3)(F), which provides that an MPL 
Order may be designated with an ALO Modifier, would follow Rule 7.31-
E(d)(3)(E). The current second sentence of Rule 7.31-E(d)(3)(F) would 
be set forth in proposed Rule 7.31-E(d)(3)(E)(i). The Exchange proposes 
to amend this rule in the same manner that it is proposing to amend the 
first sentence of Rule 7.31-E(d)(3)(C), described above. In addition, 
the Exchange proposes a non-substantive, clarifying amendment to add 
that an arriving MPL-ALO Order would trade with a contra-side same-
priced order that has been designated with a Non-Display Remove 
Modifier, which is current functionality. Accordingly, proposed Rule 
7.31-E(d)(3)(E)(i) would provide that an Aggressing MPL-ALO Order to 
buy (sell) will trade with resting orders to sell (buy) with a working 
price below (above) the midpoint of the PBBO at the working price of 
the resting orders, but will not trade with resting orders to sell 
(buy) priced at the midpoint of the PBBO unless such resting order is 
designated with a Non-Display Remove Modifier pursuant to paragraph 
(d)(3)(F) of this Rule (proposed new text italicized).\10\
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    \10\ A resting MPL-ALO Order that becomes an Aggressing Order 
would trade consistent with proposed Rule 7.31-E(d)(3)(E)(i) and 
therefore would trade with contra-side orders priced better than the 
midpoint, but would not trade at the midpoint unless such order had 
a Non-Display Remove Modifier.
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    Because an Aggressing MPL-ALO Order does not trade with resting 
contra-side orders priced at the midpoint of the PBBO (unless the 
resting order has the Non-Display Remove Modifier), the Exchange 
proposes to specify the circumstances of when an MPL-ALO Order would be 
eligible to trade if it locks contra-side orders, which would differ 
depending on whether the contra-side order is displayed.\11\ The first 
sentence of Proposed Rule 7.31-E(d)(3)(E)(ii) would provide that if an 
MPL-ALO Order to buy (sell) cannot trade with a same-priced resting 
order to sell (buy), a subsequently arriving order to sell (buy) 
eligible to trade at the midpoint would trade ahead of a resting order 
to sell (buy) that is not displayed at that price. Accordingly, if an 
MPL-ALO Order locks a non-displayed order, such resting MPL-ALO Order 
can trade at that price with a subsequent order.
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    \11\ A displayed odd-lot order that is not included in the 
calculation of the PBBO could be at the same price as an MPL Order.
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    By contrast, the second sentence of proposed Rule 7.31-
E(d)(3)(E)(ii) would provide that if such resting order to sell (buy) 
is displayed, the MPL-ALO Order to buy (sell) would not be eligible to 
trade at that price. Accordingly, if an MPL-ALO Order locks a displayed 
order, such resting MPL-ALO Order would not be eligible to trade at 
that price with any interest. The Exchange proposes to treat displayed 
orders locked by an MPL-ALO Order differently to avoid having non-
displayed orders trade ahead of a same-priced, same-side displayed 
order.
Proposed Amendments Relating to MTS
    The Exchange proposes to consolidate all references to MTS 
modifiers in Rule 7.31-E in proposed Rule 7.31-E(i)(3) as a new 
additional order instruction and modifier to be referred to as the 
``Minimum Trade Size (`MTS') Modifier.'' As proposed, Rule 7.31-E(i)(3) 
would provide that a Limit IOC Order, MPL Order, or Tracking Order may 
be designated with an MTS Modifier, which is existing functionality. 
Because this proposed rule would specify which orders would be eligible 
for the MTS Modifier, the Exchange proposes to delete existing rule 
text specifying which orders are and are not eligible for an MTS 
Modifier.\12\ Proposed Rule 7.31-E(i)(3) is based in part on NYSE 
American Rule 7.31E(i)(3).
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    \12\ The Exchange proposes to delete references to MTS in Rules 
7.31-E(b)(2)(A), 7.31-E(b)(2)(B), 7.31-E(d)(3)(D), 7.31-E(d)(4)(C), 
7.31-E(e)(3)(B), and 7.46-E(f)(1)(A). As noted above, because 
current Rule 7.31-E(d)(3)(D) would be deleted in its entirety, the 
remaining sub-paragraphs of Rule 7.31-E(d)(3) would be renumbered 
accordingly. In addition, current Rule 7.31-E(d)(4)(C) would be 
deleted in its entirety.
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    Proposed Rule 7.31-E(i)(3)(A) would provide that an MTS must be a 
minimum of a round lot and that an order with an MTS Modifier would be 
rejected if the MTS is less than a round lot or if the MTS is larger 
than the size of the order. This proposed rule text is based on the 
next-to-last sentence of current Rule 7.31-E(b)(2)(A) and the first 
sentence of current Rule 7.31-E(d)(3)(D), and in part on the first 
sentence of current Rule 7.31-E(d)(4)(C), with non-substantive 
differences to use common terminology when applying

