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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES

increasing the size of an order will result in such order losing time priority as compared to other orders in the MIAX Pearl Equities Book and the timestamp for such order being revised to reflect the time of the modification.14
The System also re-evaluates the order for execution when an Equity Member 15
increases the size of an order via a Cancel/Replace message. The same is true for a position change made pursuant to Exchange Rule 2614e during a Short Sale Period. For example, should an orders position be changed from long to short during a Short Sale Period, that order would become subject to the price restrictions of Regulation SHO 16 and the System would evaluate whether the order may be executed or re-priced pursuant to the Exchanges Short Sale Price Sliding Process.17
Under the proposed rule change, this evaluation would result in the order receiving a new timestamp and loss in priority, even when that order is not repriced. While the price of the order may not change, the position change during a Short Sale Period impacts whether the order is subject to the price restrictions of Regulation SHO and may or may not become eligible for execution.
Therefore, like size change via a Cancel/
Replace message may change the execution status of the order, the Exchange believes treating a position change made via a Cancel/Replace message in the same manner and updating the orders timestamp is reasonable and consistent with the Act because it also reflects a change in the execution status of the order.
Further, as stated above, Exchange Rule 2614e3 provides that only the price, sell long, sell short, or short exempt indicator, Max Floor of an order with a Reserve Quantity, and size terms of the order may be changed by a Cancel/Replace Message. If a User desires to change any other terms of an existing order the existing order must be cancelled and a new order must be entered. This includes, for example, changes to the minimum quantity condition of an order with a Minimum Execution Quantity instruction.18 In such case, the existing order must be cancelled and new order entered with the revised minimum execution quantity. Like a position change during a Short Sale Period, the new order would be provided a new timestamp 14 See
Exchange Rule 2616a5.
15 The term Equity Member is a Member authorized by the Exchange to transact business on MIAX Pearl Equities. See Exchange Rule 1901.
16 17 CFR 242.2011i sic.
17 Exchange Rule 2614g3.
18 See Exchange Rule 2614c7.

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and re-evaluated for execution based on the revised minimum execution quantity. Therefore, the proposed rule change promotes just and equitable principles of trade because it is similar to existing exchange functionality.
The proposed rule change promotes just and equitable principles of trade because it is consistent with the other exchanges treatment of position changes and their impact on the orders priority. For example, Investors Exchange LLC IEX Rule 11.190d4
does not allow for a position change via a Cancel/Replace message and requires that if a user desires to modify an invalid field on an order, the existing order must be canceled and a new order must be entered. 19 Therefore, on IEX, a market participant must enter a new order where it seeks to change that orders position at all times, not just during a Short Sale Period. This is broader than the Exchanges proposal which is limited to position changes during a Short Sale Period. On IEX, the new order would receive a new timestamp, resulting in a priority loss.
In addition, The Nasdaq Stock Market, LLC Nasdaq Rule 4756a3
provides that an order will be cancelled if the orders position is redesignated as short during a Short Sale Period and the order is not priced at a Permitted Price or higher under Nasdaq Rule 4763e. This would require the replacement of the original order with a new order and a new timestamp, resulting in a priority loss.20 Therefore, the Exchanges proposal is not novel and is similar to functionality provided for on other exchanges.
Unlike where an order retains its timestamp when a modification involves a decrease in the size of the order or a change to the Max Floor of an order with a Reserve Quantity, a change in the orders position during a Short Sale Period triggers compliance with additional regulatory requirements.
In such case, the Exchange must assess whether the order is priced or may be executed in accordance with Regulation SHO. For example, an order whose position is changed from long to short during a Short Sale Period may not be priced at or above the national best bid and may either need to be repriced pursuant to the Exchanges Short Sale Price Sliding Process or cancelled based 19 See IEX Rule 11.190d4 stating that Symbol, side, execution instruction, order type, and TIF are considered invalid fields. If a User attempts modify an invalid field by submitting a Replace Message, the order amendment will be rejected by the Exchange. If a User desires to modify an invalid field on an order, the existing order must be canceled and a new order must be entered.
20 See Nasdaq Rule 4756a3.

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on the Equity Members instructions.
Conversely, an order whose position is changed from short to long during a Short Sale Period would no longer be subject to the price restrictions of Regulation SHO and may now be eligible for execution or routing to an away market. An order marked short is not subject to the price restrictions of Regulation SHO when a Short Sale Period is not in effect. Therefore, allowing the order to retain its timestamp when a Short Sale Period is not in effect continues to promote just and equitable principles of trade because the execution status of the order remains unchanged.21
Notwithstanding the above, the proposed rule change also protects investors and the public interest because it does not change anything with regard to compliance with Regulation SHO, including Regulation SHOs order marking requirements and Equity Members compliance with its applicable exceptions. Today, an Equity Member has the ability to modify their orders position via a Cancel/Replace message. The proposal does not change that. Today, Equity Members are required to mark their orders properly both upon entry and when modifying that orders position later via a Cancel/
Replace message. This proposed rule change does not alter Equity Members obligations to continue to ensure that their orders are marked in accordance with the requirements of Regulation SHO and Exchange Rule 2623 22 at all times, including when changing the orders position via a Cancel/Replace message when a Short Sale Period is or is not in effect. As they are required to do today, Equity Members must also continue to ensure that their order complies with any applicable exemption from Regulation SHO that they seek to avail themselves of, not only at the time of entry, but also at the time they change the orders position 21 This is also consistent with other exchanges rules. See, e.g., Members Exchange, Inc. Rule 11.9a4 and Cboe EDGX Exchange, Inc. Rule 11.9a4.
22 Exchange Rule 26123 sic provides that all short sale orders shall be identified as short or short exempt when entered into the System. If marked short exempt, the Exchange shall execute, display and/or route a short sale order marked short exempt without regard to any short sale price test restriction in effect during a Short Sale Period, as defined in Exchange Rule 2614g3A. The Exchange relies on the marking of an order as short exempt when handling such order, and thus, it is the entering Members responsibility, not the Exchanges responsibility, to comply with the requirements of Regulation SHO
relating to marking of orders as short exempt.
Exchange Rule 2603 also requires that Equity Members input accurate information into the System.

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