83 FR 43942 - Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31 Relating to Reserve Orders and Re-Name Two Order Types
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 167 (August 28, 2018)
Federal Register Volume 83, Issue 167 (August 28, 2018)
| Page Range | 43942-43946 | |
| FR Document | 2018-18571 |
[Federal Register Volume 83, Number 167 (Tuesday, August 28, 2018)] [Notices] [Pages 43942-43946] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-18571] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83900; File No. SR-NYSENAT-2018-19] Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31 Relating to Reserve Orders and Re-Name Two Order Types August 22, 2018. 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 9, 2018, NYSE National, Inc. (``Exchange'' or ``NYSE National'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7.31 relating to Reserve Orders and re-name two order types. 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 relating to Reserve Orders and re-name two order types. Background Rule 7.31(d)(1) defines a Reserve Order as a Limit or Inside Limit Order with a quantity of the size displayed and with a reserve quantity of the size (``reserve interest'') that is not displayed. The displayed quantity of a Reserve Order is ranked Priority 2--Display Orders and the reserve interest is ranked Priority 3--Non-Display Orders.\4\ Rule 7.31(d)(1)(A) provides that on entry, the display quantity of a Reserve Order must be entered in round lots and the displayed portion of a Reserve Order will be replenished following any execution. That rule further provides that the Exchange will display the full size of the Reserve Order when the unfilled quantity is less than the minimum display size for the order. Rule 7.31(d)(1)(B) provides that each time a Reserve Order is replenished from reserve interest, a new working time is assigned to the replenished quantity of the Reserve Order, while the reserve interest retains the working time of original order entry. Pursuant to Rule 7.31(d)(1)(C), a Reserve Order must be designated Day and may be combined with a Limit Non-Routable Order or a Primary Pegged Order. --------------------------------------------------------------------------- \4\ The terms ``Priority 2--Display Orders'' and ``Priority 3-- Non-Display Orders'' are defined in Rule 7.36(e). --------------------------------------------------------------------------- Rule 7.31(d)(2) defines a ``Limit Non-Displayed Order,'' which is a Limit Order that is not displayed and does not route. Rule 7.31(e)(1) defines a ``Limit Non-Routable Order,'' which is a Limit Order that does not route. [[Page 43943]] Proposed Rule Change Relating to Order Type Names The Exchange proposes non-substantive amendments to Rules 7.31 and 7.46 to re-name the ``Limit Non-Routable Order'' as the ``Non-Routable Limit Order.'' This proposed rule change is based on the term used by the Exchange's affiliate, NYSE American LLC (``NYSE American'') for the same order type. The Exchange also proposes non-substantive amendments to Rules 7.31 and 7.46 to re-name the ``Limit Non-Displayed Order'' as the ``Non- Displayed Limit Order.'' In both cases, the Exchange believes that it promotes clarity and consistency in its rules to move the respective modifier for each of these rules before the term ``Limit Order.'' Proposed Rule Change Relating to Reserve Orders The Exchange proposes to amend Rule 7.31(d)(1) to change the manner by which the display portion of a Reserve Order would be replenished. As proposed, rather than replenishing the display quantity following any execution, the Exchange proposes to replenish the Reserve Order when the display quantity is decremented to below a round lot. The changes that the Exchange is proposing to Rule 7.31 relating to Reserve Orders (and Primary Pegged Orders) are identical to changes that were recently approved for the Exchange's affiliate, New York Stock Exchange LLC (``NYSE'').\5\ In addition, the proposed changes to how Reserve Orders would be replenished are consistent with how Reserve Orders are replenished on other equity exchanges.\6\ --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 83768 (August 3, 2018), 83 FR 39488 (August 9, 2018) (SR-NYSE-2018-26) (Approval Order). \6\ See Cboe BZX Exchange, Inc. (``BZX'') Rule 11.9(c)(1); Nasdaq Stock Market LLC (``Nasdaq'') Rule 7503(h). --------------------------------------------------------------------------- As is currently the case, the replenish quantity would be the minimum display size of the order or the remaining quantity of reserve interest if it is less than the minimum display quantity. To reflect this functionality, the Exchange proposes that Rule 7.31(d)(1)(A) would be amended as follows (deleted text bracketed; new text underlined): (A) On entry, the display quantity of a Reserve Order must be entered in round lots. The displayed portion of a Reserve Order will be replenished when the display quantity is decremented to below a round lot. The replenish quantity will be the minimum display quantity of the order or the remaining quantity of the reserve interest if it is less than the minimum display quantity[following any execution. The Exchange will display the full size of the Reserve Order when the unfilled quantity is less than the minimum display size for the order]. Under current functionality, because the replenished quantity is assigned a new working time, it is feasible for a single Reserve Order to have multiple replenished quantities with separate working times, each, a ``child'' order. The proposed change to limit when a Reserve Order would be replenished to when the display quantity is decremented to below a round lot only would reduce the number of child orders for a Reserve