83 FR 44984 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31-E Relating To Reserve Orders, To Re-Name Two Order Types, and To Delete Inoperative Rule Text
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 171 (September 4, 2018)
Federal Register Volume 83, Issue 171 (September 4, 2018)
| Page Range | 44984-44988 | |
| FR Document | 2018-19059 |
[Federal Register Volume 83, Number 171 (Tuesday, September 4, 2018)] [Notices] [Pages 44984-44988] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-19059] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83967; File No. SR-NYSEARCA-2018-61] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31- E Relating To Reserve Orders, To Re-Name Two Order Types, and To Delete Inoperative Rule Text August 28, 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 15, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 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 amend Rule 7.31-E relating to Reserve Orders, to re-name two order types, and to delete inoperative rule text. 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-E relating to Reserve Orders, to re-name two order types, and to delete inoperative rule text. Background Rule 7.31-E(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-E(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-E(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-E(d)(1)(C), a Reserve Order must be designated Day and may be combined with an Arca Only 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(e). --------------------------------------------------------------------------- Rule 7.31-E(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(e)(1) defines an ``Arca Only Order,'' which is a Limit Order that does not route. Proposed Rule Change Relating to Order Type Names The Exchange proposes non-substantive amendments to Rules 7.31-E and 7.46-E to re-name the ``Arca Only 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-E and 7.46-E to re-name the ``Limit Non-Displayed Order'' as the ``Non-Displayed Limit Order.'' The Exchange believes that this proposed rule change would conform the style of this order type with the name ``Non-Routable Limit Order.'' The Exchange therefore believes that this proposed rule change would promote clarity and consistency in its rules. Proposed Rule Change Relating to Reserve Orders The Exchange proposes to amend Rule 7.31-E(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). --------------------------------------------------------------------------- [[Page 44985]] 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-E(d)(1)(A) would be amended as follows (deleted text bracketed; new text italic): (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-E(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-E(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-E(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 and a working price equal to the contra-side PBBO, as provided for in Rule 7.31-E(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-E. --------------------------------------------------------------------------- For a Primary Pegged Reserve Order, the Exchange proposes that the replenished quantity would follow Rule 7.31-E(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-E(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-E(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-E(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 [[Page 44986]] 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-E(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-E(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. Additional Proposed Rule Changes The Exchange proposes additional non-substantive amendments to its rules to remove inoperative rule text. First, the Exchange proposes to amend Rule 7.35-E (Auctions) to remove Commentary .02, which sets forth rules that were operative no later than February 28, 2018. Because the amendments described in that Commentary .02 have been implemented, Commentary .02 is now moot and can be deleted.\8\ --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release No. 82140 (November 21, 2017), 82 FR 56304 (November 28, 2017) (SR-NYSEArca-2017-133) (Notice of filing and immediate effectiveness of proposed rule change to add temporary rule). --------------------------------------------------------------------------- Second, the Exchange proposes to amend Rule 7.39-E (Adjustment of Open Orders) to delete the title and text of the rule and designate the rule ``Reserved.'' Rule 7.39-E relates to the adjustment of open orders, i.e., orders with a Good Till Cancelled (``GTC'') or Good Till Date (``GTD'') time-in-force modifier. On Pillar, the Exchange does not offer GTC or GTD time-in-force modifiers.\9\ When the Exchange deleted its pre-Pillar order type rules, it inadvertently did not delete Rule 7.39-E.