Document ID: SEC-2019-0278-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE National, Inc.
Posted Date: 2019-03-13T04:00Z

[Federal Register Volume 84, Number 49 (Wednesday, March 13, 2019)]
[Notices]
[Pages 9168-9172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04560]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85264; File No. SR-NYSENAT-2019-04]

Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rules 7.16, 7.18, 7.31, 7.34, and 7.38

March 7, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 21, 2019, NYSE National, Inc. (``NYSE National'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. 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\ 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 Rules 7.16 (Short Sales), 7.18 
(Halts), 7.31 (Orders and Modifiers), 7.34 (Trading Session), and 7.38 
(Odd and Mixed Lots). 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 Rules 7.16 (Short Sales), 7.18 
(Halts), 7.31 (Orders and Modifiers), 7.34 (Trading Session), and 7.38 
(Odd and Mixed Lots). The proposed rule changes are intended to provide 
additional specificity in the Exchange's rules, streamline order 
processing when a security is halted or paused, and reduce operational 
complexity when transitioning to continuous trading.
Rule 7.16 (Short Sales)
    Rule 7.16 establishes requirements relating to short sales. Rule 
7.16(f)(5) sets forth how short sale orders are processed during a 
Short Sale Period, which is defined in Rule 7.16(f)(4). More 
specifically, Rule 7.16(f)(5)(B) provides how the Exchange processes 
sell short Priority 1 and Priority 3 Orders during a Short Sale 
Period.\3\ The current rule provides that such orders, which are not 
displayed, are re-priced at a Permitted Price \4\ and are continuously 
re-priced at a Permitted Price as the national best bid moves both up 
and down. Accordingly, under the current rule, during a Short Sale 
Period, orders ranked Priority 1--Market Orders, are processed in the 
same manner as orders ranked Priority 3--Non-Display Orders.
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    \3\ Pursuant to Rule 7.36(e)(1), an order ranked ``Priority 1--
Market Orders,'' which is referred to in Rule 7.16(f)(5)(B) as a 
``Priority 1 Order'' refers to unexecuted Market Orders. Pursuant to 
Rule 7.31(a)(1)(A), a Market Order may be held undisplayed on the 
Exchange Book. Pursuant to Rule 7.36(e)(3), an order ranked 
``Priority 3--Non-Display Orders,'' which is referred to in Rule 
7.16(f)(5)(B) as a ``Priority 3 Order'' refers to non-marketable 
Limit Orders for which the working price is not displayed, including 
the reserve interest of Reserve Orders.
    \4\ The Permitted Price is one minimum price variation above the 
current NBB. See Rule 7.16(f)(5)(A).
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    With this proposed rule change, the Exchange proposes to extend the 
functionality currently applicable to how sell short Market Orders on 
its affiliated exchanges, NYSE Arca, Inc. (``NYSE Arca'') and NYSE 
American LLC (``NYSE American'') function during an auction to how sell 
short Market Orders would be processed on the Exchange during 
continuous trading, i.e., that during a Short Sale Period, sell short 
Market Orders would be converted into display orders and would be 
ranked and allocated as a displayed order.\5\ To effect this change, 
the Exchange proposes to delete references to ``Priority 1 Orders'' and 
``Market Orders'' in current Rule 7.16(f)(5)(B) and add new Rule 
7.16(f)(5)(C) that would be applicable only to Market Orders. Orders 
ranked Priority 3--Non-Display Orders would continue to be processed in 
the same manner as they are today under Rule 7.16(f)(5)(B).
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    \5\ See Commentary .01(a) to NYSE Arca Rule 7.35-E and 
Commentary .01(a) to NYSE American Rule 7.35E, which both provide 
that for purposes of pricing an auction and ranking orders for 
allocation in an auction, sell short Market Orders that are adjusted 
to a Permitted Price would be processed as Limit Orders ranked 
Priority 2--Display Orders.
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    Proposed new Rule 7.16(f)(5)(C) would provide that, during a Short 
Sale Period, a sell short Market Order would be ranked Priority 2--
Display Orders and would be subject to Trading Collars specified in 
Rule 7.31(a)(1)(B)(i).\6\ As discussed below, when a sell short Market 
Order is ranked as Priority 2--Display Orders, it would be assigned a 
limit price of one MPV above $0.00. The Exchange believes that applying 
Limit Order Price Protection when such orders are ranked as Priority 
2--Display Orders would result in all such orders being rejected as 
being priced too far away from the NBBO.\7\ Accordingly, to ensure that 
there is a mechanism available to prevent such orders from causing 
significant price dislocation during a Sell Short Period, the Exchange 
proposes that such orders would continue to be subject to Trading 
Collars, which are applicable to Market Orders, rather than to Limit 
Order Price Protection.
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    \6\ During Core Trading Hours, the Trading Collar is based on a 
price that is a specified percentage away from the consolidated last 
sale price and is continuously updated based on market activity. If 
there is no consolidated last sale price on the same trading day, 
the Exchange uses the last Official Closing Price for the security. 
See Rule 7.31(a)(1)(B)(i).
    \7\ Pursuant to Rule 7.31(a)(2)(B), a Limit Order to buy (sell) 
is subject to Limit Order Price Protection and will be rejected if 
it is priced at or above (below) the greater of $0.15 or a specified 
percentage away from the NBO (NBB).

