Document ID: SEC-2023-0890-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-08-16T04:00Z

[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55791-55793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17604]

[[Page 55791]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98113; File No. SR-NYSEARCA-2023-54]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Modify Rule 
6.62P-O

August 11, 2023.
    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 August 3, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 modify Rule 6.62P-O (Orders and Modifiers) 
regarding the handling of certain Market Orders subject to Trading 
Collars and conforming changes to Rule 6.64P-O (Auction Process). 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 modify Rule 6.62P-O (Orders and Modifiers) 
regarding the handling of certain Market Orders subject to Trading 
Collars and conforming changes to Rule 6.64P-O (Auction Process).
    The Exchange employs Trading Collar functionality that is designed 
to provide OTP Holders and OTP Firms (collectively, ``OTPs'') price 
protection for Market Orders and Limit Orders traded on the 
Exchange.\4\ In particular, the Trading Collar applies a static ceiling 
price (for a buy order) or floor price (for a sell order) at which such 
order may be traded or routed that is determined at the time of entry 
(or after a series opens or reopens) and which is applicable until the 
order is traded or cancelled.\5\ As described below, the Exchange 
proposes to modify the application of Trading Collars to Market Orders.
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    \4\ See Rules 6.62P-O(a)(1) (defining Market Order), (a)(2) 
(defining Limit Order).
    \5\ See Rule 6.62P-O(a)(4)(A)-(C) (describing Trading Collar 
functionality, including how such Collars are assigned and 
calculated).
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    Currently, Rule 6.62P-O(a)(4)(D) describes how the Trading Collar 
is applied and provides that if an order to buy (sell) would trade or 
route above (below) the Trading Collar or would have its working price 
repriced to a Trading Collar that is below (above) its limit price, the 
order will be added to the Consolidated Book at the Trading Collar for 
500 milliseconds and if not traded within that period, will be 
cancelled (each a ``collared'' order).\6\ Further, once the 500-
millisecond timer begins for a collared order (the ``collar timer''), 
such order will be cancelled at the end of the timer even if it 
repriced or was routed to an Away Market during that period, in which 
case any portion of the collared order that is returned unexecuted is 
cancelled.
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    \6\ See Rule 6.76P-O(a)(3) (providing that the ``working price'' 
of an order or quote means the price at which it is eligible to 
trade at any given time, which may be different from the limit price 
or display price of the order or quote). The ``display price'' means 
the price at which an order or quote ranked Priority 2--Display 
Orders or Market Order is displayed, which may be different from the 
limit price or working price of the order. See Rule 6.76P-O(a)(1).
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    As proposed, Market Orders that are collared would no longer be 
held for the duration of the collar time (i.e., for 500 milliseconds). 
Instead, as proposed, if a Market Order to buy (sell) would trade or 
route above (below) the Trading Collar, such Market Orders would be 
cancelled.\7\ Thus, a collared Market Order that can trade within the 
Trading Collar will trade on the Exchange or route. Collared Market 
Orders will no longer be held and displayed on the Consolidated Book 
for the duration of the collar timer.
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    \7\ See proposed Rule 6.62P-O(a)(4)(D)(i). The Exchange notes 
that, consistent with current order handling, once an order has been 
cancelled, the Exchange will likewise cancel any unexecuted portion 
of the cancelled order that returns to the Exchange after having 
been routed away.
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    The Exchange is not proposing to modify the handling of Limit 
Orders and such collared orders would continue to be subject to the 
above-described handling, per Rule 6.62P-O(a)(4)(D)(i).\8\ The current 
rule treats collared Market Orders and collared Limit Orders the same 
whereas the Exchange proposes to alter only the handling of collared 
Market Orders. Unlike Market Orders, Limit Orders include a specific 
price at which an OTP is willing to trade (i.e., the limit price). 
Market Orders do not include a price and tend to be utilized to access 
liquidity. As such, the Exchange believes that the proposal to cancel 
back those Market Orders that have been collared would benefit OTPs 
because it would enable the order sender to reevaluate, on a timelier 
basis how best to handle this trading interest.
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    \8\ See proposed Rule 6.62P-O(a)(4)(D)(i).
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    The Exchange notes that it proposes to make this change in response 
to OTPs' preference to have Market Orders for which they are agent 
immediately cancel back for handling--rather than have such collared 
Market Orders first post at aggressive prices for 500 milliseconds.
Conforming Changes
    Consistent with the proposed change to the handling of collared 
Market Orders--i.e., that such orders will not be held and displayed on 
the Consolidated Book for the duration of the collar timer, the 
Exchange proposes the following conforming changes.
     First, the Exchange proposes to modify Rule 6.62P-
O(a)(1)(A)(ii), which provides, in relevant part, that ``[a] Market 
Order to sell will be cancelled if it was assigned a Trading Collar, 
routed, and when it returns unexecuted, it has no resting portion to 
join and there is no NBB, regardless of the price of the NBO.'' The 
Exchange proposes to modify this provision to instead provide that 
``[a] Market Order to sell that was assigned a Trading Collar, routed, 
and returned unexecuted, will be cancelled if there is no NBB, 
regardless of the price of the NBO.\9\
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    \9\ See proposed Rule 6.62P-O(a)(1)(A)(ii). See also Rule 6.62P-
O(a)(1)(A)(i)-(iv) (setting forth pricing validations that a Market 
Order that arrives during continuous trading or that was routed, 
returns unexecuted, and has no resting quantity to join must pass to 
prevent being rejected or cancelled, as applicable).
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     Next, the Exchange proposes to modify Rule 6.62P-
O(a)(1)(B), which