\10\ Because this rule is now inoperative, the Exchange proposes to delete it as moot. --------------------------------------------------------------------------- \9\ See Securities Exchange Act Release No. 76267 (October 26, 2015), 80 FR 66951 (October 30, 2015) (SR-NYSEArca-2015-56) (Approval Order). \10\ See Securities Exchange Act Release No. 79078 (October 11, 2016), 81 FR 71559 (October 17, 2017) (SR-NYSEArca-2016-135) (Notice of filing and immediate effectiveness). --------------------------------------------------------------------------- * * * * * 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''),\11\ in general, and furthers the objectives of Section 6(b)(5),\12\ 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. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 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.\13\ --------------------------------------------------------------------------- \13\ 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 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 [[Page 44987]] 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-E 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 ``Arca Only 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'' and using order type names that are used on NYSE American. Finally, the Exchange believes that removing inoperative rule text would remove impediments to and perfect the mechanism of a free and open market and a national market system because these proposed rule changes would promote clarity in Exchange rules. 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 \14\ and Rule 19b-4(f)(6) thereunder.\15\ 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. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A)(iii). \15\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. --------------------------------------------------------------------------- \16\ 17 CFR 240.19b-4(f)(6). \17\ 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) \18\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \18\ 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-NYSEArca-2018-61 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-NYSEArca-2018-61. 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 44988]] submissions should refer to File Number SR-NYSEArca-2018-61 and should be submitted on or before September 25, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-19059 Filed 8-31-18; 8:45 am] BILLING CODE 8011-01-P
![44984 Federal Register / Vol. 83, No. 171 / Tuesday, September 4, 2018 / Notices
Rules 17Ad–22(e)(23)(i) and (ii) under comments on the proposed rule change replenished from reserve interest, a new
the Act.44 from interested persons. working time is assigned to the
replenished quantity of the Reserve
III. Conclusion I. Self-Regulatory Organization’s
Order, while the reserve interest retains
On the basis of the foregoing, the Statement of the Terms of Substance of
the Proposed Rule Change the working time of original order entry.
Commission finds that the proposal is Pursuant to Rule 7.31–E(d)(1)(C), a
consistent with the requirements of the The Exchange proposes amend Rule Reserve Order must be designated Day
Act and in particular with the 7.31–E relating to Reserve Orders, to re- and may be combined with an Arca
requirements of Section 17A of the name two order types, and to delete Only Order or a Primary Pegged Order.
Act 45 and the rules and regulations inoperative rule text. The proposed rule Rule 7.31–E(d)(2) defines a ‘‘Limit
thereunder. change is available on the Exchange’s Non-Displayed Order,’’ which is a Limit
It is therefore ordered, pursuant to website at www.nyse.com, at the Order that is not displayed and does not
Section 19(b)(2) of the Act,46 that principal office of the Exchange, and at route. Rule 7.31–E(e)(1) defines an
proposed rule change SR–NSCC–2017– the Commission’s Public Reference ‘‘Arca Only Order,’’ which is a Limit
018, as modified by Amendment No. 1, Room. Order that does not route.
be, and it hereby is, approved 47 as of II. Self-Regulatory Organization’s
the date of this order or the date of a Proposed Rule Change Relating to Order
Statement of the Purpose of, and Type Names
notice by the Commission authorizing Statutory Basis for, the Proposed Rule
NSCC to implement advance notice SR– Change The Exchange proposes non-
NSCC–2017–806, as modified by substantive amendments to Rules 7.31–
Amendment No. 1, whichever is later. In its filing with the Commission, the E and 7.46–E to re-name the ‘‘Arca Only
self-regulatory organization included Order’’ as the ‘‘Non-Routable Limit
For the Commission, by the Division of statements concerning the purpose of,
Trading and Markets, pursuant to delegated Order.’’ This proposed rule change is
authority.48
and basis for, the proposed rule change based on the term used by the
and discussed any comments it received Exchange’s affiliate, NYSE American
Eduardo A. Aleman,
on the proposed rule change. The text LLC (‘‘NYSE American’’) for the same
Assistant Secretary. of those statements may be examined at
[FR Doc. 2018–19053 Filed 8–31–18; 8:45 am] order type.
the places specified in Item IV below.