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[[Page 9169]]

    To address what would happen when a Short Sale Period is triggered 
when there is a resting Market Order on the Exchange Book, proposed 
Rule 7.16(f)(5)(C) would further provide that if a Short Sale Period is 
triggered when an order ranked Priority 1--Market Orders is resting on 
the Exchange Book, such resting order would be converted to an order 
ranked Priority 2--Display Orders. This could happen if there is an 
unexecuted Market Order that is undisplayed on the Exchange Book 
pursuant to Rule 7.31(a)(1)(A). In such case, the resting order would 
be converted to an order ranked Priority 2--Display Orders and would be 
ranked and allocated for all purposes as a displayed order. If the 
Short Sale Period ends intraday, such order would be converted back to 
an order ranked Priority 1--Market Orders.
    While a sell short Market Order would be ranked and allocated as 
Priority 2--Display Orders during a Short Sale Period, not all 
functionality applicable to displayed orders would be applicable to 
such Market Orders. As proposed, when ranked as Priority 2--Display 
Orders, such order would be (1) assigned a limit price of one MPV above 
$0.00; (2) assigned a working and (during Core Trading Hours) a display 
price that is the higher of the Permitted Price or one MPV above the 
lower Trading Collar as determined under Rule 7.31(a)(1)(B)(i); and (3) 
cancelled if the Permitted Price is or becomes lower than the Lower 
Price Band, as provided in Rule 7.11(a)(5).
    The Exchange believes that assigning a Market Order with a limit 
price equal to one MPV above $0.00 would provide for a limit price for 
such order while it is functioning as an order ranked Priority 2--
Display Orders. However, as noted above, such limit price would not be 
used for purposes of Limit Order Price Protection. Rather, the Exchange 
proposes to continue applying the Trading Collars applicable to Market 
Orders even if such order converts to displayed interest. Next, the 
Exchange believes that assigning such order a working and display price 
(during Core Trading Hours) that is the higher of the Permitted Price 
or one MPV above the lower Trading Collar is consistent both with how 
sell short Priority 2--Display Orders are displayed and priced during a 
Short Sale Period and with the proposal that Trading Collars would 
continue to be applicable to such orders. Not displaying such orders 
until Core Trading Hours is also consistent with the continued behavior 
that such Market Orders are not eligible to trade until the Core 
Trading Session. Finally, the Exchange proposes to cancel such order if 
the Permitted Price (i.e., the displayed price of the order) is or 
becomes lower than the Lower Price Band, which is consistent with how 
Market Orders are processed pursuant to Rule 7.11(a)(5)(A)(i) if they 
cannot be traded or routed at prices at or within the Price Bands. In 
other words, if the Permitted Price would be a price at or below the 
Lower Price Band, the Exchange proposes to cancel such order rather 
than repricing it once again to the Lower Price Band, even though the 
Lower Price Band would be at a price higher than the Permitted Price. 
Thus, no short sale order would be executed (effected) at or below the 
NBB during a Short Sale Period.
    With the adoption of proposed Rule 7.16(f)(5)(C), the Exchange 
further proposes to re-number each of current sub-paragraphs (C)--(I) 
of Rule 7.16(f)(5) as (D)--(J) without making any substantive change to 
those rules.
Rule 7.18, Halts
    Rule 7.18(b) states that the Exchange does not conduct reopening 
auctions in UTP Securities and sets forth how the Exchange processes 
new and existing orders during a UTP Regulatory Halt.\8\ Rule 
7.18(b)(1) states that during a UTP Regulatory Halt, the Exchange will 
