Document ID: SEC-2023-1475-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-12-20T05:00Z

[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88201-88204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27913]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99170; File No. SR-NYSEARCA-2023-85]

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

December 14, 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 December 8, 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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[[Page 88202]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.62P-O to provide for the use 
of ALO Reserve Orders. 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 amend Rule 6.62P-O (Orders and Modifiers) 
(the ``Rule'') to provide for the use of ALO Reserve Orders.
ALO Orders
    Rule 6.62P-O(e)(2) defines an ALO Order as a Non-Routable Limit 
Order that will not remove liquidity from the Consolidated Book. As 
described below, an ALO Order can be designated to be cancelled if it 
would be displayed at a price other than its limit price for any 
reason.
    As described in Rule 6.62P-O(e)(2)(A)(ii), an ALO Order to buy 
(sell) will be displayed at its limit price if it locks non-displayed 
orders or quotes to sell (buy) on the Consolidated Book. However, per 
Rule 6.62P-O(e)(2)(A), an ALO Order will not be displayed at a price 
that would: lock or cross the ABBO, would lock or cross displayed 
interest in the Consolidated Book, or would cross non-displayed 
interest in the Consolidated Book.
    Rule 6.62P-O(e)(2)(A)(i) provides that an ALO Order may be 
designated to cancel if it would be displayed at a price other than its 
limit price. If an ALO Order is not so designated, it will be repriced 
as follows (per Rules 6.62P-O (e)(2)(B)(i)-(iii)):
     If the limit price of an ALO Order to buy (sell) would 
lock or cross displayed orders or quotes to sell (buy) on the 
Consolidated Book, it will be repriced to have a working price and 
display price one MPV below (above) the lowest (highest) priced 
displayed order or quote to sell (buy) on the Consolidated Book;
     If the limit price of an ALO Order to buy (sell) would 
lock or cross the ABO (ABB), it will be repriced to have a working 
price equal to the ABO (ABB) and a display price one MPV below (above) 
that ABO (ABB);
     If the limit price of an ALO Order to buy (sell) would 
cross non-displayed orders or quotes on the Consolidated Book, it will 
be repriced to have a working price and display price equal to the 
lowest (highest) priced non-displayed order or quote to sell (buy) on 
the Consolidated Book.
    Rule 6.62P-O(e)(2)(C) provides that, once resting on the 
Consolidated Book, the display price of an ALO Order to buy (sell) that 
has been repriced will be repriced higher (lower) only one additional 
time. If, after that repricing, the display price could be repriced 
higher (lower) again, the order can be designated to either remain at 
its last working price and display price or be cancelled, provided that 
a resting ALO Order that is a quote cannot be designated to be 
cancelled.
     Per Rule 6.62P-O(e)(2)(C)(i), if the limit price of an ALO 
Order to buy (sell) that has been repriced no longer locks or crosses 
displayed orders or quotes in the Consolidated Book, locks or crosses 
the ABBO, or crosses non-displayed orders or quotes in the Consolidated 
Book, it will be assigned a working price and display price equal to 
its limit price.
    Rule 6.62P-O(e)(2)(D) provides that the working price of a resting 
ALO Order to buy (sell) that has been repriced will be adjusted to be 
equal to its display price, if:
     the ABO (ABB) re-prices to be equal to or lower (higher) 
than the display price of the resting ALO Order to buy (sell) (per Rule 
6.62P-O(e)(2)(D)(i)); or
     an ALO Order or Day ISO ALO to sell (buy) is displayed on 
the Consolidated Book at a price equal to the working price of the 
resting ALO Order to buy (sell) (per Rule 6.62P-O(e)(2)(D)(ii)).
    Rule 6.62P-O(e)(2)(E) provides that when the working price and 
display price of an ALO Order to buy (sell) are the same, the working 
price will be adjusted higher (lower) only if the display price of the 
order is adjusted.
    Finally, per Rule 6.62P-O(e)(2)(F), the ALO designation will be 
ignored for ALO Orders that participate in an Auction.
Reserve Orders
    Rule 6.62P-O(d)(1) provides for Reserve Orders, which are Limit 
Orders with a quantity of the size displayed and with a reserve 
quantity of the size (``reserve interest'') that is not displayed. The 
displayed quantity of a Reserve Order is ranked Priority 2--Display 
Orders, and the reserve interest is ranked Priority 3--Non-Display 
Orders. Both the display quantity and the reserve interest of an 
arriving marketable Reserve Order are eligible to trade with resting 
interest in the Consolidated Book or to route to Away Markets, unless 
they are designated as a Non-Routable Limit Order. The working price of 
the reserve interest of a resting Reserve Order to buy (sell) will be 
adjusted in the same manner as a Non-Displayed Limit Order, as provided 
for in paragraph (d)(2)(A) of this Rule, provided that it will never be 
priced higher (lower) than the working price of the display quantity of 
the Reserve Order.\4\
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    \4\ See infra regarding the proposed non-substantive change to 
Rule 6.62P-O(d)(1) to remove the cross-reference to paragraph 
(d)(2)(A) of Rule 6.62P-O and replace it with the specific text from 
that paragraph regarding how the working price for resting interest 
is adjusted. See proposed Rule 6.62P-O(d)(1).
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     Rule 6.62P-O(d)(1)(A) provides that the displayed portion 
of a Reserve Order will be replenished when the display quantity is 
decremented to zero. The replenish quantity will be the minimum display 
size of the order or the remaining quantity of the reserve interest if 
it is less than the minimum display quantity.
     Rule 6.62P-O(d)(1)(B) provides that each time the display 
quantity of a Reserve Order is replenished from reserve interest, a new 
working time will be assigned to the replenished quantity.
     Rule 6.62P-O(d)(1)(C) provides that a Reserve Order may be 
designated as a Non-Routable Limit Order. If so designated, the reserve 
interest that replenishes the display quantity will be assigned a 
display price and working price consistent with the instructions for 
the order.
     Rule 6.62P-O(d)(1)(D) provides that a routable Reserve 
Order will be evaluated for routing both on arrival and each time the 
display quantity is replenished.\5\
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    \5\ See Rule 6.62P-O(d)(1)(D)(i)-(ii) (providing that for a 
routable Reserve Order, ``[i]f routing is required, the Exchange 
will route from reserve interest before publishing the display 
quantity'' and that ``[a]ny quantity of a Reserve Order that is 
returned unexecuted will join the working time of the reserve 
interest. If there is no reserve interest to join, the returned 
quantity will be assigned a new working time'', respectively.)''