The Exchange also proposes non-
BILLING CODE 8011–01–P The Exchange has prepared summaries,
substantive amendments to Rules 7.31–
set forth in sections A, B, and C below,
E and 7.46–E to re-name the ‘‘Limit
of the most significant parts of such
SECURITIES AND EXCHANGE Non-Displayed Order’’ as the ‘‘Non-
statements.
COMMISSION Displayed Limit Order.’’ The Exchange
A. Self-Regulatory Organization’s believes that this proposed rule change
[Release No. 34–83967; File No. SR– Statement of the Purpose of, and the would conform the style of this order
NYSEARCA–2018–61] Statutory Basis for, the Proposed Rule type with the name ‘‘Non-Routable
Change Limit Order.’’ The Exchange therefore
Self-Regulatory Organizations; NYSE believes that this proposed rule change
Arca, Inc.; Notice of Filing and 1. Purpose
would promote clarity and consistency
Immediate Effectiveness of Proposed The Exchange proposes to amend in its rules.
Rule Change To Amend Rule 7.31–E Rule 7.31–E relating to Reserve Orders,
Relating To Reserve Orders, To Re- to re-name two order types, and to Proposed Rule Change Relating to
Name Two Order Types, and To Delete delete inoperative rule text. Reserve Orders
Inoperative Rule Text The Exchange proposes to amend
Background
August 28, 2018. Rule 7.31–E(d)(1) to change the manner
Rule 7.31–E(d)(1) defines a Reserve by which the display portion of a
Pursuant to Section 19(b)(1) 1 of the Order as a Limit or Inside Limit Order
Securities Exchange Act of 1934 Reserve Order would be replenished. As
with a quantity of the size displayed proposed, rather than replenishing the
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3 and with a reserve quantity of the size
notice is hereby given that, on August display quantity following any
(‘‘reserve interest’’) that is not execution, the Exchange proposes to
15, 2018, NYSE Arca, Inc. (‘‘Exchange’’ displayed. The displayed quantity of a
or ‘‘NYSE Arca’’) filed with the replenish the Reserve Order when the
Reserve Order is ranked Priority 2— display quantity is decremented to
Securities and Exchange Commission Display Orders and the reserve interest
(‘‘Commission’’) the proposed rule below a round lot. The changes that the
is ranked Priority 3—Non-Display Exchange is proposing to Rule 7.31
change as described in Items I, II, and Orders.4 Rule 7.31–E(d)(1)(A) provides
III below, which Items have been relating to Reserve Orders (and Primary
that on entry, the display quantity of a Pegged Orders) are identical to changes
prepared by the self-regulatory Reserve Order must be entered in round
organization. The Commission is that were recently approved for the
lots and the displayed portion of a Exchange’s affiliate, New York Stock
publishing this notice to solicit Reserve Order will be replenished Exchange LLC (‘‘NYSE’’).5 In addition,
following any execution. That rule the proposed changes to how Reserve
44 17 CFR 240.17Ad–22(e)(23)(i) and (ii). further provides that the Exchange will Orders would be replenished are
45 15 U.S.C. 78q–1. display the full size of the Reserve consistent with how Reserve Orders are
sradovich on DSK3GMQ082PROD with NOTICES
46 15 U.S.C. 78s(b)(2).
47 In approving the Proposed Rule Change, the
Order when the unfilled quantity is less replenished on other equity exchanges.6
Commission has considered the Proposed Rule than the minimum display size for the
Change’s impact on efficiency, competition, and order. Rule 7.31–E(d)(1)(B) provides that 5 See Securities Exchange Act Release No. 83768
capital formation. See 15 U.S.C. 78c(f). each time a Reserve Order is (August 3, 2018), 83 FR 39488 (August 9, 2018)
48 17 CFR 200.30–3(a)(12).
(SR–NYSE–2018–26) (Approval Order).
1 15 U.S.C. 78s(b)(1). 4 The terms ‘‘Priority 2—Display Orders’’ and 6 See Cboe BZX Exchange, Inc. (‘‘BZX’’) Rule
2 15 U.S.C. 78a.
