Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval to a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Rules 6.62 and 6.91 Describing Complex Orders, Complex Order Priority, and Complex Order Execution, 42640-42641 [E8-16751]
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Federal Register / Vol. 73, No. 141 / Tuesday, July 22, 2008 / Notices
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 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; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–ISE–2008–56 and should be
submitted on or before August 12, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–16686 Filed 7–21–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58174; File No. SR–
NYSEArca–2008–54]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval to
a Proposed Rule Change, as Modified
by Amendment No. 1 Thereto, To
Amend Rules 6.62 and 6.91 Describing
Complex Orders, Complex Order
Priority, and Complex Order Execution
July 16, 2008.
sroberts on PROD1PC70 with NOTICES
I. Introduction
On May 23, 2008, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend NYSE Arca Rules 6.62
and 6.91 describing complex orders,
complex order priority, and complex
order execution. On June 5, 2008, the
Exchange filed Amendment No. 1 to the
proposed rule change. The proposal, as
modified by Amendment No. 1, was
published for comment in the Federal
Register on June 11, 2008.3 The
Commission received no comments on
the proposal. This order approves the
proposed rule change, as amended.
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 57927
(June 5, 2008), 73 FR 33131.
1 15
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19:47 Jul 21, 2008
Jkt 214001
II. Description of the Proposal
The Exchange proposes to amend
NYSE Arca Rules 6.62 and 6.91
describing complex orders, complex
order priority, and complex order
execution. Proposed NYSE Arca Rule
6.62 eliminates specific definitions for a
number of complex order types and
adopts a generic definition for Complex
Orders that is consistent with the
definition for Complex Orders approved
for use for exemption from Trade
Through Liability by the Options
Linkage Authority as described in the
Plan For The Purpose Of Creating And
Operating An Intermarket Option
Linkage (‘‘Linkage Plan’’).
Proposed NYSE Arca Rule 6.91
describes the entry of Complex Orders
in the Consolidated Book and the
operation of the mechanism, called the
Complex Order Matching Engine, in
which Complex Orders will be executed
against each other or against individual
quotes and orders in the Consolidated
Book. Complex Orders will be ranked in
the Consolidated Book in price-time
priority based on the strategy and the
total or net debit or credit. OTP Holders
and OTP Firms will have the ability to
view Complex Orders in the
Consolidated Book via an electronic
interface and to submit orders to the
Complex Matching Engine to trade
against such orders.
Complex Orders eligible for execution
in the Complex Matching Engine are
defined to be consistent with the
Linkage Plan Trade Through exemption.
Therefore execution prices for the
individual legs of a Complex Order that
are outside of the National Best Bid or
Offer may be reported. The Complex
Matching Engine will never, however,
execute any of the legs of a Complex
Order at a price outside of the NYSE
Arca best bid or offer (‘‘NYSE Arca
BBO’’) for that leg.
Under proposed NYSE Arca Rule
6.91, Complex Orders submitted to
NYSE Arca will attempt to execute
against other Complex Orders in the
Consolidated Book before attempting to
execute against the individual leg
markets in the Consolidated Book,
provided that if individual orders or
quotes residing in the Consolidated
Book can execute against the incoming
Complex Order in full (or in a
permissible ratio) at the same total or
net debit or credit as a Complex Order
in the Consolidated Book, the
individual orders or quotes will have
priority. Complex Orders that are not
executable when submitted to NYSE
Arca will be entered into the
Consolidated Book. The Complex
Matching Engine then will monitor
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
individual quotes and orders in the leg
markets. If a new order(s) or quote(s)
enters the Consolidated Book so that the
Complex Order becomes executable in
full (or in a permissible ratio), the
Complex Order will be executed against
the individual quotes and orders.
The Exchange also proposes that Lead
Market Makers not be afforded any
guaranteed allocation either (a) in the
execution of a complex strategy or (b) if
present at the NYSE Arca BBO, when a
Complex Order executes against the
individual leg markets since.
III. Discussion and Commission
Findings
After careful review of the proposal,
the Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.4 In
particular, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,5 which requires,
among other things, that the rules of an
exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, 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.
The Commission believes that
adopting a generic definition for
Complex Orders that is consistent with
the definition for Complex Orders
approved for use for exemption from the
Linkage Plan’s Trade-Through Liability
is consistent with the Act. The
Commission notes that a generic
definition for Complex Orders would
provide increased flexibility in the use
of orders that represent investment
strategies designed to limit risk or
unwind an already established position
in a portfolio.
The Commission also believes that the
Complex Matching Engine should
increase the transparency of Complex
Orders and could facilitate the
execution of Complex Orders. The
Commission notes that the priority of
the individual leg markets will continue
to be maintained. In this regard, if
individual orders or quotes residing in
the Consolidated Book can execute
against the incoming Complex Order in
full (or in a permissible ratio) at the
same or better total or net debit or credit
as a Complex Order in the Consolidated
4 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
5 15 U.S.C. 78f(b)(5).
