Document ID: SEC-2017-0535-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2017-04-04T04:00Z

[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Notices]
[Pages 16458-16459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06567]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80334; File No. SR-NYSE-2017-03]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change Amending Rule 98

March 29, 2017.

I. Introduction

    On January 26, 2017, New York Stock Exchange LLC (``Exchange'' or 
``NYSE'') 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 Rule 98. The proposed rule change 
was published for comment in the Federal Register on February 16, 
2017.\3\ The Commission received no comments on the proposed rule 
change. The Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80019 (Feb. 10, 
2017), 82 FR 10942 (Feb. 16, 2017).
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II. Description of the Proposal

    The Exchange proposes to amend Rule 98 to provide that, while on 
the Trading Floor, DMMs must trade DMM securities at their assigned 
stock trading post location and may not trade any security that is a 
related product of their DMM securities.\4\
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    \4\ As defined in Rule 2(i), the term ``DMM'' means an 
individual member, officer, partner, employee or associated person 
of a Designated Market Maker Unit who is approved by the Exchange to 
act in the capacity of a DMM. The term ``DMM securities'' is defined 
in Rule 98(a)(2) to mean any securities allocated to the DMM unit 
pursuant to Rule 103B or other applicable rules. The term ``related 
products'' is defined in Rule 98(a)(7) to mean any derivative 
instrument that is related to a DMM security, including options, 
warrants, hybrid securities, single-stock futures, security-based 
swap agreement, a forward contract, or any other instrument that is 
exercisable into or whose price is based upon or derived from a 
security traded at the Exchange.
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A. Background

    Rule 98 governs the operation of a DMM unit and paragraph (c)(3) of 
that rule specifies restrictions on trading for member organizations 
operating a DMM unit. More specifically, Rule 98(c)(3)(B) provides 
that, while on the Trading Floor of the Exchange,\5\ employees of the 
DMM unit:
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    \5\ As defined in Rule 6A, the term ``Trading Floor'' means the 
restricted-access physical areas designated by the Exchange for the 
trading of securities, commonly known as the ``Main Room'' and the 
``Buttonwood Room'' and does not include (i) the areas in the 
``Buttonwood Room'' designated by the Exchange where NYSE Amex-
listed options are traded, which, for the purposes of the Exchange's 
Rules, is referred to as the ``NYSE Amex Options Trading Floor'' or 
(ii) the physical area within fully enclosed telephone booths 
located in 18 Broad Street at the Southeast wall of the Trading 
Floor.
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    (i) Except as provided for in Rule 36.30,\6\ may trade only DMM 
securities only on or through the systems and facilities of the 
Exchange as permitted by Exchange rules.
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    \6\ Rule 36.30 permits a DMM unit that is registered in an 
Investment Company Unit (as defined in Section 703.16 of the Listed 
Company Manual) or a Trust Issued Receipt (as that term is defined 
in Rule 1200) to use a telephone connection or order entry terminal 
at the DMM unit's post to enter proprietary orders in the Unit or 
receipt in another market center, in a Component Security of such a 
Unit or receipt, or an options or futures contract related to such 
Unit or receipt, and may use the post telephone to obtain market 
information with respect to such Units, receipts, options, futures 
or Component Securities.
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    (ii) except as provided for in Rule 36.30, may not communicate with 
individuals or systems responsible for making trading decisions for 
related products or for away-market trading in their assigned DMM 
securities.
    (iii) shall not have access to customer information or the DMM 
unit's position in related products.
    Accordingly, under current Rule 98, while on the Trading Floor, 
DMMs may only trade DMM securities and, thus, may not trade any other 
securities, including securities that are related products to their DMM 
securities.