[[Page 3041]]

this requirement to all of the order types eligible for an MTS 
Modifier.\13\ Proposed Rule 7.31-E(i)(3)(A) is based on NYSE American 
Rule 7.31E(i)(3)(A) without any differences.
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    \13\ Nasdaq also requires that its Minimum Quantity Order also 
have a size of at least a round lot. See Nasdaq Rule 4703(e).
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    Proposed Rule 7.31-E(i)(3)(B) would provide that an order to buy 
(sell) with an MTS Modifier would trade with sell (buy) orders in the 
NYSE Arca Book that in the aggregate meet such order's MTS. This 
proposed rule text is based on the third sentence of Rule 7.31-
E(b)(2)(A) and the second sentence of Rule 7.31-E(d)(3)(D) with non-
substantive differences to use common terminology when applying this 
requirement to all of the order types eligible for an MTS Modifier.
    Because Tracking Orders do not trade on arrival, this rule text 
would be applicable only to MPL Orders and Limit IOC Orders with an MTS 
Modifier. Proposed Rule 7.31-E(i)(3)(B) is based on NYSE American Rule 
7.31E(i)(3)(B)(i) without any differences.
    Proposed Rule 7.31-E(i)(3)(C) would provide that an order with an 
MTS Modifier that is designated Day and cannot be satisfied on arrival 
would not trade and would be ranked in the NYSE Arca Book. This 
proposed rule text is based on the third sentence of Rule 7.31-
E(d)(3)(D) with non-substantive differences to reference orders 
designated Day, i.e., MPL Orders and MPL-ALO Orders. The first sentence 
of Rule 7.31-E(i)(3)(C) is based on NYSE American Rule 7.31E(i)(3)(C) 
without any differences.
    The Exchange further proposes to describe new functionality 
relating to when an order with an MTS Modifier that is designated Day 
would not be eligible to trade. In short, if a later-arriving contra-
side order can meet the MTS of a resting order with an MTS Modifier, 
the two orders would trade unless the execution would be inconsistent 
with either intra-market price priority or would result in a non-
displayed order trading ahead of a same-side, same-priced displayed 
order.\14\ Therefore, as proposed, the Exchange would not permit an 
order with an MTS Modifier that crosses other displayed or non-
displayed orders on the NYSE Arca Book to trade at prices that are 
worse than the price of such contra-side orders. As further proposed, 
the Exchange would not permit a resting order with an MTS Modifier to 
trade at a price equal to a displayed contra-side order.\15\
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    \14\ Rule 7.36-E(c) provides that the Exchange ranks all non-
marketable orders on the NYSE Arca Book according to price--time 
priority.
    \15\ At this time, the only resting orders with an MTS on the 
Exchange subject to this requirement would be MPL Orders. In such 
case, a contra-side order that is displayed and between the PBBO 
would be an odd-lot sized order; a round-lot sized displayed order 
would be reflected in the PBBO.
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    To reflect these changes, the second sentence of Rule 7.31-
E(i)(3)(C) would provide that when a buy (sell) order with an MTS 
Modifier that is designated Day is ranked in the NYSE Arca Book, it 
would not be eligible to trade:
    (i) At a price equal to or above (below) any sell (buy) orders that 
are displayed and that have a working price equal to or below (above) 
the working price of such order with an MTS Modifier, or
    (ii) at a price above (below) any sell (buy) orders that are not 
displayed and that have a working price below (above) the working price 
of such order with an MTS Modifier.
    For example,
     If the PBBO is 10.10 x 10.16, on the NYSE Arca Book there 
is a sell order (``Order A'') ranked Priority 3--Non-Display Orders for 
50 shares at 10.12 and a sell order (``Order B'') ranked Priority 2--
Display Orders for 25 shares at 10.11, and the Exchange receives a buy 
MPL Order (``Order C'') with an MTS Modifier for 100 shares with a 
10.16 limit, because the MTS cannot be met, Order C will not trade and 