Order. The Exchange believes that minimizing the number of child orders for a Reserve Order would reduce the potential for market participants to detect that a child order displayed on the Exchange's proprietary market data feeds is associated with a Reserve Order. In most cases, the maximum number of child orders for a Reserve Order would be two. For example, assume a Reserve Order to buy has a display quantity of 100 shares and an additional 200 shares of reserve interest. A sell order of 50 shares would trade with the display quantity of such Reserve Order, which would decrement the display quantity to 50 shares. As proposed, the Exchange would then replenish the Reserve Order with 100 shares from the reserve interest, i.e., the minimum display size for the order. After this second replenishment, the Reserve Order would have two child orders, one for 50 shares, the other for 100 shares, each with different working times. Generally, when there are two child orders, the older child order of less than a round lot will be executed before the second child order. However, there are limited circumstances when a Reserve Order could have two child orders that equal less than a round lot, which, as proposed, would trigger a replenishment. For such circumstance, the Exchange proposes that when a Reserve Order is replenished from reserve interest and already has two child orders that equal less than a round lot, the child order with the later working time would be reassigned the new working time assigned to the next replenished quantity. For example, taking the same Reserve Order as above:If 100 shares of such order (``A'') are routed on arrival, it would have a display quantity of 100 shares (``B'') and 100 shares in reserve interest. While ``A'' is routed, a sell order of 50 shares would trade with ``B,'' decrementing ``B'' to 50 shares and the Reserve Order would be replenished from reserve interest, creating a second child order ``C'' of 100 shares. Next, the Exchange receives a request to reduce the size of the Reserve Order from 300 shares to 230 shares. Because ``A'' is still routed away and there is no reserve interest, and as described in more detail below, this 70 share reduction in size would be applied against the most recent child order of ``C,'' which would be reduced to 30 shares. Together with ``B,'' which would still be 50 shares, the two displayed child orders would equal less than a round lot, but with no quantity in reserve interest. Next, ``A'' is returned unexecuted, and as described below, becomes reserve interest and is evaluated for replenishment. Because the total display quantity (``B'' + ``C'') is less than a round lot, this Reserve Order would be replenished. But because the Reserve Order already has two child orders, the child order with the later working time, ``C,'' would be returned to the reserve interest, which would now have a quantity of 130 shares (``C'' + ``A''), and the Reserve Order would be replenished with 100 shares from the reserve interest with a new working time, which would be a new child order ``D.'' After this replenishment, this Reserve Order would have two child orders of ``B'' for 50 shares and ``D'' for 100 shares, and a reserve interest of 30 shares. To effect these changes, the Exchange proposes to amend current Rule 7.31(d)(1)(B) to specify that each display quantity of a Reserve Order with a different working time would be referred to as a child order. The Exchange further proposes new Rule 7.31(d)(1)(B)(i) that would provide that when a Reserve Order is replenished from reserve interest and already has two child orders that equal less than a round lot, the child order with the later working time would rejoin the reserve interest and be assigned the new working time assigned to the next replenished quantity. The Exchange also proposes new Rule 7.31(d)(1)(B)(ii) to provide that if a Reserve Order is not routable (i.e., is combined with either a Non-Routable Limit Order or a Primary Pegged Order), the replenish quantity would be assigned a display and working price consistent with the instructions for the order, which represents current functionality. For example, for a Non-Routable Limit Reserve Order, if the display price would lock or cross the contra-side PBBO, the replenished quantity would be assigned a display price one MPV worse than the PBBO [[Page 43944]] and a working price equal to the contra-side PBBO, as provided for in Rule 7.31(e)(1)(A)(i).\7\ The Exchange believes that this proposed rule text would provide transparency and clarity to Exchange rules. --------------------------------------------------------------------------- \7\ The term ``PBBO'' is defined in Rule 1.1. The term ``MPV'' is defined in Rule 7.6. --------------------------------------------------------------------------- For a Primary Pegged Reserve Order, the Exchange proposes that the replenished quantity would follow Rule 7.31(h)(2)(B), which provides that a Primary Pegged Order would be rejected if the PBBO is locked or crossed. Because a Primary Pegged Reserve Order would have resting reserve interest, the Exchange proposes to amend Rule 7.31(h)(2)(B) to provide that if the PBBO is locked or crossed when the display quantity of a Primary Pegged Reserve Order is replenished, the entire order would be cancelled. The Exchange believes that cancelling the entire order is consistent with the current rule that provides that the entire order would be rejected on arrival if the display quantity would lock or cross the PBBO. The Exchange further proposes to add new subsection (D) to Rule 7.31(d)(1) to describe when a Reserve Order would be routed. As proposed, a routable Reserve Order would be evaluated for routing both on arrival and each time the display quantity