‘‘Priority 3—Non-Display Orders’’ are defined in 11.9(c)(1); Nasdaq Stock Market LLC (‘‘Nasdaq’’)
3 17 CFR 240.19b–4. Rule 7.36–E(e). Rule 7503(h).
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![Federal Register / Vol. 83, No. 171 / Tuesday, September 4, 2018 / Notices 44985
As is currently the case, the replenish replenishment. For such circumstance, rejoin the reserve interest and be
quantity would be the minimum display the Exchange proposes that when a assigned the new working time assigned
size of the order or the remaining Reserve Order is replenished from to the next replenished quantity.
quantity of reserve interest if it is less reserve interest and already has two The Exchange also proposes new Rule
than the minimum display quantity. To child orders that equal less than a round 7.31–E(d)(1)(B)(ii) to provide that if a
reflect this functionality, the Exchange lot, the child order with the later Reserve Order is not routable (i.e., is
proposes that Rule 7.31–E(d)(1)(A) working time would be reassigned the combined with either a Non-Routable
would be amended as follows (deleted new working time assigned to the next Limit Order or a Primary Pegged Order),
text bracketed; new text italic): replenished quantity. the replenish quantity would be
(A) On entry, the display quantity of For example, taking the same Reserve assigned a display and working price
a Reserve Order must be entered in Order as above: consistent with the instructions for the
round lots. The displayed portion of a • If 100 shares of such order (‘‘A’’) are order, which represents current
Reserve Order will be replenished when routed on arrival, it would have a functionality. For example, for a Non-
the display quantity is decremented to display quantity of 100 shares (‘‘B’’) and Routable Limit Reserve Order, if the
below a round lot. The replenish 100 shares in reserve interest. display price would lock or cross the
quantity will be the minimum display • While ‘‘A’’ is routed, a sell order of contra-side PBBO, the replenished
quantity of the order or the remaining 50 shares would trade with ‘‘B,’’ quantity would be assigned a display
quantity of the reserve interest if it is decrementing ‘‘B’’ to 50 shares and the price one MPV worse than the PBBO
less than the minimum display quantity Reserve Order would be replenished and a working price equal to the contra-
[following any execution. The Exchange from reserve interest, creating a second side PBBO, as provided for in Rule
will display the full size of the Reserve child order ‘‘C’’ of 100 shares. 7.31–E(e)(1)(A)(i).7 The Exchange
Order when the unfilled quantity is less • Next, the Exchange receives a believes that this proposed rule text
than the minimum display size for the request to reduce the size of the Reserve would provide transparency and clarity
order]. Order from 300 shares to 230 shares. to Exchange rules.
Under current functionality, because Because ‘‘A’’ is still routed away and For a Primary Pegged Reserve Order,
the replenished quantity is assigned a there is no reserve interest, and as the Exchange proposes that the
new working time, it is feasible for a described in more detail below, this 70 replenished quantity would follow Rule
single Reserve Order to have multiple share reduction in size would be 7.31–E(h)(2)(B), which provides that a
replenished quantities with separate applied against the most recent child Primary Pegged Order would be rejected
working times, each, a ‘‘child’’ order. order of ‘‘C,’’ which would be reduced if the PBBO is locked or crossed.
The proposed change to limit when a to 30 shares. Together with ‘‘B,’’ which Because a Primary Pegged Reserve
Reserve Order would be replenished to would still be 50 shares, the two Order would have resting reserve
when the display quantity is displayed child orders would equal less interest, the Exchange proposes to
decremented to below a round lot only than a round lot, but with no quantity amend Rule 7.31–E(h)(2)(B) to provide
would reduce the number of child in reserve interest. that if the PBBO is locked or crossed
orders for a Reserve Order. The • Next, ‘‘A’’ is returned unexecuted, when the display quantity of a Primary
Exchange believes that minimizing the and as described below, becomes Pegged Reserve Order is replenished,
number of child orders for a Reserve reserve interest and is evaluated for the entire order would be cancelled. The
Order would reduce the potential for replenishment. Because the total display Exchange believes that cancelling the
market participants to detect that a child quantity (‘‘B’’ + ‘‘C’’) is less than a entire order is consistent with the
order displayed on the Exchange’s round lot, this Reserve Order would be current rule that provides that the entire
proprietary market data feeds is replenished. But because the Reserve order would be rejected on arrival if the
associated with a Reserve Order. Order already has two child orders, the display quantity would lock or cross the
In most cases, the maximum number child order with the later working time, PBBO.