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[[Page 88203]]

     Rule 6.62P-O(d)(1)(E) provides that a request to reduce 
the size of a Reserve Order will cancel the reserve interest before 
cancelling the display quantity.
     Finally, Rule 6.62P-O(d)(1)(F) provides that a Reserve 
Order may be designated Day or GTC; this provision also currently 
provides that a Reserve Order may not be designated as an ALO Order.
Proposed ALO Reserve Orders
    The Exchange proposes to amend Rule 6.62P-O to provide for the use 
of ALO Reserve Orders. The proposed change is not intended to introduce 
any new functionality or modify any current functionality, but rather 
to facilitate the combination of two order types currently offered by 
the Exchange. As proposed, ALO Reserve Orders would operate consistent 
with current Rule 6.62P-O (d)(1) regarding Reserve Orders and current 
Rule 6.62P-O(e)(2) regarding ALO Orders. To allow for the use of ALO 
Reserve Orders, the Exchange first proposes to amend Rule 6.62P-
O(d)(1)(F) to delete the clause in the latter half of the sentence of 
such rule, which currently provides that a Reserve Order may not be 
designated as an ALO Order.
    The proposed change is intended to allow ALO Orders, as described 
in Rule 6.62P-O(e)(2) and the paragraphs thereunder, to have a 
displayed quantity, along with non-displayed reserve interest, as 
described in Rule 6.62P-O(d)(1). The display quantity of an ALO Reserve 
Order would be replenished as provided in Rule 6.62P-O(d)(1)(A) and 
(B). For an ALO Reserve Order that is designated as a Non-Routable-
Limit Order, per Rule 6.62P-O(d)(1)(C), the replenish quantity of such 
non-routable ALO Reserve Order would be assigned a display price and 
working price consistent with the behavior of ALO Orders as described 
in current Exchange rules. The Exchange proposes to modify Rule 6.62P-
O(d)(1)(C) to add a cross reference to the paragraphs (i.e., to 
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of the Rule) that describe how 
the working price and display price of Non-Routable Limit Orders and 
ALO Orders--which are a subset of Non-Routable Limit Orders are 
assigned, which would benefit investors by making the rule easier to 
navigate and comprehend.\6\
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    \6\ See proposed Rule 6.62P-O(d)(1)(C) (providing that for 
Reserve Orders designated as Non-Routable Limit Orders (inclusive of 
ALO Orders), ``the reserve interest that replenishes the display 
quantity will be assigned a display price and working price 
consistent with the instructions for the order, as provided for in 
paragraphs (e)(1)(A) and (e)(2)(A)-(B) of this Rule.'' (emphasis 
added).
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    The proposed change is intended to facilitate the combined use of 
two existing order types available on the Exchange, thereby providing 
OTP Holders and OTP Firms with enhanced flexibility and optionality 
when trading on the Exchange. The proposed change could also promote 
increased liquidity and trading opportunities on the Exchange, to the 
benefit of all market participants. The Exchange also believes the 
proposed change would permit the Exchange to offer functionality 
already available on the Exchange's affiliated (five) equities 
exchanges and at least one other (non-NYSE) equities exchange, thereby 
promoting uniformity in order types/functionality across our equity and 
options markets.\7\
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    \7\ See Securities Exchange Act Release Nos.; 98892 (November 8, 
2023), 88 FR 78398 (November 15, 2023) (SR-NYSEAmer-2023-56) 
(adopting ALO Reserve Orders on immediately effective basis); 98899 
(November 9, 2023), 88 FR 78413 ((November 15, 2023) SR-NYSEArca-
2023-77) (same); and 98891 (November 8, 2023), 88 FR 78407 (November 
15, 2023) (SR-NYSE-2023-40) (same); 98893 (November 9, 2023), 88 FR 
78401(November 15, 2023) (SR-NYSENAT-2023-25) (same); 98901 
(November 9, 2023), 88 FR 78422 (November 15, 2023) (SR-NYSECHX-
2023-21) (same). See, e.g., MEMX Rules 11.8(b)(4) and (7) (providing 
that a Limit Order may include a reserve quantity and may be 
designated with a Post Only instruction); see also MEMX User Manual, 
available at https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-User-Manual-03.10.23.pdf, at p. 9 (providing that a Limit 
Order designated Day may have both reserve quantity and Post Only 
instructions).
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    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date by 
Trader Update, which, subject to effectiveness of this proposed rule 
change, will be in the fourth quarter of 2023.
Proposed Non-Substantive Change To Reserve Orders
    The Exchange proposes to modify Rule 6.62P-O(d)(1) to add rule text 
specifying how the reserve interest of a resting Reserve Order to buy 
(sell) will be adjusted, which text would replace the existing text 
that directs the reader to another rule provision. Specifically, Rule 
6.62P-O(d)(1) states that ``[t]he working price of the reserve interest 
of a resting Reserve Order to buy (sell) will be adjusted in the same 
manner as a Non-Displayed Limit Order, as provided for in paragraph 
(d)(2)(A) of this Rule, provided that it will never be priced higher 
(lower) than the working price of the display quantity of the Reserve 
Order.'' The Exchange proposes to replace the cross reference to 
``paragraph (d)(2)(A) of the Rule'' with the relevant text from that 
paragraph (i.e., that the working price for the reserve interest of a 
resting Reserve Order to buy (sell) will be adjusted ``to be the lower 
(higher) of the limit price, or the NBO (NBB) . . . .'' \8\ The 
Exchange deems this proposed change as non-substantive because it 
merely copies the text that is being cross-referenced in the approved 
rule without any changes.
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    \8\ See proposed Rule 6.62P-O(d)(1) (providing, in relevant 
part, that ``[t]he working price of the reserve interest of a 
resting Reserve Order to buy (sell) will be adjusted to be the lower 
(higher) of the limit price, or the NBO (NBB), provided that it will 
never be priced higher (lower) than the working price of the display 
quantity of the Reserve Order.). (emphasis added).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\ 
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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
remove impediments to and perfect the mechanism of a free and open 
market because it would allow for the combined use of two existing 
order types available on the Exchange and permit the Exchange to offer 
functionality similar to that already available on the Exchange's 
(five) affiliated equities exchanges and at least one other (non-NYSE) 
equities exchange.\11\ The Exchange believes that offering ALO Reserve 
Orders on the Exchange would promote uniformity in order types and 
functionality across the NYSE equity and options markets. OTP Holders 
and OTP Firms would be free to choose to use the proposed ALO Reserve 
Order type or not, and the proposed change would not otherwise impact 
the operation of the Reserve Order or ALO Order as described in current 
Exchange rules. The Exchange also believes that the proposed rule 
change would remove impediments to and perfect the mechanism of a free 
and open market, as well as protect investors and the public interest, 
by expanding the options available to OTP Holders