is replenished. Proposed Rule 7.31(d)(1)(D)(i) would provide that if routing is required, the Exchange would route from reserve interest before publishing the display quantity. In addition, if after routing, there is less than a round lot available to display, the Exchange would wait until the routed quantity returns (executed or unexecuted) before publishing the display quantity. In the example described above, the Exchange would have published the display quantity before the routed quantity returned because the display quantity was at least a round lot. If, however, 250 shares of a Reserve Order of 300 shares had been routed on arrival, because the unrouted quantity was less than a round lot (50 shares), the Exchange would wait for the routed quantity to return, either executed or unexecuted, before publishing the display quantity. The Exchange proposes this functionality to reduce the possibility for a Reserve Order to have more than one child order. If the Exchange did not wait, and instead displayed the 50 shares when the balance of the Reserve Order has routed, if the 250 shares returns unexecuted, such Reserve Order would be replenished and would have two child orders--one for the 50 shares that was displayed when the order was entered and a second for the 100 shares that replenished the Reserve Order from the quantity that returned unexecuted. By contrast, by waiting for a report on the routed quantity, if the routed quantity was not executed, the Exchange would display the minimum display quantity as a single child order. If the routed quantity was executed, the Exchange would display the 50 shares, but only because that would be the full remaining quantity of the Reserve Order. Proposed Rule 7.31(d)(1)(D)(ii) would provide that any quantity of a Reserve Order that is returned unexecuted would join the working time of the reserve interest, which is current functionality. If there is no quantity of reserve interest to join, the returned quantity would be assigned a new working time as reserve interest. As further proposed, in either case, such reserve interest would replenish the display quantity as provided for in Rules 7.31(d)(1)(A) and (B). The Exchange believes that this proposed rule text would promote transparency and clarity in Exchange rules. The Exchange further believes it is appropriate for a returned quantity of a Reserve Order to join the reserve interest first because the order may not be eligible for a replenishment to the display quantity. Proposed Rule 7.31(d)(1)(E) would provide that a request to reduce in size a Reserve Order would cancel the reserve interest before canceling the display quantity and if there is more than one child order, the child order with the later working time would be cancelled first. This represents current functionality and the example set forth above demonstrates how this would function. The Exchange believes that canceling reserve interest before a child order would promote the display of liquidity on an exchange. The Exchange further believes that canceling a later-timed child order would respect the time priority of the first child order, and any priority such child order may have for allocations. * * * * * Because of the technology changes associated with the proposed rule changes relating to Reserve Orders, the Exchange will announce by Trader Update when these changes will be implemented, which the Exchange anticipates will be in the third quarter of 2018. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and furthers the objectives of Section 6(b)(5),\9\ 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. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change to replenish a Reserve Order only if the display quantity is decremented to below a round lot would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would reduce the number of child orders associated with a single Reserve Order. By reducing the number of child orders, the Exchange believes it would reduce the potential for market participants to detect that a child order is associated with a Reserve Order. The proposed changes to Reserve Orders and Primary Pegged Orders are identical to recently approved changes to the rules of its affiliated exchange, NYSE, and how a Reserve Order would be replenished is also consistent with how Reserve Orders function on BZX and Nasdaq.\10\ --------------------------------------------------------------------------- \10\ See supra notes 5 and 6. --------------------------------------------------------------------------- For similar reasons, the Exchange believes that if a Reserve Order has two child orders that equal less than a round lot, it would remove impediments to and perfect the mechanism of a free and open market and a national market system to assign a new working time to the later child order so that when such Reserve Order is replenished, it would have a maximum of only two child orders. The Exchange believes that this proposed change would streamline the operation of Reserve Orders and meet the objective to reduce the potential for market participants to be able to identify that a child order is associated with a Reserve Order. The Exchange further believes that the proposed rule change to evaluate a Reserve Order for routing both on arrival and when replenishing would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would reduce the potential for the display quantity of a Reserve Order to lock or cross the PBBO of an away market. The Exchange further believes that routing from reserve interest would [[Page 43945]] promote the display of liquidity on the Exchange, because if there is at least a round lot remaining of a Reserve Order that is not routed, the Exchange would display that quantity. The Exchange also believes that it would remove impediments to and perfect the mechanism of a free and open market and a national market system to wait to display a Reserve Order if there is less than a round lot remaining after routing because it would reduce the potential for such Reserve Order to have more than one child order. Finally, the Exchange believes that joining any quantity of a Reserve Order that is returned unexecuted with reserve interest first would be consistent with the proposed replenishment logic that a Reserve Order would be replenished only if the display quantity is decremented to below a round lot. 