Document ID: SEC-2019-0526-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2019-04-19T04:00Z

[Federal Register Volume 84, Number 76 (Friday, April 19, 2019)]
[Notices]
[Pages 16549-16552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07851]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85649; File No. SR-NYSE-2019-16]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7.31(i)(4) Relating to the Last Sale Peg Modifier

April 15, 2019.
    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 April 2, 2019, New York Stock Exchange LLC (``NYSE'' 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

[[Page 16550]]

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(i)(4) relating to the Last 
Sale Peg Modifier. 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 7.31(i)(4) relating to the Last 
Sale Peg Modifier, also referred to as a ``Last Sale Peg Order.'' 
Specifically, the Exchange proposes to specify a circumstance when the 
working price of a Last Sale Peg Order would not be adjusted.
    Rule 7.31(i)(4) provides that a Last Sale Peg Order is a Non-
Routable Limit Order to buy that will not trade or be displayed at a 
price higher than the last-sale price, which is the later of the most 
recent last-sale eligible trade \4\ executed on the Exchange or the 
most recent consolidated last-sale eligible trade.\5\ Rule 
7.31(i)(4)(A) provides that the working price of a Last Sale Peg Order 
will be pegged to the lower of the last-sale price, the limit price of 
the order, or the PBO. The Last Sale Peg Order is available to buy Non-
Routable Limit Orders only and is designed to assist member 
organizations in their compliance with the ``safe harbor'' provisions 
of Rule 10b-18 under the Act (``Rule 10b-18'') for issuer 
repurchases.\6\ One of the four provisions required to fall under Rule 
10b-18's safe harbor is that the purchase price of a security may not 
exceed the highest independent bid or the last independent transaction 
price for the security.\7\ Because a Last Sale Peg Order will not trade 
at a price that is higher than the last-sale price, member 
organizations can use this instruction to facilitate their compliance 
with at least one of the conditions of the safe harbor provision of 
Rule 10b-18.\8\
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    \4\ A last-sale eligible trade must be of at least one round 
lot.
    \5\ A consolidated last-sale eligible trade is the last-sale 
eligible trade reported to the responsible single plan processor.
    \6\ See 17 CFR 240.10b-18. See also Securities Exchange Act 
Release No. 78679 (August 25, 2016), 81 FR 60080 (August 31, 2016) 
(SR-NYSE-2016-59).
    \7\ See 17 CFR 240.10b-18(b)(3). The other three conditions 
relate to time of purchases, volume of purchases, and a requirement 
that only one broker or dealer be involved in such repurchases on a 
single day.
    \8\ See Securities Exchange Act Release No. 85158 (February 15, 
2019), 84 FR 5794 (February 22, 2019) (SR-NYSE-2018-52) (``NYSE 
Approval Order''). The Exchange does not represent that a Last Sale 
Peg Order is guaranteed to meet the requirements of the safe harbor 
provision of Rule 10b-18; rather, these instruction are available to 
member organizations to facilitate their own compliance with Rule 
10b-18.
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    Rule 7.31(i)(4)(B) provides that the display price of a Last Sale 
Peg Order is the same as the working price, unless the working price is 
pegged to the PBO, in which case, the display price is determined under 
paragraph (e)(1) of Rule 7.31.\9\ The Exchange proposes to amend Rule 
7.31(i)(4)(B) to further specify that the working price of a Last Sale 
Peg Order would not be adjusted if the PBO has adjusted to be equal to 
or lower than the working price of the Last Sale Order. As a Non-
Routable Limit Order, a Last Sale Peg Order is subject to Rule 
7.31(e)(1)(iii), which provides in part that if the PBO of an Away 
Market re-prices to be equal to or lower than a Non-Routable Limit 
Order's last display price, the order's display price will not change, 
but the working price will be adjusted to be equal to its display 
price. The Exchange proposes that if the PBO has adjusted in this 
manner, the working price of the Last Sale Peg Order would not change 
if the last-sale price adjusts to be the same or higher than the 
working price.
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    \9\ Rule 7.31(e)(1) describes how a Non-Routable Limit Order to 
buy that, at the time of entry and after trading with any sell 
orders in the Exchange Book priced at or below the PBO is priced.
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    Accordingly, as amended, Rule 7.31(i)(4)(B) would provide that if 
the PBO has adjusted to be equal to or lower than the working price of 
the Last Sale Peg Order, the working price of such order would not 
change if the last-sale price adjusts to be the same or higher than the 
working price. The Exchange believes that this proposed amendment would 
simplify the operation of the Last-Sale Peg Order and eliminate the 
need for a price change that would not otherwise be required for such 
order to facilitate compliance with Rule 10b-18. This proposed 
amendment would not change the behavior of a Last-Sale Peg Order if the 
last-sale price adjusts lower. In such case, even if the PBO has 
adjusted to be equal to or lower than the working price of a Last Sale 
Peg Order, if the last-sale price adjusts to be lower than such working 
price, the working price of the Last Sale Peg Order would be adjusted.
    For example, if the Away Market PBO is $10.02 and the last-sale 
price is $10.00, a Last Sale Peg Order to buy 1,000 shares with a limit 
price of $10.05 will be assigned a working and display price of $10.00, 
which is the same as the last-sale price. If the Away Market PBO 
updates to $9.95, which is lower than the Last Sale Peg Order's working 
price, pursuant to Rule 7.31(e)(1)(iii), the Last Sale Peg Order would 
remain at $10.00. If, while the PBO is $9.95, there is an update of the 
last-sale price to $10.02, with this proposed rule change, the Last 
Sale Peg Order would remain at $10.00 and not be adjusted. By contrast, 
if, while the PBO is $9.95, there is an update of the last-sale price 
to $9.99, the working price of the Last Sale Peg Order would be 
adjusted to $9.95, with a display price of $9.94.\10\
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    \10\ See Rule 7.31(e)(1)(A).
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    The Exchange has not yet implemented Last Sale Peg Orders, which 
were recently approved.\11\ The Exchange proposes that, subject to 
effectiveness of this proposed rule change, to implement this proposed 
rule change at the same time that it introduces Last Sale Peg Orders.
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    \11\ See NYSE Approval Order, supra note 8. The Exchange has 
announced that it will implement Last Sale Peg Orders on April 29, 
2019. See Trader Update dated February 21, 2019, available here: 
https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Update_NYSE_Tape_A_NGW_February_2019.pdf.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\12\ in general, and 
furthers the objectives of Section 6(b)(5),\13\ 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

