Document ID: SEC-2021-0914-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2021-06-30T04:00Z

[Federal Register Volume 86, Number 123 (Wednesday, June 30, 2021)]
[Notices]
[Pages 34819-34821]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13914]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92254; File No. SR-NYSEAMER-2021-31]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 7.31E To Add a Retail Order Modifier and the NYSE American 
Equities Price List and Fee Schedule To Cross Reference the Retail 
Order Modifier

June 24, 2021.
    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 June 21, 2021, 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 amend its rules to add new subparagraph 
(i)(4) to Rule 7.31E and amend the NYSE American Equities Price List 
and Fee Schedule. 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 its rules to add new subparagraph 
(i)(4) to Rule 7.31E (Orders and Modifiers) to add a description of a 
Retail Order modifier and to amend the Price List to add a cross-
reference to Rule 7.31E(i)(4).
Proposed Rule Change
    The Exchange proposes to amend Rule 7.31E to add new subparagraph 
(i)(4) to provide for ETP Holders \4\ to designate an order with a 
retail modifier (``Retail Order''). An order designated as a ``Retail 
Order'' pursuant to proposed Rule 7.31E(i)(4) would be eligible for the 
Retail Order Rates specified on the Exchange's Price List.
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    \4\ See Rules 1.1E(m) (definition of ETP) & (n) (definition of 
ETP Holder).
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Proposed Modifier for ``Retail Orders''
    To define ``Retail Orders,'' the Exchange proposes to amend Rule 
7.31E (Orders and Modifiers) to add a new subsection (i)(4), titled 
``Retail Modifier'' to establish requirements for Retail Orders on the 
Exchange. These requirements are based on the requirements to enter 
orders with ``retail'' modifiers for purposes of rates

[[Page 34820]]

available for such orders on the Exchange's affiliates, New York Stock 
Exchange, LLC (``NYSE'') and NYSE Arca, Inc. (``NYSE Arca'').\5\
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    \5\ See NYSE Rule 13 regarding Retail Modifiers and the NYSE 
Arca procedures for designating orders with a retail modifier for 
purposes of fee rates. See Securities Exchange Act Release No. 67540 
(July 30, 2012), 77 FR 46539 (August 3, 2012) (SR-NYSEArca-2012-77). 
These requirements are distinct from, but related to, the 
requirements for a ``Retail Order'' on the Retail Liquidity Programs 
available on NYSE and NYSE Arca. See NYSE Rule 7.44 and NYSE Arca 
Rule 7.44-E. The Exchange does not offer a ``Retail Liquidity 
Program.''
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    Proposed Rule 7.31E(i)(4)(A) would define ``Retail Order'' as an 
agency order or a riskless principal order that meets the criteria of 
FINRA Rule 5320.03 that originates from a natural person and is 
submitted to the Exchange by an ETP Holder, provided that no change is 
made to the terms of the order with respect to price or side of market 
and the order does not originate from a trading algorithm or any other 
computerized methodology.
    Proposed Rule 7.31E(i)(4)(B) would specify that in order for an ETP 
Holder to access the proposed Retail Order pricing, the ETP Holder 
would be required to designate an order as a Retail Order in the form 
and/or manner prescribed by the Exchange.
    Proposed Rule 7.31E(i)(4)(C) would specify that in order to submit 
a Retail Order, an ETP Holder must submit an attestation, in a form 
prescribed by the Exchange, that substantially all orders designated as 
``Retail Orders'' would meet the requirements set out in the definition 
above.
    Proposed Rule 7.31E(i)(4)(D) would specify that an ETP Holder must 
have written policies and procedures reasonably designed to assure that 
it would only designate orders as ``Retail Orders'' if all requirements 
of a Retail Order are met. Such written policies and procedures must 
require the ETP Holder to (i) exercise due diligence before entering a 
Retail Order to assure that entry as a Retail Order is in compliance 
with the requirements specified by the Exchange, and (ii) monitor 
whether orders entered as Retail Orders meet the applicable 
requirements. If an ETP Holder represents Retail Orders from another 
broker-dealer customer, the ETP Holder's supervisory procedures must be 
reasonably designed to assure that the orders it receives from such 
broker-dealer customer that it designates as Retail Orders meet the 
definition of a Retail Order. The ETP Holder must (i) obtain an annual 
written representation, in a form acceptable to the Exchange, from each 
broker-dealer customer that sends it orders to be designated as Retail 
Orders that entry of such orders as Retail Orders would be in 
compliance with the requirements specified by the Exchange, and (ii) 
monitor whether its broker-dealer customer's Retail Order flow 
continues to meet the applicable requirements. Proposed Rule 
7.31E(i)(4)(E) would specify that an ETP Holder that fails to abide by 
the requirements specified in paragraphs (i)(4)(A)-(D) of Rule 7.31E 
would not be eligible for the Retail Order rates for orders it 
designates as ``Retail Orders.''
Proposed Cross-Reference in the Price List to Rule 7.31E(i)(4)
    The Price List currently contains a subheading ``b. Retail Order 
Rates *,'' with text at the asterisk as follows: ``See section III 
under `General' at the end of this Price List for information on 
designating orders as `Retail Orders.' '' The Exchange proposes to 
amend that text to also include a reference to Rule 7.31E(i)(4).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\7\ 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 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 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to Rule 7.31E(i) 
to add a Retail Modifier would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because the proposed requirements are based on existing requirements 
for orders designated as ``retail'' on NYSE and NYSE Arca for purposes 
of fees and credits on those exchanges, and therefore are not novel. In 
addition, the proposed designation, attestation, and written policies 
and procedures are also based on existing procedures for similarly-
defined orders on NYSE and NYSE Arca, and therefore are not novel.\8\ 
The Exchange believes that the proposed requirements to submit 
attestations and to maintain written policies and procedures are not 
unfairly discriminatory, because they apply equally to all ETP Holders 
that wish to receive the Retail Order Rates. The Exchange further 
believes that the proposed addition of a cross-reference to proposed 
Rule 7.31E(i)(4) in the Price List would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it would enhance the clarity and transparency of the 
Price List and reduce any potential customer confusion.
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    \8\ As noted above (see supra note 11[sic]), the proposed 
changes are based not on the Retail Liquidity Programs available on 
NYSE and NYSE Arca, but on the availability of retail fees on those 
exchanges for orders properly designated as ``retail'' orders. See 
NYSE Rule 13; Securities Exchange Act Release No. 72253 (May 27, 
2014), 79 FR 31353 (June 2, 2014) (SR-NYSE-2014-26) (approving the 
addition of ``retail'' order modifier at NYSE Rule 13(f)); and 
Securities Exchange Act Release No. 67540 (July 30, 2012), 77 FR 
46539 (August 3, 2012) (SR-NYSEArca-2012-77) (approving the addition 
of ``retail'' order modifier on NYSE Arca).
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    The proposed retail modifier for purposes of providing different 
rates for ``Retail Orders'' is also based in part on the availability 
of such modifiers on the Nasdaq Stock Market LLC (``Nasdaq'') and Cboe 
EDGX Exchange, Inc. (``EDGX''), which both offer pricing for orders 
designated as ``retail'' under their respective rules, even in the 
absence of a retail price improvement program. For example, Nasdaq 
defines the term ``Designated Retail Order'' on its Price List as:

    [A]n agency or riskless principal order that meets the criteria 
of FINRA Rule 5320.03 and that originates from a natural person and 
is submitted to Nasdaq by a member that designates it pursuant to 
this section, provided that no change is made to the terms of the 
order with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. An order from a ``natural person'' can include orders 
on behalf of accounts that are held in a corporate legal form--such 
as an Individual Retirement Account, Corporation, or a Limited 
Liability Company--that has been established for the benefit of an 
individual or group of related family members, provided that the 
order is submitted by an individual. Members must submit a signed 
written attestation, in a form prescribed by Nasdaq, that they have 
implemented policies and procedures that are reasonably designed to 
ensure that substantially all orders designated by the member as 
``Designated Retail Orders'' comply with these requirements. Orders 
may be designated on an order by-order basis, or by designating all 
orders on a particular order entry port as Designated Retail 
Orders.\9\
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    \9\ Nasdaq Equity 7, section 118; see also Cboe EDGX Rule 11.21 
(defining ``Retail Order'' and establishing attestation requirement 
to access preferential pricing for such orders).

[[Page 34821]]

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    Nasdaq does not have a corresponding definition of ``Designated 
Retail Order'' in its trading rules.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\10\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, the Exchange believes that the proposed 
rule change would promote competition because it is based on the 
availability of similar ``retail'' modifiers on NYSE, NYSE Arca, 
Nasdaq, and EDGX. More specifically, multiple other cash equity 
exchanges offer pricing for orders designated as ``retail'' orders, 
even in the absence of a retail price improvement program on those 
exchanges.\11\ The Exchange believes that the proposed change could 
promote competition between the Exchange and other execution venues, 
including those that currently offer similar order types and comparable 
transaction pricing, by encouraging additional orders to be sent to the 
Exchange for execution.
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    \10\ 15 U.S.C. 78f(b)(8).
    \11\ See supra note 17 [sic].
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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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
Because the proposed rule change: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) does not 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.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission notes that 
the proposal is based on the rules of other national securities 
exchanges and finds that the proposal presents no legal or novel 
regulatory questions.\17\ For these reasons, the Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ See supra note 5.
    \18\ For purposes only of waiving the operative delay for this 
proposal, the Commission has 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 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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-NYSEAMER-2021-31 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-2021-31. 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 submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEAMER-2021-31 and should be submitted 
on or before July 21, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13914 Filed 6-29-21; 8:45 am]
BILLING CODE 8011-01-P