83 FR 58628 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delete Exchange Rules That Reference Pillar Phase I Protocols

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 224 (November 20, 2018)

[Federal Register Volume 83, Number 224 (Tuesday, November 20, 2018)]
[Notices]
[Pages 58628-58630]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-25238]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84586; File No. SR-NYSEArca-2018-79]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Delete Exchange 
Rules That Reference Pillar Phase I Protocols

November 14, 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 November 5, 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 and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 delete Exchange rules that reference 
Pillar phase I protocols now that Pillar phase I protocols are no 
longer available for ETP Holders to communicate with the NYSE Arca 
Marketplace. 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.

[[Page 58629]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to delete obsolete 
rules from the Exchange's rulebook.
    As a general matter, ETP Holders enter orders and order 
instructions by using communication protocols that map to the order 
types and modifiers described in Exchange rules. Prior to the 
implementation of Pillar, ETP Holders communicated with the NYSE Arca 
Marketplace using Pillar phase I protocols. When the Exchange 
introduced trading on its Pillar trading platform, the Exchange also 
introduced new technology to support how ETP Holders communicate with 
the NYSE Arca Marketplace, referred to in the Exchange's rules as 
Pillar phase II protocols. During the Pillar implementation, there was 
a period of time when both Pillar phase I protocols and Pillar phase II 
protocols were available to ETP Holders. Effective October 1, 2018, 
Pillar phase I protocols are no longer available to ETP Holders. All 
ETP Holders now use Pillar phase II protocols to communicate with the 
NYSE Arca Marketplace. As a result, there is no longer a need to 
provide a distinction between Pillar phase I protocols and Pillar phase 
II protocols in the Exchange's rules.
    Now that Pillar phase I protocols are no longer available, the 
Exchange proposes to delete references to Pillar phase I protocols from 
the Exchange's rulebook. Specifically, the Exchange proposes to delete 
the preamble to Rule 7.11-E (Limit Up-Limit Down Plan and Trading 
Pauses in Individual Securities Due to Extraordinary Market 
Volatility), which states: ``Rules 7.11-E(a)(5) and (a)(6) govern order 
processing when ETP Holders communicate with the NYSE Arca Marketplace 
using Pillar phase I protocols. Rule 7.11-E(a)(5P) governs order 
processing when ETP Holders communicate with the NYSE Arca Marketplace 
using Pillar phase II protocols. The Exchange will file a separate 
proposed rule change to delete Rules 7.11-E(a)(5) and (a)(6) when the 
Pillar phase I protocols are no longer available.''
    The Exchange also proposes to delete Rules 7.11-E(a)(5) and (a)(6) 
from the rulebook since Pillar phase I protocols are no longer 
available on the Exchange. The preamble also states that Rule 7.11-
E(a)(5P) would govern order processing when ETP Holders communicate 
with the NYSE Arca Marketplace using Pillar phase II protocols. Now 
that ETP Holders communicate with the NYSE Arca Marketplace using 
Pillar phase II protocols, for purposes of Rule 7.11-E, order 
processing would be governed by Rule 7.11-E(a)(5P). With the proposed 
deletion of current text in Rules 7.11-E(a)(5) and (a)(6), the Exchange 
proposes to renumber current Rule 7.11-E(a)(5P) as 7.11-E(a)(5) and 
renumber current Rule 7.11-E(a)(7)-(9) as Rule 7.11-E(a)(6)-(8) with no 
changes to the rule text.
    Additionally, the Exchange proposes to amend Rule 7.31-E (Orders 
and Modifiers). Specifically, Rule 7.31-E(c)(5) currently provides that 
an Imbalance Offset Order (``IO Order'') is a Limit Order to buy (sell) 
that is to be traded only in a Trading Halt Auction. The rule further 
provides that IO Orders are available only to ETP Holders using Pillar 
phase II protocols. Now that all ETP Holders use Pillar phase II 
protocols, the Exchange proposes to delete the second sentence of Rule 
7.31-E(c)(5), which the Exchange believes is superfluous and no longer 
necessary.
    Further, the Exchange proposes to amend Rule 7.31-E(i)(2) which 
provides how the Self Trade Prevention (``STP'') functionality operates 
on the Exchange. Current Rule 7.31-E(i)(2) provides that any incoming 
order designated with an STP modifier is prevented from executing 
against a resting opposite side order also designated with an STP 
modifier and from the same ETP ID. The STP modifier on the incoming 
order controls the interaction between two orders marked with STP 
modifiers. Orders marked with an STP modifier are not prevented from 
interacting during any auction.
    As part of the Pillar implementation, the Exchange amended Rule 
7.31-E(i)(2)(E) to provide that for purposes of STP, references to ETP 
ID mean an ETP ID when using Pillar phase I protocols to communicate 
with the NYSE Arca Marketplace or an MPID when using Pillar phase II 
protocols to communicate with the NYSE Marketplace. Now that all ETP 
Holders use Pillar phase II protocols, the Exchange proposes to delete 
Rule 7.31-E(i)(2)(E) as the distinction provided in the rule is no 
longer necessary. The Exchange also proposes to replace all references 
to ETP ID in Rule 7.31-E(i)(2)(A)-(D) with MPID to reflect that with 
Pillar phase II protocols in place now, the Exchange would use MPID 
instead of ETP ID to identify ETP Holders for purposes of STP.
    Finally, the Exchange proposes to amend Rule 7.34-E (Trading 
Sessions). Specifically, Rule 7.34-E(b)(1) provides that any order 
entered into the NYSE Arca Marketplace must include a designation for 
which trading session(s) the order would remain in effect. The rule 
further provides that for ETP Holders that communicate with the NYSE 
Arca Marketplace using Pillar phase II protocols, orders entered 
without a trading session designation would be rejected. The Exchange 
proposes to delete reference to ETP Holders communicating with the NYSE 
Arca Marketplace using Pillar phase II protocols from the current rule 
because such reference is not necessary since all ETP Holders now 
communicate with the NYSE Arca Marketplace using Pillar phase II 
protocols. Additionally, since ETP Holders no longer communicate with 
the NYSE Arca Marketplace using Pillar phase I protocols, the Exchange 
proposes to delete Rules 7.34-E(b)(2) and (b)(3) in their entirety 
because it is no longer necessary for Exchange rules to distinguish 
between Pillar phase I protocols and Pillar phase II protocols for 
purposes of designating the trading session(s) for which orders would 
remain in effect on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\5\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that amending its rules to 
remove references to Pillar phase I protocols would promote the 
protection of investors and the public interest because it would 
promote clarity and transparency in Exchange rules governing what rules 
govern trading on the Exchange because Pillar phase I protocols are no 
longer available for ETP Holders to communicate with the NYSE Arca 
Marketplace. The Exchange further believes that deleting references to 
Pillar phase I protocols from the Exchange's rules would remove 
impediments to and perfect the mechanism of a national