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 a request to reduce in size a Reserve Order to the reserve interest first, and then next to the child order with the later working time, because such functionality would promote the display of liquidity on the Exchange and honor the priority of the first child order with the earlier working time. The Exchange believes that including this existing functionality in Rule 7.31 would promote transparency and clarity in Exchange rules. The Exchange believes that the proposed change to Primary Pegged Reserve Orders would remove impediments to and perfect the mechanism of a free and open market and a national market system because similar to how a Primary Pegged Order would function on arrival, if the replenish quantity of a Primary Pegged Reserve Order would lock or cross the PBBO, the entire Reserve Order would be cancelled. The Exchange believes that by cancelling the entire order, the Exchange would reduce the potential for such order to be displayed at a price that would lock or cross the PBBO. The Exchange believes that the proposed non-substantive amendments to rename the ``Limit Non-Displayed Order'' as the ``Non-Displayed Limit Order'' and to rename the ``Limit Non-Routable Order'' as the ``Non-Routable Limit Order'' would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed changes are designed to promote clarity and consistency in Exchange rules by moving the modifier describing the function of the order type before the term ``Limit Order.'' 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 address any competitive issues. Rather, the proposed rule change to Reserve Orders is designed to reduce the potential for market participants to identify that a child order is related to a Reserve Order. The additional proposed rule changes are non-substantive and are designed to promote clarity and consistency in Exchange rules. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 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. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78s(b)(3)(A)(iii). \12\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. --------------------------------------------------------------------------- \13\ 17 CFR 240.19b-4(f)(6). \14\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- 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) \15\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- 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-NYSENAT-2018-19 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-2018-19. 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 [[Page 43946]] submissions should refer to File Number SR-NYSENAT-2018-19 and should be submitted on or before September 18, 2018. --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-18571 Filed 8-27-18; 8:45 am] BILLING CODE 8011-01-P
![43942 Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
investors and the markets, the proposed Exchange Act and the rules and II. Self-Regulatory Organization’s
rule change may still fail to meet other regulations thereunder applicable to a Statement of the Purpose of, and
requirements under the Exchange Act. national securities exchange, and in Statutory Basis for, the Proposed Rule
For the reasons discussed above, the particular, with Section 6(b)(5) of the Change
Exchange has not met its burden of Exchange Act.
demonstrating an adequate basis in the In its filing with the Commission, the
It is therefore ordered, pursuant to self-regulatory organization included
record for the Commission to find that
Section 19(b)(2) of the Exchange Act, statements concerning the purpose of,
the proposal is consistent with
Exchange Act Section 6(b)(5), and, that proposed rule change SR– and basis for, the proposed rule change
accordingly, the Commission must NYSEArca–2017–139 is disapproved. and discussed any comments it received
disapprove the proposal. For the Commission, by the Division of on the proposed rule change. The text
Trading and Markets, pursuant to delegated of those statements may be examined at
D. Other Comments authority.93 the places specified in Item IV below.
Comment letters also addressed the The Exchange has prepared summaries,
Eduardo A. Aleman,
intrinsic value of bitcoin; 84 the desire of set forth in sections A, B, and C below,
Assistant Secretary. of the most significant parts of such
investors to gain access to bitcoin
[FR Doc. 2018–18572 Filed 8–27–18; 8:45 am] statements.
through an ETP; 85 investor
BILLING CODE 8011–01–P
understanding about bitcoin; 86 the A. Self-Regulatory Organization’s
volatility of bitcoin prices,87 the Statement of the Purpose of, and the
regulation of bitcoin spot markets,88 the Statutory Basis for, the Proposed Rule
operation and valuation of the proposed SECURITIES AND EXCHANGE
COMMISSION Change
ETPs,89 the potential impact of
Commission approval of the proposed 1. Purpose
ETP on the price of bitcoin,90 and the [Release No. 34–83900; File No. SR–
The Exchange proposes to amend
legitimacy that Commission approval of NYSENAT–2018–19]
Rule 7.31 relating to Reserve Orders and
the proposed ETP might confer upon re-name two order types.
