Document ID: SEC-2023-0936-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2023-08-28T04:00Z

[Federal Register Volume 88, Number 165 (Monday, August 28, 2023)]
[Notices]
[Pages 58625-58627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18430]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98197; File No. SR-NYSEAMER-2023-41]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Modify Rule 
928NYP

August 22, 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 17, 2023, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 928NYP (Pre-Trade and 
Activity-Based Risk Controls) to allow certain order types to be 
excluded from the Activity-Based Risk Controls. 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 928NYP (Pre-Trade and 
Activity-Based Risk Controls) to allow certain order types to be 
excluded from the Activity-Based Risk Controls.\4\ Specifically, the 
Exchange proposes to allow ATP Holders \5\ the ability to exclude 
orders marked as GTX \6\ from counting towards the limits established 
by the Activity-Based Risk Controls and to exclude GTX orders from 
cancellation when an Activity-Based Risk Limit is breached.\7\ The 
Exchange notes that a substantively similar change was recently adopted 
on its affiliated exchange, NYSE Arca, Inc. (``NYSE Arca'') and 
therefore this proposal raises no new or novel issues not previously 
considered by the Commission.\8\
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    \4\ The Exchange notes that this proposed change modifies a 
Pillar rule (i.e., with a ``P'' modifier) that has not yet been 
implemented. The Exchange anticipates migrating to its Pillar 
trading platform beginning on October 23, 2023. As is the case with 
all Pillar rules, this proposed rule change (as well as the entire 
Rule 928NYP) will not be implemented until all other Pillar-related 
rule filings are approved or operative, as applicable, and the 
Exchange announces the migration of underlying symbols to Pillar by 
Trader Update.
    \5\ An ATP Holder is a natural person, sole proprietorship, 
partnership, corporation, limited liability company or other 
organization, in good standing, which has been issued an ATP, and 
references to ``member'', and ``member organization'' as those terms 
are used in the Rules of the Exchange should be deemed to be 
references to ATP Holders. See Rule 900.2NY. An ATP is an American 
Trading Permit issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities. See 
id. The Exchange notes that an ATP may be acting as a Specialist, 
which market participant is subject to heightened requirements. See, 
e.g., Rule 925.1NYP(b), (c).
    \6\ See infra note 17 (for description of orders marked as GTX).
    \7\ See proposed Rules 928NYP(c)(2)(B) and (c)(2)(C)(iii).
    \8\ See Securities Exchange Act Release No. 98038 (August 1, 
2023), 88 FR 52231 (Augst 7, 2023) (SR-NYSEARCA-2023-49) 
(immediately effective rule change to allow market participants to 
exclude orders marked as GTX from the Activity-Based Risk Controls, 
per Rule 6.40P-O).
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    The Exchange offers ATP Holders the option of utilizing Activity-
Based Risk Controls to assist ATP Holders in managing risk related to 
submitting orders during periods of increased and significant trading 
activity.\9\ ATP

[[Page 58626]]