[[Page 58630]]

market system because these proposed changes would add greater clarity 
to the Exchange's rules and promote market transparency and efficiency 
because Pillar phase I protocols, which for a period of time were 
available to ETP Holders to communicate with the NYSE Arca Marketplace, 
are no longer available.
    The Exchange believes that the proposed rule change to replace 
references to ETP ID with MPID for STP purposes would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the proposed change would eliminate 
confusion with respect to how the Exchange identifies the identity of 
an ETP Holder for purposes of the Exchange's STP functionality. The 
Exchange further believes that this non-substantive amendment to the 
current rule is intended to provide clarity and eliminate confusion 
among market participants, which is in the interests of all investors 
and the general public.

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 competitive issues but rather is designed to 
ensure a fair and orderly market by removing trading rules that are no 
longer operative. As such, the proposed rule changes are intended to 
promote greater efficiency and transparency concerning trading on the 
Exchange.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\ thereunder because 
the proposal does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) by its terms, become operative for 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \8\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay period. The Commission 
believes that waiver of the 30-day operative delay period is consistent 
with the protection of investors and the public interest. Specifically, 
the Commission believes that the proposal would delete obsolete rules 
from the Exchange's rulebook and thus should provide clarity and 
eliminate confusion. For these reasons, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest, and designates the proposed rule 
change to be operative upon filing with the Commission.\9\
---------------------------------------------------------------------------

    \8\ 17 CFR 240.19b-4(f)(6)(iii).
    \9\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.\10\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2018-79 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-2018-79. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-79 and should be submitted 
on or before December 11, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25238 Filed 11-19-18; 8:45 am]
 BILLING CODE 8011-01-P