bitcoin as a digital asset.91 Ultimately, Self-Regulatory Organizations; NYSE
however, additional discussion of these National, Inc.; Notice of Filing and Background
tangential topics is unnecessary, as they Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.31 Rule 7.31(d)(1) defines a Reserve
do not bear on the basis for the Order as a Limit or Inside Limit Order
Commission’s decision to disapprove Relating to Reserve Orders and Re-
with a quantity of the size displayed
the proposal. Name Two Order Types
and with a reserve quantity of the size
E. Basis for Disapproval August 22, 2018. (‘‘reserve interest’’) that is not
displayed. The displayed quantity of a
The record before the Commission Pursuant to Section 19(b)(1) 1 of the Reserve Order is ranked Priority 2—
does not provide a basis for the Securities Exchange Act of 1934 Display Orders and the reserve interest
Commission to conclude that the (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 is ranked Priority 3—Non-Display
Exchange has met its burden under the notice is hereby given that on August 9, Orders.4 Rule 7.31(d)(1)(A) provides
Exchange Act and the Commission’s 2018, NYSE National, Inc. (‘‘Exchange’’ that on entry, the display quantity of a
Rules of Practice to demonstrate that its or ‘‘NYSE National’’) filed with the Reserve Order must be entered in round
proposed rule change is consistent with Securities and Exchange Commission lots and the displayed portion of a
Exchange Act Section 6(b)(5).92 (‘‘Commission’’) the proposed rule Reserve Order will be replenished
IV. Conclusion change as described in Items I, II, and following any execution. That rule
For the reasons set forth above, the III below, which Items have been further provides that the Exchange will
Commission does not find, pursuant to prepared by the self-regulatory display the full size of the Reserve
Section 19(b)(2) of the Exchange Act, organization. The Commission is Order when the unfilled quantity is less
that the proposed rule change is publishing this notice to solicit than the minimum display size for the
consistent with the requirements of the comments on the proposed rule change order. Rule 7.31(d)(1)(B) provides that
from interested persons. each time a Reserve Order is
84 See Ahn Letter, supra note 9. replenished from reserve interest, a new
85 See Fink Letter, supra note 9; Kaleda Letter,
I. Self-Regulatory Organization’s working time is assigned to the
supra note 9; Moberg Letter, supra note 9; Rousseau Statement of the Terms of Substance of replenished quantity of the Reserve
Letter, supra note 9; Santos Letter, supra note 9. the Proposed Rule Change Order, while the reserve interest retains
86 See Desai Letter, supra note 9, at 1; Kumar
the working time of original order entry.
Letter, supra note 9. The Exchange proposes to amend Pursuant to Rule 7.31(d)(1)(C), a Reserve
87 See Desai Letter, supra note 9, at 1; Malkin
Rule 7.31 relating to Reserve Orders and Order must be designated Day and may
Letter, supra note 9, at 1.
88 See Desai Letter, supra note 9, at 1; Fitzgerald
re-name two order types. The proposed be combined with a Limit Non-Routable
Letter, supra note 9, at 1; Kumar Letter, supra note rule change is available on the Order or a Primary Pegged Order.
9; Malkin Letter, supra note 9, at 1; Mohammed Exchange’s website at www.nyse.com, at
Letter, supra note 9. Rule 7.31(d)(2) defines a ‘‘Limit Non-
89 See Desai Letter, supra note 9, at 1; Malkin
the principal office of the Exchange, and Displayed Order,’’ which is a Limit
Letter, supra note 9, at 1; Kumar Letter, supra note
at the Commission’s Public Reference Order that is not displayed and does not
daltland on DSKBBV9HB2PROD with NOTICES
9; NERA Letter, supra note 9, at 1–2, 3, 5. Room. route. Rule 7.31(e)(1) defines a ‘‘Limit
90 See Santos Letter, supra note 9.
91 See Desai Letter, supra note 9, at 1, 2; Kumar
Non-Routable Order,’’ which is a Limit
Letter, supra note 9; Santos Letter, supra note 9.
Order that does not route.
93 17 CFR 200.30–3(a)(12).
92 In disapproving the proposed rule change, the
1 15 U.S.C. 78s(b)(1).