of child orders for a Reserve Order ‘‘C,’’ would be returned to the reserve The Exchange further proposes to add
would be two. For example, assume a interest, which would now have a new subsection (D) to Rule 7.31–E(d)(1)
Reserve Order to buy has a display quantity of 130 shares (‘‘C’’ + ‘‘A’’), and to describe when a Reserve Order would
quantity of 100 shares and an additional the Reserve Order would be replenished be routed. As proposed, a routable
200 shares of reserve interest. A sell with 100 shares from the reserve interest Reserve Order would be evaluated for
order of 50 shares would trade with the with a new working time, which would routing both on arrival and each time
display quantity of such Reserve Order, be a new child order ‘‘D.’’ the display quantity is replenished.
which would decrement the display • After this replenishment, this Proposed Rule 7.31–E(d)(1)(D)(i)
quantity to 50 shares. As proposed, the Reserve Order would have two child would provide that if routing is
Exchange would then replenish the orders of ‘‘B’’ for 50 shares and ‘‘D’’ for required, the Exchange would route
Reserve Order with 100 shares from the 100 shares, and a reserve interest of 30 from reserve interest before publishing
reserve interest, i.e., the minimum shares. the display quantity. In addition, if after
display size for the order. After this To effect these changes, the Exchange routing, there is less than a round lot
second replenishment, the Reserve proposes to amend current Rule 7.31– available to display, the Exchange
Order would have two child orders, one E(d)(1)(B) to specify that each display would wait until the routed quantity
for 50 shares, the other for 100 shares, quantity of a Reserve Order with a returns (executed or unexecuted) before
each with different working times. different working time would be publishing the display quantity. In the
Generally, when there are two child referred to as a child order. The
sradovich on DSK3GMQ082PROD with NOTICES
example described above, the Exchange
orders, the older child order of less than Exchange further proposes new Rule would have published the display
a round lot will be executed before the 7.31–E(d)(1)(B)(i) that would provide quantity before the routed quantity
second child order. However, there are that when a Reserve Order is returned because the display quantity
limited circumstances when a Reserve replenished from reserve interest and was at least a round lot. If, however, 250
Order could have two child orders that already has two child orders that equal
equal less than a round lot, which, as less than a round lot, the child order 7 The term ‘‘PBBO’’ is defined in Rule 1.1. The
proposed, would trigger a with the later working time would term ‘‘MPV’’ is defined in Rule 7.6–E.
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![44988 Federal Register / Vol. 83, No. 171 / Tuesday, September 4, 2018 / Notices
submissions should refer to File change was published for comment in I. Description
Number SR–NYSEArca–2018–61 and the Federal Register on January 8, In the Advance Notice, NSCC
should be submitted on or before 2018.4 On February 8, 2018, the proposes to (1) adopt an R&W Plan; (2)
September 25, 2018. Commission designated a longer period amend NSCC’s Rules & Procedures
For the Commission, by the Division of within which to approve, disapprove, or (‘‘Rules’’) 9 to adopt Rule 41
Trading and Markets, pursuant to delegated institute proceedings to determine (Corporation Default), Rule 42 (Wind-
authority.19 whether to approve or disapprove the down of the Corporation), and Rule 60
Eduardo A. Aleman, proposed rule change.5 On March 20, (Market Disruption and Force Majeure)
Assistant Secretary. 2018, the Commission instituted (each a ‘‘Proposed Rule’’ and,
[FR Doc. 2018–19059 Filed 8–31–18; 8:45 am] proceedings to determine whether to collectively, the ‘‘Proposed Rules’’); and
BILLING CODE 8011–01–P approve or disapprove the proposed (3) re-number current Rule 42 (Wind-
rule change.6 On June 25, 2018, the down of a Member, Fund Member or
Commission designated a longer period Insurance Carrier/Retirement Services
SECURITIES AND EXCHANGE for Commission action on the Member) to Rule 40, which is currently
COMMISSION proceedings to determine whether to reserved for future use.