cancel any unexecuted portion of Market Orders and orders not eligible 
to trade in the current trading session on the Exchange Book.\9\ The 
Exchange proposes to amend this Rule to further provide that orders 
that are not displayed would also be cancelled during a UTP Regulatory 
Halt. To reflect this change, the Exchange proposes to amend Rule 
7.18(b)(1) to provide that Non-Displayed Limit Orders,\10\ Mid-Point 
Liquidity (``MPL'') Orders,\11\ Tracking Orders,\12\ and Market Pegged 
Orders \13\ would also be canceled during a UTP Regulatory Halt. The 
Exchange believes that cancelling these non-displayed orders during a 
UTP Regulatory Halt would streamline order processing once trading 
resumes.
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    \8\ A ``UTP Regulatory Halt'' is defined in Rule 1.1 as a trade 
suspension, halt, or paused [sic] called by the UTP Listing Market 
in a UTP Security that requires all market centers to halt trading 
in that security. The terms UTP Security and UTP Listing Market are 
also defined in Rule 1.1.
    \9\ See Rule 1.1(l).
    \10\ See Rule 7.31(d)(2).
    \11\ See Rule 7.31(d)(3).
    \12\ See Rule 7.31(d)(4).
    \13\ See Rule 7.31(h)(1).
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Rule 7.31, Orders and Modifiers
    The Exchange proposes to make a number of changes to Rule 7.31, 
each of which are designed to streamline order processing.
    Rule 7.31(a)(2)(C) currently describes how the Exchange re-prices 
resting orders under specified circumstances. Specifically, if a BB 
(BO) that is locked or crossed by an Away Market PBO (PBB) is 
cancelled, executed or routed and the next best-priced resting Limit 
Order(s) on the Exchange Book that would become the new BB (BO) would 
have a display price that would lock or cross the PBO (PBB), such Limit 
Order(s) to buy (sell) will be assigned a display price one MPV below 
(above) the PBO (PBB) and a working price equal to the PBO (PBB). Such 
Limit Orders are re-priced when the PBBO is updated, including if the 
Exchange receives a Day ISO that would result in at least a round lot 
being displayed as the new BBO.
    The Exchange proposes to amend this text to provide that the 
arrival of any-sized Day ISO would result in the re-pricing of such 
resting orders. The arrival of a Day ISO of any size provides the 
Exchange with notice that the ETP Holder \14\ that has entered such 
order has met the requirement under Rule 7.31(e)(3)(A)(ii) to 
simultaneously route one or more additional Limit Orders to trade 
against the full displayed size of any protected bids (for sell orders) 
or protected offers (for buy orders) on Away Markets. Accordingly, the 
Exchange would adjust the PBBO based on the arrival of any-sized Day 
ISO. Because the PBBO would be adjusted based on the arrival of any-
sized Day ISO, the Exchange believes it would no longer be necessary to 
wait for a round-lot sized Day ISO before repricing orders under Rule 
7.31(a)(2)(C). Accordingly, the Exchange proposes to delete the 
following text in the second sentence of current Rule 7.31(a)(2)(C)--
``and would result in at least a round lot being displayed as a new BB 
(BO)''--and the third and last sentence of current Rule 7.31(a)(2)(C).
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    \14\ See Rule 1.1(i).
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    The Exchange also proposes to provide additional specificity in 
Rule 7.31(h)(2)(B) regarding when a Primary Pegged Order's display 
price and working price would be adjusted when the PBBO is locked or 
crossed.\15\ Specifically, the Exchange proposes to specify that 
Primary Pegged Orders would be re-priced whenever a Limit Order is re-
priced pursuant to Rules 7.31(a)(2)(C). Re-pricing a Primary Pegged 
Order like a Limit Order pursuant to Rule 7.31(a)(2)(C) ensures that if 
the PBBO is locked or crossed, a