Commission has considered its impact on 4 The terms ‘‘Priority 2—Display Orders’’ and
2 15 U.S.C. 78a.
efficiency, competition, and capital formation. See ‘‘Priority 3—Non-Display Orders’’ are defined in
15 U.S.C. 78c(f). 3 17 CFR 240.19b–4. Rule 7.36(e).
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![Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices 43943
Proposed Rule Change Relating to Order less than the minimum display Reserve Order would be replenished
Type Names quantity[following any execution. The from reserve interest, creating a second
The Exchange proposes non- Exchange will display the full size of child order ‘‘C’’ of 100 shares.
the Reserve Order when the unfilled • Next, the Exchange receives a
substantive amendments to Rules 7.31
quantity is less than the minimum request to reduce the size of the Reserve
and 7.46 to re-name the ‘‘Limit Non-
display size for the order]. Order from 300 shares to 230 shares.
Routable Order’’ as the ‘‘Non-Routable
Under current functionality, because Because ‘‘A’’ is still routed away and
Limit Order.’’ This proposed rule
the replenished quantity is assigned a there is no reserve interest, and as
change is based on the term used by the
new working time, it is feasible for a described in more detail below, this 70
Exchange’s affiliate, NYSE American
single Reserve Order to have multiple share reduction in size would be
LLC (‘‘NYSE American’’) for the same
replenished quantities with separate applied against the most recent child
order type. order of ‘‘C,’’ which would be reduced
working times, each, a ‘‘child’’ order.
The Exchange also proposes non-
The proposed change to limit when a to 30 shares. Together with ‘‘B,’’ which
substantive amendments to Rules 7.31
Reserve Order would be replenished to would still be 50 shares, the two
and 7.46 to re-name the ‘‘Limit Non- displayed child orders would equal less
when the display quantity is
Displayed Order’’ as the ‘‘Non- decremented to below a round lot only than a round lot, but with no quantity
Displayed Limit Order.’’ In both cases, would reduce the number of child in reserve interest.
the Exchange believes that it promotes orders for a Reserve Order. The • Next, ‘‘A’’ is returned unexecuted,
clarity and consistency in its rules to Exchange believes that minimizing the and as described below, becomes
move the respective modifier for each of number of child orders for a Reserve reserve interest and is evaluated for
these rules before the term ‘‘Limit Order would reduce the potential for replenishment. Because the total display
Order.’’ market participants to detect that a child quantity (‘‘B’’ + ‘‘C’’) is less than a
Proposed Rule Change Relating to order displayed on the Exchange’s round lot, this Reserve Order would be
Reserve Orders proprietary market data feeds is replenished. But because the Reserve
associated with a Reserve Order. Order already has two child orders, the
The Exchange proposes to amend In most cases, the maximum number child order with the later working time,
Rule 7.31(d)(1) to change the manner by of child orders for a Reserve Order ‘‘C,’’ would be returned to the reserve
which the display portion of a Reserve would be two. For example, assume a interest, which would now have a
Order would be replenished. As Reserve Order to buy has a display quantity of 130 shares (‘‘C’’ + ‘‘A’’), and
proposed, rather than replenishing the quantity of 100 shares and an additional the Reserve Order would be replenished
display quantity following any 200 shares of reserve interest. A sell with 100 shares from the reserve interest
execution, the Exchange proposes to order of 50 shares would trade with the with a new working time, which would
replenish the Reserve Order when the display quantity of such Reserve Order, be a new child order ‘‘D.’’
display quantity is decremented to which would decrement the display • After this replenishment, this
below a round lot. The changes that the quantity to 50 shares. As proposed, the Reserve Order would have two child
Exchange is proposing to Rule 7.31 Exchange would then replenish the orders of ‘‘B’’ for 50 shares and ‘‘D’’ for
relating to Reserve Orders (and Primary Reserve Order with 100 shares from the 100 shares, and a reserve interest of 30
Pegged Orders) are identical to changes reserve interest, i.e., the minimum shares.