E:\FR\FM\22JYN1.SGM
22JYN1
Federal Register / Vol. 73, No. 141 / Tuesday, July 22, 2008 / Notices
Book, the individual orders or quotes in
the leg markets will have priority.
Finally, the Commission believes that
the Exchange’s proposal not to provide
a guaranteed allocation to LMMs with
respect to Complex Orders executed in
the Complex Matching Engine is
reasonable and consistent with the Act,
because LMMs do not have any quoting
obligations for complex strategies.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,6 that the
proposed rule change (SR–NYSEArca–
2008–54), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–16751 Filed 7–21–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58168; File No. SR–Phlx–
2008–53]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of a Proposed Rule
Change Relating to an Exchange
Member’s Conduct of Doing Business
With the Public
July 16, 2008.
sroberts on PROD1PC70 with NOTICES
Pursuant to Section 19(b)(1) of the
Securities and Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 11,
2008, the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I, II, and III below, which items
have been substantially prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx Rules 1024 (Conduct of Accounts
for Options Trading), 1025 (Supervision
of Accounts), 1027 (Discretionary
Accounts), and 1049 (Communications
to Customers) that govern an Exchange
6 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 17
VerDate Aug<31>2005
19:47 Jul 21, 2008
Jkt 214001
member’s conduct of doing business
with the public. Specifically, the
proposed rule change would require
that member organizations integrate the
responsibility for supervision of a
member organizations’ public customer
options business into their overall
supervisory and compliance programs.
In addition, the proposed rule change
would strengthen member
organizations’ supervisory procedures
and internal controls as they relate to a
members’ public customer options
business.
The text of the proposed rule change
is available at the Phlx, the
Commission’s Public Reference Room
and https://www.phlx.com/regulatory/
reg_rulefilings.aspx.
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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
a. Integration of Options Supervision
The purpose of the proposed rule
change is to create a supervisory
structure for options that is similar to
that required by New York Stock
Exchange (‘‘NYSE’’) Rule 342 and
National Association of Securities
Dealers (‘‘NASD’’) Rule 3010.3 The
proposed rule change would eliminate
the requirement that member
organizations qualified to do a public
customer business in options must
designate a single person to act as
Senior Registered Options Principal
(‘‘SROP’’) for the member organization
and that each such member organization
3 On July 26, 2007, the Commission approved a
proposed rule change filed by NASD to amend
NASD’s Certificate of Incorporation to reflect its
name change to Financial Industry Regulatory
Authority, Inc., or FINRA, in connection with the
consolidation of the member firm regulatory
functions of NASD and NYSE Regulation, Inc. See
Securities Exchange Act Release No. 56146 (July 26,
2007), 72 FR 42190 (August 1, 2007). The FINRA
rule book currently consists of both NASD rules and
certain NYSE Rules that FINRA has incorporated.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
42641
designate a specific individual as a
Compliance Registered Options
Principal (‘‘CROP’’). Instead member
organizations would be required to
integrate the SROP and CROP functions
into their overall supervisory and
compliance programs. The proposed
rule change is substantively similar to
recent amendments to the rules of the
Chicago Board Options Exchange, Inc.
(‘‘CBOE’’) which were approved by the
Commission.4
The SROP concept was first
introduced by Phlx and other options
exchanges during the early years of the
development of the listed options
market. Initially, member organizations
were required to designate one or more
persons qualified as Registered Options
Principals (‘‘ROPs’’) having supervisory
responsibilities in respect of the
member organization’s options business.
As the number of ROPs at larger
member organizations began to increase,
Phlx imposed an additional requirement
that member organizations designate
one of their ROPs as the SROP. This was
intended to eliminate confusion as to
where the compliance and supervisory
responsibilities lay by centralizing in a
single supervisory officer overall
responsibility for the supervision of a
member organization’s options
activities.5 Subsequently, following the
recommendation of the Commission’s
Options Study, Phlx and other options
exchanges required member
organizations to designate a CROP to be
responsible for the member
organization’s overall compliance
program in respect of its options
activities.6 The CROP may be the same
person who is designated as SROP.
Since the SROP and CROP
requirements were first imposed, the
supervisory function in respect of the
options activities of most securities
firms has been integrated into the matrix
of supervisory and compliance
functions in respect of the firms’ other
securities activities. This not only
reflects the maturity of the options
market, but also recognizes the ways in
which the uses of options themselves
have become more integrated with other
securities in the implementation of
particular strategies. Thus, the current
requirement for a separately designated
senior supervisor in respect of all
aspects of a member organization’s
options activities, rather than clarifying
the allocation of supervisory
4 See Securities Exchange Act Release No. 56971
(December 14, 2007), 72 FR 72804 (December 21,
2007) (SR–CBOE–2007–106).
5 See Securities and Exchange Commission, 96th
Cong., 1st Sess., Report of the Special Study of the
Options Markets (Comm. Print 1978) 316 fn. 11.
