Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Rule 6800 Series

Published date06 August 2020
Citation85 FR 47813
Record Number2020-17132
SectionNotices
CourtSecurities And Exchange Commission
Federal Register, Volume 85 Issue 152 (Thursday, August 6, 2020)
[Federal Register Volume 85, Number 152 (Thursday, August 6, 2020)]
                [Notices]
                [Pages 47813-47816]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-17132]
                =======================================================================
                -----------------------------------------------------------------------
                SECURITIES AND EXCHANGE COMMISSION
                [Release No. 34-89439; File No. SR-NYSEAMER-2020-60]
                Self-Regulatory Organizations; NYSE American LLC; Notice of
                Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
                the Rule 6800 Series
                July 31, 2020.
                 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
                (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
                on July 27, 2020, NYSE American LLC (``NYSE American'' or the
                ``Exchange'') filed with the Securities and Exchange Commission
                (``Commission'') the proposed rule change as described in Items I and
                II below, which Items have been prepared by the self-regulatory
                organization. The Commission is publishing this notice to solicit
                comments on the proposed rule change from interested persons.
                ---------------------------------------------------------------------------
                 \1\ 15 U.S.C. 78a.
                 \2\ 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 the Rule 6800 Series, the Exchange's
                compliance rule (``Compliance Rule'') regarding the National Market
                System Plan Governing the Consolidated Audit Trail (the ``CAT NMS
                Plan'' or ``Plan'') \3\ to be consistent with an amendment to the CAT
                NMS Plan recently approved by the Commission. 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.
                ---------------------------------------------------------------------------
                 \3\ Unless otherwise specified, capitalized terms used in this
                rule filing are defined as set forth in the Compliance Rule.
                ---------------------------------------------------------------------------
                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 purpose of this proposed rule change is to amend the Rule 6800
                Series, the Compliance Rule regarding the CAT NMS Plan, to be
                consistent with an amendment to the CAT NMS Plan recently approved by
                the Commission.\4\ The Commission approved an amendment to the CAT NMS
                Plan to amend the requirements for Firm Designated IDs in four ways:
                (1) To prohibit the use of account numbers as Firm Designated IDs for
                trading accounts that are not proprietary accounts; (2) to require that
                the Firm Designated ID for a trading account be persistent over time
                for each Industry Member so that a single account may be tracked across
                time within a single Industry Member; (3) to permit the use of
                relationship identifiers as Firm Designated IDs in certain
                circumstances; and (4) to permit the use of entity identifiers as Firm
                Designated IDs in certain circumstances (the ``FDID Amendment''). As a
                result, the Exchange proposes to amend the definition of ``Firm
                Designated ID'' in Rule 6810 to reflect the changes to the CAT NMS Plan
                regarding the requirements for Firm Designated IDs.
                ---------------------------------------------------------------------------
                 \4\ See Securities Exchange Act Release No. 89397 (July 24,
                2020) (Federal Register publication pending).
                ---------------------------------------------------------------------------
                 Rule 6810(r) defines the term ``Firm Designated ID'' to mean ``a
                unique identifier for each trading account designated by Industry
                Members for purposes of providing data to the Central Repository, where
                each such identifier is unique among all identifiers from any given
                Industry Member for each business date.''
                [[Page 47814]]
                (1) Prohibit Use of Account Numbers
                 The Exchange proposes to amend the definition of ``Firm Designated
                ID'' in Rule 6810(r) to provide that Industry Members may not use
                account numbers as the Firm Designated ID for trading accounts that are
                not proprietary accounts. Specifically, the Exchange proposes to add
                the following to the definition of a Firm Designated ID: ``provided,
                however, such identifier may not be the account number for such trading
                account if the trading account is not a proprietary account.''