Holders acting as Specialist must apply one of the Activity-Based Risk 
Controls to all of its orders and quotes, whereas an ATP Holder not 
acting as a Specialist may, but is not required to, apply one of the 
Activity-Based Risk Controls to its orders.\10\ To determine when an 
Activity-Based Risk Control has been breached, the Exchange will 
maintain a Trade Counter that will be incremented every time an order 
(or quote) trades, including any leg of a Complex Order, and will 
aggregate the number of contracts traded during each such 
execution.\11\ When designating one of the three Activity-Based Risk 
Controls, an ATP Holder must indicate the action that it would like the 
Exchange to take if an Activity-Based Risk Limit is exceeded.\12\ 
Currently, the Exchange affords ATP Holders the ability to exclude 
certain orders from being considered by a Trade Counter.\13\ The order 
types that an ATP Holder may opt to exclude are orders designated as 
IOC or FOK, which order types are designed to cancel if not executed on 
arrival.\14\ In addition, the Exchange exempts certain orders from 
being cancelled or blocked--specifically Auction-Only orders (submitted 
solely for the purpose of being executed in an opening auction) and GTC 
Orders, which by their terms are meant to eventually execute unless 
specifically cancelled by the order-sender.\15\
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    \9\ See Rule 928NYP(a)(3)(A)-(C) (describing the three potential 
Activity-Based Risk Controls: Transaction-Based Risk Limit; Volume-
Based Risk Limit; and Percentage-Based Risk Limit).
    \10\ See Rule 928NYP(c)(2)(A).
    \11\ See Rule 928NYP(c)(2)(B).
    \12\ See Rule 928NYP(c)(2)(C) (describing the potential 
automated breach actions of Notification Only, Block Only, and 
Cancel and Block).
    \13\ See Rule 928NYP(c)(2)(B).
    \14\ See id. See also Rule 900.3NYP(b)(2) (IOC) and (3) (FOK).
    \15\ See Rule 928NYP(c)(2)(C)(iii).
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    The Exchange proposes to modify Rule 928NYP(c)(2)(B) to add GTX to 
the order types that may be excluded by Trade Counters in tracking 
Activity-Based Risk Controls.\16\ In addition, for ATP Holders that 
select the automated breach action of ``Cancel and Block,'' the 
Exchange proposes to modify Rule 928NYP(c)(2)(C)(iii) to provide ATP 
Holders the option of instructing the Exchange not to cancel unexecuted 
GTX orders in the event of a breach.\17\
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    \16\ See proposed Rule 928NYP(c)(2)(B) (providing, in relevant 
part, that an ATP Holder ``may opt to exclude any orders designated 
IOC, FOK, or GTX from being considered by a Trade Counter.'')
    \17\ See proposed Rule 928NYP(c)(2)(C)(iii) (providing, in 
relevant part, that an ATP Holder ``may opt to exclude orders 
designated as GTX from being cancelled.'').
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    An order marked GTX, such as a GTX order submitted in response to a 
CUBE Order (``CUBE GTX'') or a COA GTX Order submitted in response to a 
Complex Order Auction (or COA), will cancel after executing to the 
extent possible with a CUBE Order, or a COA Order in a Complex Order 
Auction, as applicable (collectively, ``GTX orders'').\18\ As such, GTX 
orders are never ranked (as resting interest) in the Consolidated Book. 
Because GTX orders are submitted for the sole purposes of executing (to 
the extent possible) with either a CUBE Order or a COA Order before 
cancelling, the Exchange believes providing ATP Holders the option of 
exempting these orders from the Activity-Based Risk Controls would 
enable these ATP Holders to exclude GTX orders from being counted and 
avoid potentially triggering their risk settings (prematurely), 
resulting in the cancellation of open orders. Likewise, the Exchange 
believes that allowing ATP Holders to instruct the Exchange not to 
cancel any unexecuted GTX orders if their risk setting is breached 
would likewise afford such ATP Holders additional flexibility. This 
proposed handling of GTX orders is consistent with how the Exchange 
currently handles GTX orders per (pre-Pillar) Commentary .01 to Rule 
928NY (Risk Limitation Mechanism).\19\
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    \18\ Per Rule 971.1NYP regarding Single-Leg CUBE Auctions, an 
ATP Holder may respond to a CUBE Auction (``Auction'') with an order 
marked as GTX, which order is not displayed and which must be 
entered during the Response Time Interval of the Auction and may 
include an AuctionID to specify the CUBE Order with which it would 
like to trade. See Rule 971.1NYP(c)(1)(C)(i). A CUBE GTX Order will 
cancel after executing with the CUBE Order to the extent possible. 
Similarly, per Rule 980NYP(b)(2), an ATP Holder may designate an 
Electronic Complex Order (or ECO) as GTX. A ``COA GTX Order'' is an 
order sent in response to a Complex Order Auction (or COA), which 
order is not displayed and which must be entered during the Response 
Time Interval of a COA. The COA GTX Order will cancel after 
executing with the COA Order to the extent possible. See Rule 
980NYP(b)(2)(C). The Exchange notes that NYSE Arca does not offer 
the CUBE Auction or CUBE GTX Orders.
    \19\ See (pre-Pillar) Rule 928NY, Commentary .01 (providing, in 
relevant part, that upon the triggering of an established risk 
limit, the Exchange would cancel all open orders and quotes in the 
affected series but would exclude from such cancellation any 
``orders entered in response to an electronic auction that are valid 
only for the duration of the auction (`GTX')'', which includes CUBE 
GTX Orders and COA GTX Orders).
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    The Exchange believes that providing ATP Holders this additional 
flexibility may encourage more ATP Holders to utilize the risk 
settings, which benefits all market participants. The Exchange also 
believes that the proposed change would result in risk settings that 
may be better calibrated to suit the needs of certain ATP Holders 
(i.e., those that routinely utilize GTX orders) and should encourage 
ATP Holders to direct additional order flow and liquidity to the 
Exchange.
Implementation
    This proposed change modifies a Pillar rule (i.e., with a ``P'' 
modifier). As is the case with all Pillar rules, this proposed rule 
change (as well as the entire Rule 928NYP) will not be implemented 
until all other Pillar-related rule filings are approved or operative, 
as applicable, and the Exchange announces the migration of underlying 
symbols to Pillar by Trader Update.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\20\ in 
general, and furthers the objectives of section 6(b)(5) of the Act,\21\ 
in particular, in that 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market by 
providing ATP Holders greater control and flexibility over setting 
their risk tolerance, which may enhance the efficacy of the risk 
settings. Orders marked GTX, including CUBE GTX Orders and COA GTX 
Orders, will cancel after executing to the extent possible with a COA 
Order as part of a Complex Order Auction. As such, GTX orders are never 
ranked (as resting interest) in the Consolidated Book. The Exchange 
believes that certain market participants utilize GTX orders to access 
liquidity on the Exchange. Thus, the proposed change is designed to 
accommodate participants that utilize GTX orders in this manner by 
enabling them to exclude GTX orders from being counted and avoid 
potentially triggering their risk settings (prematurely), resulting in 
the cancellation of open orders. In addition, allowing ATP Holders the 
option to exclude unexecuted GTX orders from being cancelled in the 
event of a breach would allow ATP Holders to utilize this order type 
without fear of such orders being cancelled before having the 
opportunity to trade in a Complex Order Auction. As noted herein, this 
proposed handling of