that were recently approved for the display size for the order. After this To effect these changes, the Exchange
Exchange’s affiliate, New York Stock second replenishment, the Reserve proposes to amend current Rule
Exchange LLC (‘‘NYSE’’).5 In addition, Order would have two child orders, one 7.31(d)(1)(B) to specify that each display
the proposed changes to how Reserve for 50 shares, the other for 100 shares, quantity of a Reserve Order with a
Orders would be replenished are each with different working times. different working time would be
consistent with how Reserve Orders are Generally, when there are two child referred to as a child order. The
replenished on other equity exchanges.6 orders, the older child order of less than Exchange further proposes new Rule
As is currently the case, the replenish a round lot will be executed before the 7.31(d)(1)(B)(i) that would provide that
quantity would be the minimum display second child order. However, there are when a Reserve Order is replenished
size of the order or the remaining limited circumstances when a Reserve from reserve interest and already has
quantity of reserve interest if it is less Order could have two child orders that two child orders that equal less than a
than the minimum display quantity. To equal less than a round lot, which, as round lot, the child order with the later
reflect this functionality, the Exchange proposed, would trigger a working time would rejoin the reserve
proposes that Rule 7.31(d)(1)(A) would replenishment. For such circumstance, interest and be assigned the new
be amended as follows (deleted text the Exchange proposes that when a working time assigned to the next
bracketed; new text underlined): Reserve Order is replenished from replenished quantity.
(A) On entry, the display quantity of reserve interest and already has two The Exchange also proposes new Rule
a Reserve Order must be entered in child orders that equal less than a round 7.31(d)(1)(B)(ii) to provide that if a
round lots. The displayed portion of a lot, the child order with the later Reserve Order is not routable (i.e., is
Reserve Order will be replenished when working time would be reassigned the combined with either a Non-Routable
the display quantity is decremented to new working time assigned to the next Limit Order or a Primary Pegged Order),
below a round lot. The replenish replenished quantity. the replenish quantity would be
quantity will be the minimum display For example, taking the same Reserve assigned a display and working price
quantity of the order or the remaining Order as above: consistent with the instructions for the
daltland on DSKBBV9HB2PROD with NOTICES
quantity of the reserve interest if it is • If 100 shares of such order (‘‘A’’) are order, which represents current
routed on arrival, it would have a functionality. For example, for a Non-
5 See Securities Exchange Act Release No. 83768
display quantity of 100 shares (‘‘B’’) and Routable Limit Reserve Order, if the
(August 3, 2018), 83 FR 39488 (August 9, 2018) display price would lock or cross the
(SR–NYSE–2018–26) (Approval Order).
100 shares in reserve interest.
6 See Cboe BZX Exchange, Inc. (‘‘BZX’’) Rule • While ‘‘A’’ is routed, a sell order of contra-side PBBO, the replenished
11.9(c)(1); Nasdaq Stock Market LLC (‘‘Nasdaq’’) 50 shares would trade with ‘‘B,’’ quantity would be assigned a display
Rule 7503(h). decrementing ‘‘B’’ to 50 shares and the price one MPV worse than the PBBO
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![43946 Federal Register / Vol. 83, No. 167 / Tuesday, August 28, 2018 / Notices
submissions should refer to File (b) The exercise price of each option Funds (‘‘ETFs’’ and referred to as
Number SR–NYSENAT–2018–19 and series listed by the Exchange shall be ‘‘Units’’ in Rule 5.3), or options on Trust
should be submitted on or before fixed at a price per share which is Issued Receipts (‘‘TIRs’’), the Exchange
September 18, 2018. reasonably close to the price of the shall not add new LEAP series on a
For the Commission, by the Division of underlying equity security, Exchange currently listed and traded option class
Trading and Markets, pursuant to delegated Traded Fund (‘‘ETF’’ and referred to as earlier than the Monday prior to the
authority.16 a ‘‘Unit’’ in Rule 5.3) or Trust Issued September expiration (which is 28
Eduardo A. Aleman, Receipt (‘‘TIR’’) at or about the time the months before the expiration)[:
Assistant Secretary. Exchange determines to list such series. (i) Earlier than September (which is
[FR Doc. 2018–18571 Filed 8–27–18; 8:45 am]
Additionally, 28 months before the expiration), for an
(i) Exercise Price Range Limitations— option class on the January expiration
BILLING CODE 8011–01–P
Except as provided in subparagraphs (ii) cycle;
through (iv) below, if the price of the (ii) Earlier than October (which is 27
SECURITIES AND EXCHANGE underlying security is less than or equal months before expiration), for an option
COMMISSION to $20, the Exchange shall not list new class on the February expiration cycle;
option series with an exercise price and
[Release No. 34–83909; File No. SR–CBOE– more than 100% above or below the (iii) Earlier than November (which is
2018–061] price of the underlying security. 26 months before expiration), for an
However, the foregoing restriction shall option class on the March expiration
Self-Regulatory Organizations; Cboe
not prohibit the listing of at least three cycle].