[[Page 16551]]

and a national market system and, in general, to protect investors and 
the public interest. The Exchange believes that the proposal would 
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 because it would specify in the 
Exchange's rules circumstances when a Last Sale Peg Order would not be 
re-priced. The proposed rule change would further remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because it would simplify operations by reducing the 
number of times a Last Sale Peg Order would be required to re-price 
while at the same time maintaining the order type's core functionality 
to facilitate compliance with Rule 10b-18. Because a Last Sale Peg 
Order will continue to not trade at a price that is higher than the 
last sale, member organizations can continue use Last Sale Peg Orders 
to facilitate their compliance with at least one of the conditions of 
the safe harbor provision of Rule 10b-18.\14\ Lastly, the Last Sale Peg 
Order was recently approved by the Commission \15\ and this proposal 
does not seek to amend its operation in any significant manner.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See supra note 6.
    \15\ See NYSE Approval Order, supra note 8.
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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 proposed rule change is 
not designed to have a competitive impact because it is intended to 
simplify operations by reducing the number of times a Last Sale Peg 
Order would be required to reprice, while maintaining the core 
functionality of such order to facilitate compliance with Rule 10b-18. 
Nonetheless, the proposed rule change should promote competition by 
enhancing the Exchange's rules to provide greater specificity to market 
participants and improving the efficiency of the Exchange's order 
handling processes.

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 \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
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 \18\ and Rule 19b-4(f)(6) 
thereunder.\19\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The NYSE asked the Commission to 
waive the 30-day operative delay so that the Exchange. Specifically the 
Exchange noted that Last Sale Peg Orders were approved by the 
Commission on February 15, 2019,\21\ and intends to implement the 
orders on April 29, 2019.\22\ The Exchange represents that this 
proposed rule change does not seek to amend the operation of the Last 
Sale Peg Order in any significant manner and that the proposed rule 
change maintains the core functionality of this order type to 
facilitate issuer compliance with Exchange Act Rule 10b-18. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest, and 
accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\23\
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    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See NYSE Approval Order, supra note 8.
    \22\ See supra note 11.
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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-NYSE-2019-16 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-NYSE-2019-16. 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

[[Page 16552]]

submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2019-16 and should be 
submitted on or before May 10, 2019.

    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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07851 Filed 4-18-19; 8:45 am]
 BILLING CODE 8011-01-P