[[Page 58627]]

GTX orders (i.e., excluding such orders from cancellation upon 
triggering of a risk setting) is consistent with how the Exchange 
currently handles GTX orders per (pre-Pillar) Commentary .01 to Rule 
928NY (Risk Limitation Mechanism).
    The Exchange believes that providing ATP Holders this additional 
flexibility may encourage more ATP Holders to utilize the risk 
settings, which benefits all market participants. Further, the proposed 
change would promote just and equitable principles of trade because it 
would result in risk settings that may be better calibrated to suit the 
needs of certain ATP Holders (i.e., those that routinely utilize GTX 
orders) and should encourage ATP Holders to direct additional order 
flow and liquidity to the Exchange. To the extent additional order flow 
is submitted to the Exchange as a result of the proposed change, all 
market participants stand to benefit from increased trading. The 
Exchange notes that an ATP Holder has the option of utilizing risk 
settings for all orders submitted to the Exchange and, as proposed, 
would have the additional option of excluding from these risk settings 
any GTX orders in a given options class submitted to the Exchange.
    This proposed change, which was specifically requested by some ATP 
Holders, would foster cooperation and coordination with persons engaged 
in regulating, clearing, settling, and processing information with 
respect to, and facilitating transactions in, securities as it will be 
available to all ATP Holders and may encourage more ATP Holders to 
utilize this enhanced functionality to the benefit of all market 
participants.

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 ATP Holders with greater control 
and flexibility over setting their risk tolerance and, potentially, 
more protection over risk exposure. The proposal is structured to offer 
the same enhancement to all ATP Holders and would not impose a 
competitive burden on any participant. The Exchange does not believe 
that the proposed enhancement to the existing Activity-Based Risk 
Controls would impose a burden on competing options exchanges. Rather, 
the availability of these controls 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 a whole 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

    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 \22\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\23\
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    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange 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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    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-NYSEAMER-2023-41 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-NYSEAMER-2023-41. 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-NYSEAMER-2023-41 and should 
be submitted on or before September 18, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18430 Filed 8-25-23; 8:45 am]
BILLING CODE 8011-01-P