[[Page 55792]]

provides, in relevant part, that ``[a]fter trading or routing, or both, 
the Market Order will be displayed at the Trading Collar, subject to 
paragraph (a)(1)(C),'' which provision provides that a Market Order 
will be cancelled before being displayed if there are no remaining 
contra-side Market Maker quotes on the Exchange or contra-side 
ABBO.\10\ Proposed Rule 6.62P-O(a)(1)(B) would provide that ``[a]fter 
trading or routing, or both, the Market Order will be cancelled.''
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    \10\ See Rule 6.62P-O(a)(1)(C).
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     In addition, the Exchange also proposes to delete as 
inapplicable Rule 6.62P-O(a)(1)(C).\11\ Consistent with this deletion, 
the Exchange proposes to modify Rule 6.64P-O(f)(3)(A)(vi), which cross 
references the to-be-deleted provision, and to provide that 
``[u]nexecuted Market Orders will be cancelled.'' \12\
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    \11\ See Rule 6.62P-O(a)(1)(C) (providing that a Market Order 
will be cancelled before being displayed if there are no remaining 
contra-side Market Maker quotes on the Exchange or contra-side 
ABBO).
    \12\ Compare proposed Rule 6.64P-O(f)(3)(A)(vi) with Rule 6.64P-
O(f)(3)(A)(vi) (providing that Market Orders received during a pre-
open state will be subject to the validation specified in Rule 
6.62P-O(a)(1)(C).
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     Finally, the Exchange also proposes to delete as 
inapplicable Rule 6.62P-O(a)(1)(D).\13\
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    \13\ See Rule 6.62P-O(a)(1)(D) (providing that after being 
displayed at its Trading Collar, a Market Order will be cancelled if 
there ceases to be a contra-side NBBO). The Exchange proposes the 
non-substantive change to re-number current paragraph (a)(1)(E) of 
the Rule to new paragraph (a)(1)(C) to account for the 
aforementioned deletions.
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    The Exchange believes that the proposed functionality would provide 
greater determinism for Market Orders that have been collared, which 
would provide OTPs that send Market Orders as agent greater control 
over, and more certainty regarding, the Exchange's handling of such 
orders.
Implementation
    The Exchange will announce by Trader Update the implementation date 
of the proposed rule change, which implementation will be no later than 
90 days after the effectiveness of this rule change.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\14\ in general, and 
furthers the objectives of section 6(b)(5),\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed change to modify the handling of 
collared Market Orders, which is being made in response to OTPs' 
preference to have Market Orders for which they are agent immediately 
cancel back for handling--rather than have such collared Market Orders 
first post at aggressive prices for 500 milliseconds, would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed handling would refine 
existing functionality in a manner that would enable OTPs to have more 
certainty regarding, and more control over, the handling of their 
Market Orders.\16\
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    \16\ As discussed supra, the proposal would alter the handling 
of collared Market Orders (but not collared Limit Orders) because 
Market Orders (unlike Limit Orders) do not include a price and tend 
to be utilized to access liquidity. Thus, the proposal to cancel 
back collared Market Orders would benefit OTPs because it would 
enable the order sender to reevaluate, on a timelier basis how best 
to handle this trading interest.
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    The proposed conforming changes would remove impediments to, and 
perfect the mechanism of, a free and open market and a national market 
system and, in general, would protect investors and the public interest 
because such changes would add clarity, transparency, and internal 
consistency to Exchange rules.

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 is proposing a 
market enhancement that would provide OTPs with greater control over, 
and more certainty regarding, collared Market Orders that such OTPs 
have submitted as agent. The proposal would apply to all similarly-
situated OTPs and would not impose a competitive burden on any 
participant. The Exchange does not believe that the proposed change to 
the existing Trading Collar functionality would impose a burden on 
competing options exchanges. Rather, the availability of the modified 
Trading Collar functionality may foster more competition. Specifically, 
the Exchange notes that it operates in a highly competitive market in 
which market participants can readily favor competing venues. When an 
exchange offers enhanced functionality that distinguishes it from the 
competition and participants find it useful, it has been the Exchange's 
experience that competing exchanges will move to adopt similar 
functionality. Thus, the Exchange believes that this type of 
competition amongst exchanges is beneficial to the marketplace as it 
can result in enhanced processes, functionality, and technologies.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the foregoing proposed rule change does not: (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
section 19(b)(3)(A)(iii) of the Act \19\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\20\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may take effect immediately. The

[[Page 55793]]

Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest because it 
will enable the Exchange to provide, without delay, more refined 
handling of collared Market Orders. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\23\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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 under 
section 19(b)(2)(B) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2023-54 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-2023-54. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEARCA-2023-54 and should 
be submitted on or before September 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-17604 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P