will be ranked in the NYSE Arca Book at the midpoint of 10.13. At this 
point, the Exchange would have a non-displayed buy order crossing both 
non-displayed and displayed sell orders on the NYSE Arca Book. If the 
Exchange then receives a non-displayed sell order (``Order D'') for 100 
shares at 10.11, even though Order D would be marketable against Order 
C, it would not trade because a trade at 10.13 would be above the price 
of resting sell orders.\16\ Order D would be added to the NYSE Arca 
Book at 10.11.
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    \16\ Pursuant to Rule 7.31-E(d)(3)(C), an Aggressing Order will 
trade with a resting MPL Order at the midpoint of the PBBO.
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     If next, the Exchange receives a buy order (``Order E'') 
to buy 25 shares at 10.11, it would trade with Order B. As discussed 
above, this execution would trigger the Exchange to evaluate whether 
Order C becomes marketable against contra-side orders.\17\ In this 
scenario, because Order B has now executed, Order C is no longer 
restricted from trading at 10.11. Because Order C's restriction has 
been lifted and Order D does not have a working price change, Order C 
would become an Aggressing Order and trade as the liquidity taker with 
Order D at 10.11.
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    \17\ See discussion infra regarding the second sentence to 
proposed Rule 7.36-E(a)(5).
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    Proposed Rule 7.31-E(i)(3)(D) would provide that an order with an 
MTS Modifier that is designated IOC and cannot be immediately satisfied 
would be cancelled in its entirety. This proposed rule text is based on 
the last sentence of Rule 7.31-E(b)(2)(A), with non-substantive 
differences to specify that this functionality would be applicable to 
any orders designated IOC that have an MTS Modifier, i.e., Limit IOC 
Orders and MPL-IOC Orders. Proposed Rule 7.31-E(i)(3)(D) is based on 
NYSE American Rule 7.31E(i)(3)(D) without any differences.
    Proposed Rule 7.31-E(i)(3)(E) would provide that a resting order to 
buy (sell) with an MTS Modifier would trade with individual sell (buy) 
orders that each meets the MTS.\18\ This proposed rule text is based on 
the fourth sentence of Rule 7.31-E(d)(3)(D) with a non-substantive 
difference to use the same terminology as proposed Rule 7.31-E(i)(3)(B) 
because a resting order with an MTS Modifier only trades if contra-side 
individual orders each meets such order's MTS. The Exchange proposes 
non-substantive differences to use common terminology when applying 
this requirement to all of the order types eligible for an MTS 
Modifier. Proposed Rule 7.31-E(i)(3)(E) is based on NYSE American Rule 
7.31E(i)(3)(E) without any differences.
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    \18\ A resting order with an MTS Modifier that becomes an 
Aggressing Order would trade consistent with proposed Rule 7.31-
E(i)(3)(E) and therefore would trade with individual orders that 
each meet the MTS.
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    Proposed Rules 7.31-E(i)(3)(E)(i)-(ii) would set forth additional 
requirements for how a resting order with an MTS Modifier would trade. 
Proposed Rule 7.31-E(i)(3)(E)(i) would provide that if an Aggressing 
Order to sell (buy) does not meet the MTS of the resting order to buy 
(sell) with an MTS Modifier, that Aggressing Order would not trade with 
and may trade through such order with an MTS Modifier. This proposed 
rule text is based on the fifth sentence of current Rule 7.31-
E(d)(3)(D) and the second sentence of current Rule 7.31-E(d)(4)(C) with 
non-substantive differences to use common terminology when applying 
this requirement to all of the order types eligible for an MTS 
Modifier. Proposed Rule 7.31-E(i)(3)(E)(i) is based on NYSE American 
Rule 7.31E(i)(3)(E)(i) with a non-substantive difference to use the 
term ``Aggressing Order.''
    Proposed Rule 7.31-E(i)(3)(E)(ii) would provide that if a resting 
non-displayed sell (buy) order did not meet the MTS of a same-priced 
resting order