[[Page 9170]]

resting Primary Pegged Order would not be re-priced to a locking or 
crossing price, for example, if the Exchange BBO changes.\16\ To effect 
this change, the Exchange proposes to amend Rule 7.31(h)(2)(B) to 
specify that if a resting Limit Order on the Exchange Book is assigned 
a new display price and working price pursuant to Rules 7.31(a)(2)(C) 
and the PBBO is still locked or crossed, a resting Primary Pegged Order 
would also be assigned a new display price and working price pursuant 
to Rule 7.31E(a)(2)(C). The proposed text represents current 
functionality. The Exchange believes that this proposed rule change 
would provide clarity and transparency in Exchange rules of when a 
Primary Pegged Order would be re-priced consistent with Rule 
7.31(a)(2)(C).
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    \15\ Pursuant to Rule 7.31(h)(2), a Primary Pegged Order is a 
displayed Pegged Order to buy (sell) with a working price that is 
pegged to the PBB (PBO), with no offset allowed.
    \16\ For example, if the PBBO is 10.00 x 10.02, and Exchange's 
BB is 10.00, a Primary Pegged Order to buy would peg to that 10.00. 
If next, an Away Market PBO is displayed at 9.98, crossing the 
Exchange BB, pursuant to Rule 7.31-E(h)(2)(B), the Primary Pegged 
Order would remain displayed at 10.00. If next, the 10.00 BB on the 
Exchange cancels, the Primary Pegged Order would need to reprice, 
but at that point, the PBBO is crossed because of the Away Market 
PBO of 9.98. In this scenario, the Primary Pegged Order would be 
repriced to 9.97 as provided for in Rule 7.31(a)(2)(C).
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Rule 7.34, Trading Sessions
    Rule 7.34(c)(1) describes order entry during the Early Trading 
Session.\17\ The Exchange proposes to add new subparagraph (F) to Rule 
7.34(c)(1) to provide that the following non-displayed orders would be 
rejected if entered before the Early Trading Session begins: Non-
Displayed Limit Orders, MPL Orders, and Tracking Orders. Similar to how 
the Exchange proposes to cancel non-displayed orders during a halt or 
pause, the Exchange believes that rejecting these non-displayed orders 
when the Exchange is not engaged in continuous trading would reduce 
operational complexity when the Exchange transitions to continuous 
trading. ETP Holders seeking to enter theses order types may do so once 
the Early Trading Session begins.
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    \17\ The Early Trading Session begins at 7 a.m. Eastern Time and 
concludes at the commencement of the Core Trading Session. See Rule 
7.34(a)(1). The Core Trading Session begins at 9:30 a.m. Eastern 
Time and ends at the conclusion of Core Trading Hours. See Rule 
7.34(a)(2).
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Rule 7.38, Odd and Mixed Lots
    The Exchange proposes to amend Rule 7.38 relating to Odd and Mixed 
Lots. Rule 7.38 sets forth requirements relating to odd lot and mixed 
lot trading on the Exchange. Rule 7.38(b) further provides that round 
lot, mixed lot, and odd lot orders are treated in the same manner on 
the Exchange, provided that the working price of an odd lot order is 
adjusted both on arrival and when resting on the Exchange Book based on 
the limit price of the order. Currently, if the limit price of an odd 
lot order to buy (sell) is at or below (above) the PBO (PBB), the order 
has a working price equal to the limit price. If the limit price of an 
odd lot order to buy (sell) is above (below) the PBO (PBB), the order 
has a working price equal to the PBO (PBB). The rule further provides 
that if the limit price of an odd lot order to buy (sell) is above 
(below) the PBO (PBB) and the PBBO is crossed, the order has a working 
price equal to the PBB (PBO).
    Under the current rule, although the working price of an odd lot 
order is adjusted based on the PBBO, the display price of an odd lot 
order ranked Priority 2--Display Orders is not adjusted based on the 
PBBO. Additionally, the rule provides that an odd lot order ranked 
Priority 2--Display Orders will not be assigned a new working time if 
its working price is adjusted under the rule. If the display price of 