                (2) Persistent Firm Designated ID
                 The Exchange also proposes to amend the definition of ``Firm
                Designated ID'' in Rule 6810(r) to require a Firm Designated ID
                assigned by an Industry Member to a trading account to be persistent
                over time, not for each business day.\5\ To effect this change, the
                Exchange proposes to amend the definition of ``Firm Designated ID'' in
                Rule 6810(r) to add ``and persistent'' after ``unique'' and delete
                ``for each business date'' so that the definition of ``Firm Designated
                ID'' would read, in relevant part, as follows:
                ---------------------------------------------------------------------------
                 \5\ If an Industry Member assigns a new account number or entity
                identifier to a client or customer due to a merger, acquisition or
                some other corporate action, then the Industry Member should create
                a new Firm Designated ID to identify the new account identifier/
                relationship identifier/entity identifier in use at the Industry
                Member for the entity. In addition, if a previously assigned Firm
                Designated ID is no longer in use by an Industry Member (e.g., if
                the trading account associated with the Firm Designated ID has been
                closed), then an Industry Member may reuse the Firm Designated ID
                for another trading account. The Plan Processor will maintain a
                history of the use of each Firm Designated ID, including, for
                example, the effective dates of the Firm Designated ID with respect
                to each associated trading account.
                 A unique and persistent identifier for each trading account
                designated by Industry Members for purposes of providing data to the
                Central Repository . . . where each such identifier is unique among
                all identifiers from any given Industry Member.
                (3) Relationship Identifiers
                 The FDID Amendment also permits an Industry Member to provide a
                relationship identifier as the Firm Designated ID, rather than an
                identifier that represents a trading account, in certain scenarios in
                which an Industry Member does not have an account number available to
                its order handling and/or execution system at the time of order receipt
                (e.g., certain institutional accounts, managed accounts, accounts for
                individuals). In such scenarios, the trading account structure may not
                be available when a new order is first received from a client and,
                instead, only an identifier representing the client's trading
                relationship is available. In these limited instances, the Industry
                Member may provide an identifier used by the Industry Member to
                represent the client's trading relationship with the Industry Member
                instead of an account number.
                 When a trading relationship is established at a broker-dealer for
                clients, the broker-dealer typically creates a parent account, under
                which additional subaccounts are created. However, in some cases, the
                broker-dealer establishes the parent relationship for a client using a
                relationship identifier as opposed to an actual parent account. The
                relationship identifier could be any of a variety of identifiers, such
                as a short name for a relevant individual or institution. This
                relationship identifier is established prior to any trading for the
                client. If a relationship identifier has been established rather than a
                parent account, and an order is placed on behalf of the client, any
                executed trades will be kept in a firm account (e.g., a facilitation or
                average price account) until they are allocated to the proper
                subaccount(s), i.e., the accounts associated with the parent
                relationship identifier connecting them to the client.
                 Relationship identifiers are used in circumstances in which the
                account structure is not available to the trading system at the time of
                order placement. The clients have established accounts prior to the
                trade that satisfy relevant regulatory obligations for opening
                accounts, such as Know Your Customer and other customer obligations.
                However, the order receipt workflows operate using relationship
                identifiers, not accounts.
                 For Firm Designated ID purposes, as with an identifier for a
                trading account, the relationship identifier must be persistent over
                time. The relationship identifier also must be unique among all
                identifiers from any given Industry Member. With these requirements, a
                single relationship could be tracked across time within a single
                Industry Member using the Firm Designated ID. In addition, the
                relationship identifier must be masked as the relationship identifier
                could be a name or otherwise provide an indication as to the identity
                of the relationship. The masking requirement would avoid potentially
                revealing the identity of the relationship.
                 An example of the use of a relationship identifier as a Firm
                Designated ID would be as follows: Suppose that Big Fund Manager is
                known in Industry Member A's systems as ``BFM1.'' When an order is
                placed by Big Fund Manager, the order is tagged to BFM1. Industry
                Member A could use a masked version of BFM1 in place of the Firm
                Designated ID representing a trading account when reporting a new order
                from Big Fund Manager instead of the account numbers to which executed
                shares/contracts will be allocated at a later time via a booking or
                other system. Similarly, another example of the use of a relationship
                identifier as a Firm Designated ID would involve an individual in place
                of the Big Fund Manager in the above example.
                 In accordance with the FDID Amendment, the Exchange proposes to
                amend the definition of a ``Firm Designated ID'' in Rule 6810(r) to
                permit Industry Members to provide a relationship identifier as the
                Firm Designated ID as described above. Specifically, the Exchange
                proposes to amend the definition of ``Firm Designated ID'' in Rule
                6810(r) to state that a Firm Designated ID means, in relevant part, ``a
                unique and persistent relationship identifier when an Industry Member
                does not have an account number available to its order handling and/or
                execution system at the time of order receipt, provided, however, such
                identifier must be masked.''