[[Page 3042]]

to buy (sell) with an MTS Modifier, a subsequently arriving sell (buy) 
order that meets the MTS would trade ahead of such resting non-
displayed sell (buy) order at that price. This proposed rule text is 
based in part on the second sentence of Rule 7.31-E(d)(4)(C) with non-
substantive differences to use common terminology when applying this 
requirement to all of the order types eligible for an MTS Modifier. 
This proposed rule text is also based in part on NYSE American Rule 
7.31E(i)(3)(E)(ii).
    However, the Exchange proposes a difference from current text and 
the NYSE American Rule to add that the subsequently arriving order 
could trade ahead of a resting non-displayed order at that price, e.g., 
at the internal locking price. This proposed behavior is consistent 
with the proposed amendment to MPL-ALO Orders, described above in 
proposed Rule 7.31-E(d)(3)(E)(ii). In addition, as discussed above, 
pursuant to proposed Rule 7.31-E(i)(3)(C)(i), if an order with an MTS 
Modifier is locked by a displayed order, the resting order with an MTS 
Modifier would not be eligible to trade at that price. In such case, 
the subsequently arriving order would not trade with the order with an 
MTS Modifier.
    Proposed Rule 7.31-E(i)(3)(F) would provide that a resting order 
with an MTS Modifier would be cancelled if it is traded in part or 
reduced in size and the remaining quantity is less than such order's 
MTS. This proposed rule text is based on the last sentence of Rule 
7.31-E(d)(3)(D) and the last sentence of Rule 7.31-E(d)(4)(C) with non-
substantive differences to use common terminology when applying this 
requirement to all of the order types eligible for an MTS Modifier. 
Proposed Rule 7.31-E(i)(3)(F) is based on NYSE American Rule 
7.31E(i)(3)(F) without any differences
    Because of the technology changes associated with these proposed 
rule change, the Exchange will announce the implementation date of this 
proposed rule change by Trader Update. The Exchange anticipates that 
the implementation date will be in the first quarter of 2018.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\19\ in general, and 
furthers the objectives of Section 6(b)(5),\20\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed definition of ``Aggressing 
Order'' in Rule 7.36-E would remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, protect investors and the public interest because it would 
provide for a definition in Exchange rules that describes orders that 
are or become marketable. The Exchange believes that the proposed 
definition would promote transparency in Exchange rules by providing 
detail regarding circumstances when a resting order may become 
marketable, and thus would be an Aggressing Order. The Exchange further 
believes that use of such definition would promote clarity in Exchange 
rules, particularly in the context of the amendments to MPL Orders and 
orders with an MTS Modifier.
    The Exchange believes that the proposed amendments to Rule 7.31-
E(d)(3)(C) and (E) to use the term ``Aggressing Order'' and to describe 
the prices at which an Aggressing MPL Order would trade would remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because it would promote clarity and transparency in 
Exchange rules regarding the behavior of marketable MPL and MPL-ALO 
Orders. In particular, the rule would provide greater specificity 
regarding how a resting MPL Order that becomes an Aggressing Order 
would trade.
    The Exchange believes that the proposed amendments to Rule 7.31-
E(d)(3)(E) regarding when a resting MPL-ALO Order that locks contra-
side, same-priced orders would be eligible to trade would remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because it would describe circumstances when a 
subsequently arriving order could trade with the MPL-ALO Order. The 
proposed rule change would protect displayed orders by not allowing a 
subsequently arriving order to trade ahead of a same-priced, same-side 
displayed order.
    The Exchange believes that the proposed amendment to describe the 
existing MTS Modifier in proposed Rule 7.31-E(i)(3) would remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because it would promote transparency in Exchange rules 
because MTS Modifiers for different order types operate in the same 
manner. The Exchange believes that by consolidating such references in 
a single location in Rule 7.31-E, the rule will be easier for members, 
the Commission, and the public to navigate.
    Finally, the Exchange believes that the proposal regarding when a 
resting order with an MTS Modifier would be eligible to trade would 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, protect investors 
and the public interest, because the proposed rule change would ensure 
that there would not be an execution of a resting order with an MTS 
Modifier that either would be inconsistent with intra-market price 
priority or would result in a non-displayed order trading ahead of a 
same-side, same-priced displayed order. This proposed rule change would 
therefore promote just and equitable principles of trade by ensuring 
that displayed interest does not get traded through by a non-displayed 
order.

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 rule change is not designed to address any competitive 
issues, but rather to add further clarity to Exchange rules by defining 
the term ``Aggressing Order,'' using that term in connection with MPL 
Orders, and consolidating references to MTS Modifiers in a single 
location in Exchange rules. In addition, the rule is designed to ensure 
that resting orders with trading restrictions, such as MPL-ALO Orders 
and resting orders with an MTS Modifier, would not trade through 
displayed orders or violate intra-market price priority.

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.

[[Page 3043]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2018-01 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-NYSEArca-2018-01. 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-NYSEArca-2018-01 and should be submitted 
on or before February 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00975 Filed 1-19-18; 8:45 am]
 BILLING CODE 8011-01-P