an odd lot order to buy (sell) is above (below) its working price, the 
order is ranked and allocated based on its display price. As a result, 
an odd lot bid or offer can be displayed on the Exchange's proprietary 
data feeds at a price that appears to cross the PBBO, even if such 
order would not be eligible to trade at that price.
    The Exchange proposes to amend Rule 7.38(b) to provide that the 
display price of an odd lot order would be adjusted whenever the 
working price is adjusted. To effect this change, the Exchange proposes 
to amend current Rule 7.38(b)(1) to provide that the working and 
display price of an odd lot order would be adjusted both on arrival and 
when resting on the Exchange Book. The Exchange further proposes to 
break current Rule 7.38(b)(1) into subparagraphs (A)--(C) so that the 
rule provides how odd lot orders are ranked and executed under each of 
the instances provided in the current rule that are described above.
    Proposed Rule 7.38(b)(1)(A) would provide that if the limit price 
of an odd lot order to buy (sell) is at or below (above) the PBO (PBB), 
the order would have a working price and display price equal to the 
limit price of the order. This proposed rule text does not change any 
functionality, but rather, provides greater specificity of what the 
display price would be when the limit price of an odd lot order is not 
through the PBBO.
    Proposed Rule 7.38(b)(1)(B) would provide that if the limit price 
of an odd lot order to buy (sell) is above (below) the PBO (PBB), the 
order would have a working price and display price equal to the PBO 
(PBB) unless the order's instruction requires a display price to be 
different from the PBBO. This proposed rule text represents new 
functionality that the display price of an odd lot order would be 
adjusted at the same time as the working price is currently adjusted 
for such order. This proposed amendment does not change the price at 
which such odd-lot order would be eligible to trade, only the price at 
which it is displayed on the Exchange's proprietary data feeds. The 
proposed rule text includes that the display price would be adjusted to 
the contra-side PBBO unless the order's instruction requires a display 
price to be different from the PBBO to account for those order types 
that, by their terms, do not allow the display price to be equal to a 
contra-side PBBO. For example, a Non-Routable Limit Order does not have 
a display price equal to the contra-side PBBO.\18\ Accordingly, if an 
odd lot order were to be a Non-Routable Limit Order, pursuant to that 
order's instructions, it would have a display price different from the 
contra-side PBBO.
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    \18\ See Rule 7.31(e)(1).
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    Proposed Rule 7.38(b)(1)(C) would address what the display price of 
an odd lot order would be if the PBBO is locked or crossed. The 
Exchange proposes to expand the current rule text to include locked 
markets and add that both the display price and working price would be 
adjusted to the same-side PBBO if the PBBO is locked or crossed. 
Accordingly, as proposed, if the limit price of an odd lot order to buy 
(sell) is above (below) the PBO (PBB) and the PBBO is locked or 
crossed, the order would have a working price and display price equal 
to the PBB (PBO). The proposed rule would further provide that the 
working price and the display price of such odd lot order would not be 
adjusted again until the PBBO unlocks or uncrosses.
    Additionally, the Exchange proposes to delete the last two 
sentences of current Rule 7.38(b)(1) regarding the display price of odd 
lot orders and their ranking given the changes proposed to the current 
rule regarding the display price of an odd lot order render this text 
moot. By deleting this rule text, the general rules governing when a 
working time is assigned to an order, as specified in Rule 7.36(f)(2), 
would be applicable to odd lot orders.
* * * * *
    Because of the technology changes associated with this proposed 
rule change, the Exchange will announce the implementation date of this 
proposed rule change by Trader Update. The