[[Page 88204]]

and OTP Firms when trading on the Exchange and promoting increased 
liquidity and additional trading opportunities for all market 
participants.
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    \11\ See note 7, supra (citing to equities markets that offer 
this functionality).
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    The proposed non-substantive change to Rule 6.62P-O(d)(1) to 
specify how the working price of the reserve interest of a resting 
Reserve Order is adjusted would add clarity and transparency to 
Exchange rules to the benefit of investors.

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. Specifically, the Exchange's 
proposal to adopt Reserve ALO Orders--which combine two existing orders 
available on the Exchange--would not impose a burden on intramarket 
competition because the proposed ALO Reserve Order is available to all 
market participants that trade on the Exchange.
    The Exchange believes that the proposed change would enhance inter-
market competition as other options exchanges that do not currently 
offer this functionality are free to do so. The Exchange also believes 
that, to the extent the proposed change increases opportunities for 
order execution, the proposed change would promote competition by 
making the Exchange a more attractive venue for order flow and 
enhancing market quality for all market participants.
    The Exchange believes the proposed non-substantive change to Rule 
6.62P-O(d)(1) to specify how the working price of the reserve interest 
of a resting Reserve Order is adjusted, would not impose an undue 
burden on competition. This proposed change is not meant to be 
competitive but is instead designed to add clarity, transparency, and 
internal consistency to Exchange rules.

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

    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) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
it may implement the ALO Reserve order type without delay. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest because the 
proposal raises no novel or controversial issues in permitting the 
proposed combination of two order types already in use on the Exchange, 
as well as replacing a cross-reference to improve clarity in the 
Exchange's rules. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ 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.

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-2023-85 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-2023-85. 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-2023-85 and should 
be submitted on or before January 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27913 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P