B. Proposed Rule Change

    The Exchange proposes to amend Rule 98 to remove restrictions on 
DMM operations on the Trading Floor that are unrelated to the role of 
DMMs at the Exchange. Specifically, as described in Rule 104, DMMs have 
specified obligations with respect to their DMM securities and have 
access to specified non-public order information regarding their DMM 
securities.\7\ However, the Exchange states that DMMs do not have a 
unique role or access to any non-public order information with respect 
to securities that are not assigned to them under Rule 103B. The 
Exchange therefore believes that the current Rule 98 restrictions are 
unnecessarily broad.
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    \7\ See, e.g., Rule 104(a) and (j).
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    Accordingly, the Exchange proposes to amend Rule 98(c)(3)(B)(i) to 
provide that, while on the Trading Floor, employees of the DMM unit may 
trade DMM securities only on or through the systems and facilities of 
the Exchange at the DMM unit's assigned stock trading post location and 
as permitted by Exchange rules. Because the proposed rule would no 
longer specify the only securities that a DMM is permitted to trade, 
the Exchange proposes to delete

[[Page 16459]]

the clause ``except as provided for in Rule 36.30.'' The Exchange also 
proposes to add new Rule 98(c)(3)(B)(ii) to provide that while on the 
Trading Floor of the Exchange, employees of the DMM unit may not trade 
any security that is a related product of its DMM securities. The 
Exchange would renumber current Rules 98(c)(3)(B)(ii) and (iii) as new 
Rules 98(c)(3)(B)(iii) and (iv).
    As a result of these proposed changes, DMMs would no longer be 
restricted from trading securities that are unrelated to DMM securities 
while on the Trading Floor. However, the proposed amendments would 
continue to require that, while on the Trading Floor, DMMs would not be 
able to trade any securities that are related products to DMM 
securities. The proposed amendment would also add a new requirement 
that DMMs may only trade their DMM securities at their assigned stock 
trading post.
    The proposed rule change would allow Exchange DMMs that are also 
NYSE MKT LLC (``NYSE MKT'') DMMs to continue to operate. Currently, 
NYSE MKT's cash equities trading operations share a Floor with the 
Exchange. DMMs who are also approved as NYSE MKT DMMs currently trade 
in both NYSE-listed DMM securities and NYSE MKT-listed DMM securities 
from the same physical location on the exchanges' respective Trading 
Floors.\8\ NYSE MKT has proposed to transition from a Floor-based 
trading model to a fully automated trading model.\9\ After this 
transition, NYSE MKT would continue to have electronic-access DMMs that 
would be the same member organizations that are currently operating as 
Floor-based NYSE MKT DMMs. The proposed amendment to Rule 98 would 
permit NYSE DMMs to continue to support their electronic NYSE MKT DMM 
functions in the same physical location where they are currently 
operating.
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    \8\ NYSE MKT DMMs operate under the NYSE MKT Rule 98--Equities.
    \9\ See Securities Exchange Act Release No. 79993 (Feb. 9, 
2017), 82 FR 10814 (Feb. 15, 2017) (notice of filing of SR-NYSEMKT-
2017-1 (``NYSE MKT Trading Rules Filing'')). Subject to rule 
approval, NYSE MKT anticipates transitioning off of its Floor in the 
second quarter of 2017.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
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 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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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(5).
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    Under the proposal, DMMs would be permitted to trade securities 
that are unrelated to DMM securities while on the Trading Floor. The 
Exchange represents that DMMs do not have a unique role or access to 
any non-public order information with respect to securities that are 
not assigned to them under Rule 103B. The Commission notes that, while 
on the Trading Floor, DMMs would continue to be prohibited from trading 
securities that are related products to DMM securities. In addition, 
the Commission notes that, while on the Trading Floor, employees of the 
DMM unit would be permitted to trade DMM securities only on or through 
the systems and facilities of the Exchange at the DMM unit's assigned 
stock trading post location and as permitted by Exchange rules.
    For the above reasons, the Commission finds that the proposal is 
consistent with the requirements of the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (NYSEMKT-2017-03) be, and it 
hereby is, approved.
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    \12\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06567 Filed 4-3-17; 8:45 am]
 BILLING CODE 8011-01-P