[[Page 9171]]

Exchange anticipates that the implementation date will be in the second 
quarter of 2019.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\19\ in general, and 
furthers the objectives of Section 6(b)(5),\20\ 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 because it 
would provide additional specificity in the Exchange's rules, 
streamline order processing when a security is halted or paused, and 
reduce operational complexity when transitioning to continuous trading.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    Rule 7.16, Short Sales. The Exchange believes that the proposed 
processing of sell short Market Orders during a Short Sale Period, as 
proposed in Rule 7.16(f)(5)(C), would remove impediments to and perfect 
the mechanism of a fair and orderly market because it would use a 
method of processing of sell short Market Orders that is already in 
place on auctions on NYSE Arca and NYSE American. As described in 
Commentary .01(a) to NYSE Arca Rule 7.35-E and Commentary .01(a) to 
NYSE American Rule 7.35E, during a Short Sale Period, sell short Market 
Orders are currently processed as Limit Orders ranked Priority 2--
Display Orders. The Exchange believes that it would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system to apply this functionality to how sell short Market 
Orders are processed during continuous trading. The Exchange further 
believes that because Market Orders would be assigned a limit price of 
one MPV above $0.00, it would remove impediments to and perfect the 
mechanism of a free and open market for sell short Market Orders that 
have been converted to an order ranked Priority 2--Display Orders to 
continue to be subject to Trading Collars and be cancelled if the 
Permitted Price is equal to or below the Lower Price Band. The Exchange 
believes that the proposed changes will provide clarity on the short 
sale order handling procedures employed by the Exchange so that such 
orders are handled by the Exchange consistent with Regulation SHO. The 
Exchange also believes that the proposed functionality related to the 
processing of short sale orders will assist ETP Holders in executing or 
displaying their orders consistent with Regulation SHO.
    Rule 7.18, Halts. The proposed change to Rule 7.18(b) to cancel 
certain non-displayed orders in UTP Securities during UTP Regulatory 
Halt promotes just and equitable principles of trade and removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system because it would reduce the operational 
complexity of processing these orders following a halt or pause.
    Rule 7.31, Orders and Modifiers. The Exchange believes that the 
proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
providing specificity regarding when resting orders would be re-priced 
due to the arrival of a Day ISO. Specifically, as proposed, because 
any-sized Day ISO would result in a new PBBO, it is not necessary for 
an arriving Day ISO to result in a round lot or more being displayed as 
a new BBO before resting orders would be re-priced under Rule 
7.31(a)(2)(C). The Exchange therefore believes that this proposed 
change would remove impediments to and perfect the mechanism of a free 
and open market and a national market system because it would promote 
the display of orders at their limit price without locking or crossing 
the PBBO.
    Amending Rule 7.31(h)(2)(B) to describe when a resting Primary 
Pegged Order would be re-priced pursuant to Rule 7.31(a)(2)(C) removes 
impediments to, and perfects the mechanism of, a free and open market 
and a national market system because it does not propose new 
functionality, but rather provides additional specificity in the 
Exchange's rules regarding the operation of Primary Pegged Orders such 
that it prevents a resting Primary Pegged Order from being re-priced to 
peg to a locked or crossed market. This change does not alter the 
operation of Primary Pegged Orders. Rather, it would further clarify 
the Exchange's rules regarding when a Primary Pegged Order would be re-
priced to avoid pegging to a locked or crossed PBBO.
    Rule 7.34, Trading Sessions. The proposed changes to Rule 7.34(c) 
promote just and equitable principles of trade and remove impediments 
to, and perfect the mechanism of, a free and open market and a national 
market system because rejecting Non-Displayed Limit Orders, MPL Orders, 
and Tracking Orders entered before the Early Trading Session begins 
would reduce operational complexity when the Exchange transitions to 
continuous trading. It would also streamline order processing when the 
Exchange begins continuous trading. ETP Holders seeking to enter these 
order types may do so once the Early Trading Session begins.
    Rule 7.38, Odd and Mixed Lots. The Exchange believes that the 
proposed processing of odd lot orders would remove impediments to and 
perfect the mechanism of a fair and orderly market because the proposed 
change would align the working price and display price of odd lot 
orders. The proposed change would not alter the price at which an odd 
lot order would be eligible to trade, but rather, would provide greater 
transparency regarding what price an odd lot order would trade by 
aligning the display price of such order with its working price. The 
Exchange believes that this proposed rule change would further remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system by reducing the potential for an odd lot order 
to appear on the Exchange's proprietary data feeds as though it is 
locking or crossing the PBBO. The Exchange further believes the 
proposed rule change, which proposes to assign a display price that is 
equal to the working price for odd lot orders, would remove impediments 
to and perfect the mechanism of a fair and orderly market because it 
would promote transparency in the ranking and execution of such orders. 
Additionally, the Exchange believes the proposed change to how the 
working time of an odd lot order would be adjusted would remove 
impediments to and perfect the mechanism of a free and open market by 
aligning the processing of odd lot orders with the standard manner by 
which the working time is assigned to an order, as provided for in Rule 
7.36(f)(2).

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 changes to 
Rules 7.18, 7.31, and 7.34 are designed to provide additional 
specificity to the Exchange's rules, reduce operational complexity 
during a halt or pause, and streamline order processing when 
transitioning to continuous trading when continuous trading begins. The 
proposed changes to

[[Page 9172]]

Rules 7.16, 7.31, and 7.38 are also designed to provide additional 
specificity to the Exchange's rules and reduce operational complexity 
by (i) aligning the display price of an odd lot order with its working 
price, (ii) converting sell short Market Orders to displayed interest, 
(iii) clarifying that Primary Pegged Orders would not be re-priced to a 
locked or crossed PBBO, and (iv) promoting transparency in the ranking 
and execution of odd lot orders. These proposed changes should, 
therefore, 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 \21\ and Rule 19b-4(f)(6) thereunder.\22\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \22\ 17 CFR 240.19b-4(f)(6).
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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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSENAT-2019-04 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-NYSENAT-2019-04. 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 a.m. and 3 p.m. 
Copies of this filing will also 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 submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSENAT-2019-04, and should be submitted on or before April 3, 2019.
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    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04560 Filed 3-12-19; 8:45 am]
 BILLING CODE 8011-01-P