Exchange, Inc.; Notice of Filing and Pursuant to the Options Listing
Immediate Effectiveness of a Proposed exercise prices per expiration month in
an option class. Except as provided in Procedures Plan, exchanges that list and
Rule Change To Amend Rule 5.5A, trade the same equity option class, ETF
Select Provisions of Options Listing Rule 5.5(d)(4), if the price of the
underlying security is greater than $20, option class, or TIR option class are
Procedures Plan, 5.8, Long-Term authorized to jointly determine and
Equity Option Series (LEAPS) and Rule the Exchange shall not list new option
series with an exercise price more than coordinate with the Clearing
24.9, Terms of Index Option Contracts Corporation on the date of introduction
50% above or below the price of the
August 22, 2018. underlying security. of new LEAP series for that option class
Pursuant to Section 19(b)(1) of the The price of the underlying security is consistent with this paragraph ([c]b).
Securities Exchange Act of 1934 (the measured by: ([d]c) The Exchange shall not list new
‘‘Act’’),1 and Rule 19b–4 thereunder,2 (1) For intra-day add-on series and LEAP series on equity option classes,
notice is hereby given that on August next-day series additions, the daily high options on ETFs, or options on TIRs in
20, 2018, Cboe Exchange, Inc. (the and low of all prices reported by all a new expiration year if the national
‘‘Exchange’’ or ‘‘Cboe Options’’) filed national securities exchanges; average daily contract volume,
with the Securities and Exchange (2) for new expiration months, the excluding LEAP and FLEX series, for
Commission (the ‘‘Commission’’) the daily high and low of all prices reported that option class during the preceding
proposed rule change as described in by all national securities exchanges on three calendar months is less than 1,000
Items I and II below, which Items have the day the Exchange determines its contracts, unless the new LEAP series
been prepared by the Exchange. The preliminary notification of new series; has an expiration year that has already
Exchange filed the proposal as a ‘‘non- [and] been listed on another exchange for that
controversial’’ proposed rule change (3) for option series to be added as a option class. The preceding volume
pursuant to Section 19(b)(3)(A)(iii) of result of pre-market trading, the most threshold does not apply during the first
the Act 3 and Rule 19b–4(f)(6) recent share price reported by all six months an equity option class,
thereunder.4 The Commission is national securities exchanges between option on an ETF, or option on a TIR
publishing this notice to solicit 7:45 a.m. and 8:30 a.m. (Chicago is listed on any exchange.
comments on the proposed rule change time)[.]; and * * * * *
from interested persons. (4) for option series to be added based
on trading following regular trading Rule 24.9. Terms of Index Option
I. Self-Regulatory Organization’s hours, the most recent share price Contracts
Statement of the Terms of Substance of reported by all national securities (a) No change.
the Proposed Rule Change exchanges between 3:15 p.m. and 5:00 (b) Long-Term Index Option Series
The Exchange proposes to amend p.m. (Chicago time). (‘‘LEAPS’’).
Rules 5.5A, 5.8, and 24.9. (ii)–(vi) No change. (1) Notwithstanding the provisions of
(additions are italicized; deletions are * * * * * Paragraph (a)(2) above, the Exchange
[bracketed]) may list long-term index option series
Rule 5.8. Long-Term Equity Option that expire from 12 to 180 months from
* * * * * Series (LEAPS) the date of issuance.
Rules of Cboe Exchange, Inc. (a) No change. (A) Index LEAPS may be based on
(b) [When a new equity LEAPS series either the full or reduced value of the
* * * * * is listed, such series will be opened for underlying index.
Rule 5.5A. Select Provisions of Options trading either when there is buying or (B) There may be up to 10 expiration
Listing Procedures Plan selling interest, or 40 minutes prior to months, none further out than one-
daltland on DSKBBV9HB2PROD with NOTICES
(a) No change. the close, whichever occurs first. No hundred eighty (180) months.
quotations will be posted for such [(B) When a new Index LEAPS series
16 17 CFR 200.30–3(a)(12). option series until they are opened for is listed, such series will be opened for
1 15 U.S.C. 78s(b)(1). trading. trading either when there is buying or
2 17 CFR 240.19b–4. (c)] With regard to the listing of new selling interest, or 40 minutes prior to
3 15 U.S.C. 78s(b)(3)(A)(iii). January LEAPS series on equity option the close, whichever occurs first. No
4 17 CFR 240.19b–4(f)(6). classes, options on Exchange Traded quotations will be posted for such
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Document Created: 2018-08-28 00:23:27
Document Modified: 2018-08-28 00:23:27
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 43942 |
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