NSCC states that the R&W Plan would
[Release No. 34–83974; File No. SR–NSCC– approve or disapprove the proposed
be used by the Board of Directors of
2017–017] rule change.7 On June 28, 2018, NSCC
NSCC (‘‘Board’’) and management of
filed Amendment No. 1 to the proposed NSCC in the event NSCC encounters
Self-Regulatory Organizations; rule change to amend and replace in its
National Securities Clearing scenarios that could potentially prevent
entirety the proposed rule change as it from being able to provide its critical
Corporation; Order Approving a originally submitted on December 18,
Proposed Rule Change, as Modified by services as a going concern.
2017.8 The Commission did not receive NSCC states that the Proposed Rules
Amendment No. 1, To Adopt a any comments. This order approves the are designed to (1) facilitate the
Recovery & Wind-Down Plan and proposed rule change, as modified by implementation of the R&W Plan when
Related Rules necessary and, in particular, allow
Amendment No. 1 (hereinafter
August 28, 2018. ‘‘Proposed Rule Change’’). NSCC to effectuate its strategy for
On December 18, 2017, National winding down and transferring its
Securities Clearing Corporation 2017. Securities Exchange Act Release No. 83745 business; (2) provide Members and
(‘‘NSCC’’) filed with the Securities and (July 31, 2018), 83 FR 38329 (August 6, 2018) (SR– Limited Members with transparency
NSCC–2017–805). NSCC submitted a courtesy copy around critical provisions of the R&W
Exchange Commission (‘‘Commission’’) of Amendment No. 1 to the Advance Notice through
proposed rule change SR–NSCC–2017– the Commission’s electronic public comment letter
Plan that relate to their rights,
017 pursuant to Section 19(b)(1) of the mechanism. Accordingly, Amendment No. 1 to the responsibilities and obligations; and (3)
Securities Exchange Act of 1934 Advance Notice has been publicly available on the provide NSCC with the legal basis to
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2 to Commission’s website at https://www.sec.gov/rules/ implement those provisions of the R&W
sro/nscc-an.htm since June 29, 2018. On July 6, Plan when necessary.
adopt a recovery and wind-down plan 2018, the Commission received a response to its
and related rules.3 The proposed rule request for additional information in consideration A. NSCC R&W Plan
of the Advance Notice, which, in turn, added a
19 17 further 60-days to the review period pursuant to The R&W Plan would be structured to
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
Section 806(e)(1)(E) and (G) of the Clearing provide a roadmap, define the strategy,
2 17 CFR 240.19b–4.