6 Id. at P. 335
E:\FR\FM\22JYN1.SGM
22JYN1
]]>Agencies
[Federal Register Volume 73, Number 141 (Tuesday, July 22, 2008)]
[Notices]
[Pages 42640-42641]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-16751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58174; File No. SR-NYSEArca-2008-54]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval to a Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To Amend Rules 6.62 and 6.91 Describing Complex Orders,
Complex Order Priority, and Complex Order Execution
July 16, 2008.
I. Introduction
On May 23, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend NYSE Arca Rules 6.62 and 6.91 describing complex orders, complex
order priority, and complex order execution. On June 5, 2008, the
Exchange filed Amendment No. 1 to the proposed rule change. The
proposal, as modified by Amendment No. 1, was published for comment in
the Federal Register on June 11, 2008.\3\ The Commission received no
comments on the proposal. This order approves the proposed rule change,
as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 57927 (June 5,
2008), 73 FR 33131.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend NYSE Arca Rules 6.62 and 6.91
describing complex orders, complex order priority, and complex order
execution. Proposed NYSE Arca Rule 6.62 eliminates specific definitions
for a number of complex order types and adopts a generic definition for
Complex Orders that is consistent with the definition for Complex
Orders approved for use for exemption from Trade Through Liability by
the Options Linkage Authority as described in the Plan For The Purpose
Of Creating And Operating An Intermarket Option Linkage (``Linkage
Plan'').
Proposed NYSE Arca Rule 6.91 describes the entry of Complex Orders
in the Consolidated Book and the operation of the mechanism, called the
Complex Order Matching Engine, in which Complex Orders will be executed
against each other or against individual quotes and orders in the
Consolidated Book. Complex Orders will be ranked in the Consolidated
Book in price-time priority based on the strategy and the total or net
debit or credit. OTP Holders and OTP Firms will have the ability to
view Complex Orders in the Consolidated Book via an electronic
interface and to submit orders to the Complex Matching Engine to trade
against such orders.
Complex Orders eligible for execution in the Complex Matching
Engine are defined to be consistent with the Linkage Plan Trade Through
exemption. Therefore execution prices for the individual legs of a
Complex Order that are outside of the National Best Bid or Offer may be
reported. The Complex Matching Engine will never, however, execute any
of the legs of a Complex Order at a price outside of the NYSE Arca best
bid or offer (``NYSE Arca BBO'') for that leg.
Under proposed NYSE Arca Rule 6.91, Complex Orders submitted to
NYSE Arca will attempt to execute against other Complex Orders in the
Consolidated Book before attempting to execute against the individual
leg markets in the Consolidated Book, provided that if individual
orders or quotes residing in the Consolidated Book can execute against
the incoming Complex Order in full (or in a permissible ratio) at the
same total or net debit or credit as a Complex Order in the
Consolidated Book, the individual orders or quotes will have priority.
Complex Orders that are not executable when submitted to NYSE Arca will
be entered into the Consolidated Book. The Complex Matching Engine then
will monitor individual quotes and orders in the leg markets. If a new
order(s) or quote(s) enters the Consolidated Book so that the Complex
Order becomes executable in full (or in a permissible ratio), the
Complex Order will be executed against the individual quotes and
orders.
The Exchange also proposes that Lead Market Makers not be afforded
any guaranteed allocation either (a) in the execution of a complex
strategy or (b) if present at the NYSE Arca BBO, when a Complex Order
executes against the individual leg markets since.
III. Discussion and Commission Findings
After careful review of the proposal, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\4\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\5\ which
requires, among other things, that the rules of an exchange be designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, 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.
---------------------------------------------------------------------------
\4\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that adopting a generic definition for
Complex Orders that is consistent with the definition for Complex
Orders approved for use for exemption from the Linkage Plan's Trade-
Through Liability is consistent with the Act. The Commission notes that
a generic definition for Complex Orders would provide increased
flexibility in the use of orders that represent investment strategies
designed to limit risk or unwind an already established position in a
portfolio.
The Commission also believes that the Complex Matching Engine
should increase the transparency of Complex Orders and could facilitate
the execution of Complex Orders. The Commission notes that the priority
of the individual leg markets will continue to be maintained. In this
regard, if individual orders or quotes residing in the Consolidated
Book can execute against the incoming Complex Order in full (or in a
permissible ratio) at the same or better total or net debit or credit
as a Complex Order in the Consolidated
[[Page 42641]]
Book, the individual orders or quotes in the leg markets will have
priority. Finally, the Commission believes that the Exchange's proposal
not to provide a guaranteed allocation to LMMs with respect to Complex
Orders executed in the Complex Matching Engine is reasonable and
consistent with the Act, because LMMs do not have any quoting
obligations for complex strategies.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-NYSEArca-2008-54), as
modified by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16751 Filed 7-21-08; 8:45 am]
BILLING CODE 8010-01-P