                (4) Entity Identifiers
                 The FDID Amendment also permits Industry Members to provide an
                entity identifier, rather than an identifier that represents a trading
                account, when an employee of the Industry Member is exercising
                discretion over multiple client accounts and creates an aggregated
                order for which a trading account number of the Industry Member is not
                available at the time of order origination. An entity identifier is an
                identifier of the Industry Member that represents the firm
                discretionary relationship with the client rather than a firm trading
                account.
                 The scenarios in which a firm uses an entity identifier are
                comparable to when a firm uses a relationship identifier (as described
                above) except the entity identifier represents the Industry Member
                rather than a client. As with relationship identifiers, entity
                identifiers are used in circumstances in which the account structure is
                not available to the trading system at the time of order placement. In
                this workflow, the Industry Member's order handling and/execution
                system does not have an account number at the time of order
                origination. The relevant clients that will receive an allocation of
                the execution have established accounts prior to the trade that satisfy
                relevant regulatory obligations for opening accounts, such as Know Your
                Customer and other customer obligations. However, the order origination
                [[Page 47815]]
                workflows operate using entity identifiers, not accounts.
                 For Firm Designated ID purposes, as with the identifier for a
                trading account or a relationship, the entity identifier must be
                persistent over time. The entity identifier also must be unique among
                all identifiers from any given Industry Member. Each Industry Member
                must make its own risk determination as to whether it believes it is
                necessary to mask the entity identifier when using an entity identifier
                to report the Firm Designated ID to CAT.
                 An example of the use of an entity identifier as a Firm Designated
                ID would be when Industry Member 1 has an employee that is a registered
                representative that has discretion over several client accounts held at
                Industry Member 1. The registered representative places an order that
                he will later allocate to individual client accounts. At the time the
                order is placed, the trading system only knows it involves a
                representative of Industry Member 1 and it does not have a specific
                trading account that could be used for Firm Designated ID reporting.
                Therefore, Industry Member 1 could report IM1, its entity identifier,
                as the FDID with the new order.
                 In accordance with the FDID Amendment to the CAT NMS Plan, the
                Exchange proposes to amend the definition of ``Firm Designated ID'' in
                Rule 6810(r) to permit the use of an entity identifier as a Firm
                Designated ID as described above. Specifically, the Exchange proposes
                to amend the definition of a ``Firm Designated ID'' in Rule 6810(r) to
                state that a Firm Designated ID means, in relevant part, ``a unique and
                persistent entity identifier when an employee of an Industry Member is
                exercising discretion over multiple client accounts and creates an
                aggregated order for which a trading account number of the Industry
                Member is not available at the time of order origination.''
                2. Statutory Basis
                 NYSE American believes that the proposed rule change is consistent
                with the provisions of Section 6(b)(5) of the Act,\6\ which require,
                among other things, that the Exchange's rules must be designed to
                prevent fraudulent and manipulative acts and practices, to promote just
                and equitable principles of trade, and, in general, to protect
                investors and the public interest, and Section 6(b)(8) of the Act,\7\
                which requires that the Exchange's rules not impose any burden on
                competition that is not necessary or appropriate.
                ---------------------------------------------------------------------------
                 \6\ 15 U.S.C. 78f(b)(6).
                 \7\ 15 U.S.C. 78f(b)(8).
                ---------------------------------------------------------------------------
                 NYSE American believes that this proposal is consistent with the
                Act because it is consistent with, and implements, a recent amendment
                to the CAT NMS Plan, and is designed to assist the Exchange and its
                Industry Members in meeting regulatory obligations pursuant to the
                Plan. In approving the Plan, the SEC noted that the Plan ``is necessary
                and appropriate in the public interest, for the protection of investors
                and the maintenance of fair and orderly markets, to remove impediments
                to, and perfect the mechanism of a national market system, or is
                otherwise in furtherance of the purposes of the Act.'' \8\ To the
                extent that this proposal implements the Plan, and applies specific
                requirements to Industry Members, the Exchange believes that this
                proposal furthers the objectives of the Plan, as identified by the SEC,
                and is therefore consistent with the Act.