Supervision Act. 12 U.S.C. 5465(e)(1)(E) and (G); and identify the tools available to NSCC
see Memorandum from the Office of Clearance and
3 On December 18, 2017, NSCC filed the proposed
Settlement Supervision, Division of Trading and
to either (i) recover, in the event it
rule change as advance notice SR–NSCC–2017–805 Markets, titled ‘‘Response to the Commission’s experiences losses that exceed its
with the Commission pursuant to Section 806(e)(1) Request for Additional Information,’’ available at prefunded resources (such strategies
of Title VIII of the Dodd-Frank Wall Street Reform
and Consumer Protection Act entitled the Payment,
https://www.sec.gov/rules/sro/nscc-an.htm. The and tools referred to herein as the
Commission did not receive any comments. The ‘‘Recovery Plan’’) or (ii) wind-down its
Clearing, and Settlement Supervision Act of 2010 proposal, as set forth in both the Advance Notice
(‘‘Clearing Supervision Act’’) and Rule 19b– and the proposed rule change, each as modified by business in a manner designed to permit
4(n)(1)(i) of the Act (‘‘Advance Notice’’). 12 U.S.C. Amendments No. 1, shall not take effect until all the continuation of its critical services
5465(e)(1) and 17 CFR 240.19b–4(n)(1)(i), required regulatory actions are completed. in the event that such recovery efforts
respectively. The Advance Notice was published for
comment in the Federal Register on January 30,
4 Securities Exchange Act Release No. 82430
are not successful (such strategies and
(January 2, 2018), 83 FR 841 (January 8, 2018) (SR– tools referred to herein as the ‘‘Wind-
2018. In that publication, the Commission also
NSCC–2017–017).
extended the review period of the Advance Notice 5 Securities Exchange Act Release No. 82669 down Plan’’).
for an additional 60 days, pursuant to Section The R&W Plan would identify (i) the
806(e)(1)(H) of the Clearing Supervision Act. 12 (February 8, 2018), 83 FR 6653 (February 14, 2018)
U.S.C. 5465(e)(1)(H); Securities Exchange Act (SR–DTC–2017–021, SR–FICC–2017–021, SR– recovery tools available to NSCC to
Release No. 82581 (January 24, 2018), 83 FR 4327 NSCC–2017–017). address the risks of (a) uncovered losses
6 Securities Exchange Act Release No. 82908
(January 30, 2018) (SR–NSCC–2017–805). On April or liquidity shortfalls resulting from the
10, 2018, the Commission required additional (March 20, 2018), 83 FR 12986 (March 26, 2018)
(SR–NSCC–2017–017). default of one or more Members, and (b)
information from NSCC pursuant to Section
806(e)(1)(D) of the Clearing Supervision Act, which 7 Securities Exchange Act Release No. 83509 losses arising from non-default events,
tolled the Commission’s period of review of the (June 25, 2018), 83 FR 30785 (June 29, 2018) (SR– such as damage to its physical assets, a
Advance Notice until 60 days from the date the DTC–2017–021, SR–FICC–2017–021, SR–NSCC– cyber-attack, or custody and investment
information required by the Commission was 2017–017).
8 Securities Exchange Act Release No. 83632 (July
losses, and (ii) the strategy for
received by the Commission. 12 U.S.C.
sradovich on DSK3GMQ082PROD with NOTICES
5465(e)(1)(D); see 12 U.S.C. 5465(e)(1)(E)(ii) and 13, 2018), 83 FR 34166 (July 19, 2018) (SR–NSCC– implementation of such tools. The R&W
(G)(ii); see Memorandum from the Office of 2017–017). NSCC submitted a courtesy copy of Plan would also establish the strategy
Clearance and Settlement Supervision, Division of Amendment No. 1 to the proposed rule change and framework for the orderly wind-
Trading and Markets, titled ‘‘Commission’s Request through the Commission’s electronic public down of NSCC and the transfer of its
for Additional Information,’’ available at https:// comment letter mechanism. Accordingly,
www.sec.gov/rules/sro/nscc-an.htm. On June 28, Amendment No. 1 to the proposed rule change has business in the remote event the
2018, NSCC filed Amendment No. 1 to the Advance been publicly available on the Commission’s
Notice to amend and replace in its entirety the website at https://www.sec.gov/rules/sro/nscc.htm 9 Capitalized terms used herein and not otherwise
Advance Notice as originally filed on December 18, since June 29, 2018. defined herein are defined in the Rules.
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Document Created: 2018-09-01 02:59:09
Document Modified: 2018-09-01 02:59:09
| 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 44984 |
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