                ---------------------------------------------------------------------------
                 \8\ See Securities Exchange Act Release No. 79318 (November 15,
                2016), 81 FR 84696, 84697 (November 23, 2016).
                ---------------------------------------------------------------------------
                B. Self-Regulatory Organization's Statement on Burden on Competition
                 NYSE American does not believe that the proposed rule change will
                result in any burden on competition that is not necessary or
                appropriate in furtherance of the purposes of the Act. NYSE American
                notes that the proposed rule changes are consistent with a recent
                amendment to the CAT NMS Plan, and are designed to assist the Exchange
                in meeting its regulatory obligations pursuant to the Plan. NYSE
                American also notes that the amendment to the Compliance Rule will
                apply equally to all Industry Members that trade NMS Securities and OTC
                Equity Securities. In addition, all national securities exchanges and
                FINRA are proposing this amendment to their Compliance Rules.
                Therefore, this is not a competitive rule filing, and, therefore, it
                does not impose a burden on competition.
                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 \9\ and Rule 19b-4(f)(6) thereunder.\10\
                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 \11\ and Rule 19b-
                4(f)(6)(iii) thereunder.\12\
                ---------------------------------------------------------------------------
                 \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
                 \10\ 17 CFR 240.19b-4(f)(6).
                 \11\ 15 U.S.C. 78s(b)(3)(A).
                 \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
                requires the Exchange to give the Commission written notice of the
                Exchange's intent to file the proposed rule change, along with a
                brief description and text of the proposed rule change, at least
                five business days prior to the date of filing of the proposed rule
                change, or such shorter time as designated by the Commission. The
                Exchange has satisfied this requirement.
                ---------------------------------------------------------------------------
                 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 19b-4(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. The Exchange has asked
                the Commission to waive the 30-day operative delay so that the proposal
                may become operative by July 31, 2020. The Commission believes that
                waiver of the 30-day operative delay is consistent with the protection
                of investors and the public interest because it implements an amendment
                to the CAT NMS Plan approved by the Commission.\15\ Accordingly, the
                Commission hereby waives the 30-day operative delay and designates the
                proposal operative as of July 31, 2020.\16\
                ---------------------------------------------------------------------------
                 \13\ 17 CFR 240.19b-4(f)(6).
                 \14\ 17 CFR 240.19b-4(f)(6)(iii).
                 \15\ See Securities Exchange Act Release No. 89397 (July 24,
                2020) (Federal Register publication pending).
                 \16\ For purposes only of waiving the 30-day operative delay,
                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 this 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 will institute proceedings to
                determine whether the proposed rule
                [[Page 47816]]
                change should be approved or disapproved.
                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-NYSEAMER-2020-60 on the subject line.
                Paper Comments
                 Send paper comments in triplicate to Secretary, Securities
                and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
                All submissions should refer to File Number SR-NYSEAMER-2020-60. This
                file number should be included on the subject line if email is used. To
                help the Commission process and review your comments more efficiently,
                please use only one method. The Commission will post all comments on
                the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
                Copies of the submission, all subsequent amendments, all written
                statements with respect to the proposed rule change that are filed with
                the Commission, and all written communications relating to the proposed
                rule change between the Commission and any person, other than those
                that may be withheld from the public in accordance with the provisions
                of 5 U.S.C. 552, will be available for website viewing and printing in
                the Commission's Public Reference Room, 100 F Street NE, Washington, DC
                20549, on official business days between the hours of 10:00 a.m. and
                3:00 p.m. Copies of the filing also will be available for inspection
                and copying at the principal office of the Exchange. All comments
                received will be posted without change. Persons submitting comments are
                cautioned that we do not redact or edit personal identifying
                information from comment submissions. You should submit only
                information that you wish to make available publicly. All submissions
                should refer to File Number SR-NYSEAMER-2020-60, and should be
                submitted on or before August 27, 2020.
                 For the Commission, by the Division of Trading and Markets,
                pursuant to delegated authority.\17\
                ---------------------------------------------------------------------------
                 \17\ 17 CFR 200.30-3(a)(12).
                ---------------------------------------------------------------------------
                J. Matthew DeLesDernier,
                Assistant Secretary.
                [FR Doc. 2020-17132 Filed 8-5-20; 8:45 am]
                BILLING CODE 8011-01-P
                

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT