Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NSX Rules To Provide for a Minimum Execution Quantity Instruction on Certain Pegged Zero Display Reserve Orders, 59014-59017 [E8-23765]
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59014
Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
of T. NSCC then collects Clearing Fund
payments at 10 a.m. on T+1. NSCC is
revising its processing to address the
timing of the NSCC trade guarantee,
trade processing, and Clearing Fund
provisions for such shortened
settlement Index Receipts.
Because next day settling trades are
effectively guaranteed in the CNS night
cycle prior to margining, NSCC
currently uses a process that takes that
uncertainty into consideration by
collecting a ‘‘look-back’’ premium in the
Clearing Fund calculation.5 Leveraging
this existing practice for next-day
settlement of creates and redeems
would be cost-prohibitive based on the
large number of ‘‘in kind’’ shares 6 that
are exchanged in this process.
NSCC is therefore delaying the
processing of next day settling creates
and redeems and their underlying
components until the CNS day cycle on
T+1.7 These transactions would be
reported on the Second Supplemental
Consolidated Trade Summary that is
generally released mid-day. Delayed
processing should allow NSCC ample
time to collect Clearing Fund payments
prior to guaranteeing the transactions
and thus obviate the need for the lookback Clearing Fund premium.8
In addition, NSCC plans to implement
a new fee for shortened-cycle creates
and redeems as more fully described
below.
Therefore, NSCC proposes to amend
its Rules as follows to provide for
settlement of index receipt transactions
on T+1 or T+2 on an optional basis:
jlentini on PROD1PC65 with NOTICES
(a) Amendment of Addendum K
regarding guarantee of next day settling
index receipts
NSCC is amending Addendum K to
provide that settlement of creates and
redeems, including the underlying
components, on a T+1 basis (including
T+2 settling as-of creates and redeems
submitted on T+1) will be guaranteed
on Settlement Date when NSCC
determines to complete processing for
those items in the day cycle (normally,
5 In order to account for the risk of unknown
positions, Risk Management performs a look-back
calculation to estimate shortened settlement
volumes and values. The shortened settlement
component is added to a members’ Clearing Fund
requirement for 21 days after each shortened
settlement occurs.
6 Most Index Receipts are created and redeemed
in units of 50,000. In other words, if a member were
to create six units it would receive 300,000 shares
of the Index Receipt securities.
7 The CNS day-cycle is typically run at 11:30 a.m.
Component securities that are not CNS-eligible
would be processed through the Balance Order
Accounting Operation.
8 If Clearing Fund payments are not timely
collected on T+1, creates and redeems would not
be processed.
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18:10 Oct 07, 2008
Jkt 217001
11:30 a.m.), provided that the
transaction is not removed from
processing as described below.9
(b) Amendment of Procedure II to allow
for settlement on a shorter than T+3
basis
NSCC is amending Procedure II,
Section H to provide that: (i) The Index
Receipt agent may elect for settlement of
the creates and redeems on a T+1 or T+2
basis; (ii) as-of Index Receipt creates and
redeems will only be accepted if
submitted by the cut-off time designated
by NSCC;10 (iii) NSCC reserves the right
to remove Index Receipt transactions
from processing in the event that the
applicable member has not met a
Clearing Fund call on settlement date;
and (iv) next day settling creates and
redeems (including T+2 settling as-of
creates and redeems submitted on T+1)
will be posted to the Second
Supplemental Consolidated Trade
Summary and processed in the day
cycle of the CNS Accounting Operation.
(c) Amendment of Procedure XV
(Clearing Fund Formula)
NSCC is amending Procedure XV to
provide that creates and redeems of
Index Receipts and the underlying
components, will not be subject to the
‘‘20-day look back provision.’’ 11
(d) Amendment of Addendum A (Fee
Structure)
The current fee for regular-way (T+3)
settlement of creates and redeems is $30
per create and redeem. To offset
additional costs associated with
shortened settlement processing, NSCC
plans to implement a new fee of $50.00
per create and redeem with a shortened
settlement cycle.
C. Implementation timeframe
NSCC intends to implement the
changes set forth in this filing in the
third quarter of 2008. Members will be
advised of the implementation date
through issuance of NSCC Important
Notices.
III. Discussion
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
9 In addition, the transaction must be submitted
for recording by an Index Receipt agent by such
cutoff time as designated by the NSCC (pursuant to
Procedure II).
10 Submission of next-day settling creates and
redeems will be required by such cut-off time on
T.
11 The ‘‘20-day look back provision’’ provides for
a charge based on the average of the member’s three
highest aggregate calculated charges for daily
‘‘Specified (shortened cycle) Activity’’ measured
over the most recent 20 settlement days.
PO 00000
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Fmt 4703
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rules and regulations thereunder
applicable to a registered clearing
agency. In particular, the Commission
believes the proposal is consistent with
the requirements of Section
17A(b)(3)(F),12 which, among other
things, requires that the rules of a
clearing agency are designed to remove
impediments to and perfect the
mechanisms of a national system for the
prompt and accurate clearance and
settlement of securities transactions.
The Commission finds that the
proposed rule change, which enhances
the processing of exchange-traded
funds, is consistent with those statutory
obligations.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 13 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (File No. SR–
NSCC–2008–07) be, and hereby is,
approved.15
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23761 Filed 10–7–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58702; File No. SR–NSX–
2008–16]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Amend
NSX Rules To Provide for a Minimum
Execution Quantity Instruction on
Certain Pegged Zero Display Reserve
Orders
October 1, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
12 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1.
14 15 U.S.C. 78s(b)(2).
15 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
13 15
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59015
Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
September 19, 2008, National Stock
Exchange, Inc. (‘‘NSX’’ 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 Exchange. The Commission is
publishing this notice to solicit
comment 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 is proposing to amend
NSX Rules to allow ETP Holders the
option of submitting a minimum
execution quantity requirement on any
Midpoint or Market Peg Zero Display
Reserve Order resting in the NSX Book.
The text of the proposed rule change
is below. Proposed new language is in
italics. Material proposed to be deleted
is enclosed in brackets.
RULES OF NATIONAL STOCK
EXCHANGE, INC.
CHAPTER XI
jlentini on PROD1PC65 with NOTICES
Trading Rules
*
*
*
*
*
Rule 11.11. Orders and Modifiers
Users may enter into the System the
types of orders listed in this Rule 11.11,
subject to the limitations set forth in this
Rule or elsewhere in these Rules.
(a)–(b) No change.
(c) Other Types of Orders and Order
Modifiers
(1) No change.
(2) Reserve Order. A limit order with
a portion of the quantity displayed
(‘‘display quantity’’) and with a reserve
portion of the quantity (‘‘reserve
quantity’’) that is not displayed.
(A) A User may enter a Reserve Order
with zero display quantity, in which
case the Reserve Order will be known as
a ‘‘Zero Display Reserve Order.’’ The
price of a Zero Display Reserve Order
may be set (‘‘pegged’’) to track the buyside of the Protected BBO, the sell-side
of the Protected BBO, or the midpoint
of the Protected BBO. A pegged Zero
Display Reserve Order which tracks the
inside quote of the opposite side of the
market is defined as a Market Peg and
a pegged Zero Display Reserve Order
that tracks the midpoint is defined as a
Midpoint Peg. A pegged Zero Display
Reserve Order may have an optional
limit price (‘‘Cap’’) beyond which the
order shall not be executed.
(B) For Market Peg and Midpoint Peg
Zero Display Reserve Orders, a User
may enter an optional minimum
transaction quantity instruction of at
least a round lot for an execution
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18:10 Oct 07, 2008
Jkt 217001
(hereinafter ‘‘Minimum Execution
Quantity’’). Orders with the Minimum
Execution Quantity instruction will not
execute unless the minimum quantity
can be satisfied. However, if the residual
shares of a Zero Display Reserve Order
with a Minimum Execution Quantity
instruction is less than the Minimum
Execution Quantity on the order, the
order may be executed even if the
resulting execution is an odd lot.
([B]C) A Zero Display Reserve Order,
pegged or otherwise, may be designated
as a Post Only Order by a User. If a Zero
Display Reserve Order is not designated
as a Post Only Order and is entered
using the Order Delivery mode of
interaction described in Rule 11.13(b)(2)
and the order is immediately marketable
upon entry into the System, the order
will have its mode of order interaction
converted to Automatic Execution as
described in Rule 11.13(b)(1). A Zero
Display Reserve Order with a Minimum
Execution Quantity instruction will be
deemed a Post Only Order regardless of
whether the order is designated as a
Post Only Order.
([C]D) Zero Display Reserve Orders
will not be eligible for routing to away
trading centers pursuant to Rule
11.15(a)(ii).
(3)–(4) No change.
(5) Post Only Order. A limit order that
is to be posted on the Exchange and not
routed away to another trading center.
(A) No change.
(B) A Post Only Order that is a Zero
Display Reserve Order and which would
interact immediately with a contra-side
round lot order will:
(i) execute against a contra-side round
lot order if the contra-side order is a
Zero Display Reserve Order that is not
designated as a Post Only Order. Upon
execution, the contra-side Zero Display
Reserve Order (which was not
designated as a Post Only Order) will be
deemed as taking liquidity from the Post
Only Order that is a Zero Display
Reserve Order and be liable for the
applicable fee for taking liquidity that is
set forth in the NSX [BLADE] Fee and
Rebate Schedule even if the contra-side
Zero Display Reserve Order was placed
in the NSX Book prior to the Post Only
Order that is a Zero Display Reserve
Order;
(ii) not execute against a contra-side
round lot order if (x) the contra-side
order is a displayed order that is already
contained in the NSX Book or (y) the
contra-side order is another Post Only
Order that is a Zero Display Reserve
Order that is already contained in the
NSX Book. The Post Only Order that is
a Zero Display Reserve Order will
instead be placed in the NSX Book.
(6)–(9) No change.
PO 00000
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*
(d) No change.
*
*
*
*
Rule 11.14. Priority of Orders
(a) Ranking. Orders of Users shall be
ranked and maintained in the NSX Book
based on the following priority:
(1) No Change.
(2) Where orders to buy (or sell) are
made at the same price, the order clearly
established as the first entered into the
System at such particular price shall
have precedence at that price, up to the
number of shares of stock specified in
the order, provided that the priority
between displayed and Reserve orders is
set forth in subsection (4) below. A
cancel and replace of an order will
result in a new timestamp and change
in time priority.
(3) No Change.
(4) The displayed quantity of a
Reserve Order shall have time priority
as of the time of display. If the
displayed quantity of the Reserve Order
is decremented such that 99 shares or
fewer would be displayed, the displayed
portion of the Reserve Order shall be
refreshed for (i) the original displayed
quantity, or (ii) the entire reserve
quantity, if the remaining reserve
quantity is smaller than the original
displayed quantity. After the refresh, the
displayed portion of the Reserve Order
shall have time priority as of the time
of the refresh. The reserve quantity of a
Reserve Order shall have no time
priority against other displayed orders
at the same price until displayed. If all
displayed orders and displayed portions
of Reserve Orders at a given price are
executed, and following such execution
any marketable contra-side orders
remain outstanding, then such contraside orders shall be executed against the
reserve portions of Reserve Orders at
such price based on the time priority as
determined by this paragraph (4). For
purposes of the preceding sentence, a
Zero Display Reserve Order without a
Minimum Execution Quantity
instruction will be deemed to have a
displayed portion equal to one round
lot. A Zero Display Reserve Order with
a Minimum Execution Quantity
instruction will be deemed to have a
displayed portion equal to its Minimum
Execution Quantity for the first pass,
and for each additional pass, will be
deemed to have a displayed portion
equal to one round lot. Following
satisfaction of the marketable contraside orders, the NSX Book will be
refreshed.
(b) No Change.
*
*
*
*
*
E:\FR\FM\08OCN1.SGM
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59016
Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
Exchange Rule 11.11 to allow ETP
Holders the option of submitting a
minimum round lot execution
instruction on certain Zero Display
Reserve Orders posting in the NSX
Book. Under current Rule 11.11(c)(2),
Zero Display Reserve Orders may be
entered with either a limit price or with
a ‘‘peg’’, which, at the ETP Holder’s
discretion is pegged to the buy-side,
sell-side or midpoint of the Protected
Best Bid or Offer (‘‘PBBO’’).
In this proposal, NSX proposes to
enhance its Zero Display Reserve Order
functionality to allow ETP Holders
seeking to post Zero Display Reserve
Orders pegged to track the inside quote
on the opposite side of the market
(hereinafter ‘‘Market Peg’’) or the
midpoint (hereinafter ‘‘Midpoint Peg’’)
to stipulate a minimum transaction size
of at least one round lot for an execution
(hereinafter the ‘‘Minimum Execution
Quantity’’).3
Any Midpoint or Market Peg order
with a Minimum Execution Quantity
instruction will be deemed a ‘‘Post
Only’’ order, regardless of whether the
order is designated as such. Thus, any
Zero Display Reserve Order with a
Minimum Execution Quantity
instruction will never take liquidity
from the NSX Book.
A Zero Display Reserve Order with a
Minimum Execution Quantity
instruction may only be executed if the
quantity is equal to or greater than the
minimum quantity amount. Thus, if an
order with the Minimum Execution
Quantity instruction is posted in the
NSX Book and eligible for matching, it
will be allocated shares in the first
matching pass in accordance with the
minimum quantity amount. However, in
any subsequent matching pass, these
orders will be allocated shares in the
same method as other Zero Display
Reserve Orders with a deemed display
of one round lot, according to its price
and time priority under NSX Rule
11.14(a). A chart reflecting the
allocation method is reflected in
Example 1 below.
Example 1:
BOOK
Time
T1
T2
T3
T4
Bid
....................................................................
....................................................................
....................................................................
....................................................................
Display
Market Peg .....................................................
Mdpt Peg ........................................................
Mdpt Peg ........................................................
9.80 ................................................................
NBBO 10 X 10.10—INBOUND MARKET However, in this case, a new timestamp
will be applied.
SELL OF 3000
Pass 1–20 ..............
T1
Pass 21 ..................
T2
T3
T2
T3
T2
T3
Pass 22 ..................
jlentini on PROD1PC65 with NOTICES
Pass 23 ..................
2,000 @ 10.10
(100 each pass)
10.05
500 @ 10.05
100 @ 10.05
100 @ 10.05
100 @ 10.05
100 @ 10.05
100 @ 10.05
Zero Display Reserve Orders with a
Minimum Execution Quantity
instruction will not execute unless the
minimum quantity required can be
satisfied. In the event that following a
partial execution the residual order
quantity is less than the Minimum
Execution Quantity, the Minimum
Execution Quantity will be ignored and
the order may be executed, even if the
resulting execution is an odd lot. In
addition, as with other Zero Display
Reserve Order features, the Minimum
Execution Quantity instruction may be
modified by entering a cancel/replace of
the Zero Display Reserve Order.
3 While the minimum quantity for a Minimum
Execution Quantity order is a round lot, mixed lots
are permitted.
VerDate Aug<31>2005
18:10 Oct 07, 2008
Jkt 217001
Reserve
0
0
0
100
2000
5000
3000
0
Min Ex
Qty
0
500
0
........................
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Finally, the Exchange proposes a
technical change to conform Rule
11.11(c)(5)(B)(i) to the revised name of
the NSX Fee and Rebate Schedule.
The Exchange does not believe that
the proposed rule change will impose
any inappropriate burden on
competition.
Statutory Basis
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) of the
Act,4 in general, and Section 6(b)(5) of
the Act,5 in particular, which requires,
among other things, that the rules of an
exchange be designed 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 feature proposed in
this filing promotes the foregoing
objectives by facilitating executions
with optional minimum quantity
thresholds.
4 15
5 15
PO 00000
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00093
Fmt 4703
Sfmt 4703
E:\FR\FM\08OCN1.SGM
08OCN1
Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 6 and Rule
19b–4(f)(6) 7 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest.8
Previously, the Commission approved
an order type similar to the one
proposed,9 and this proposal does not
raise any novel issues. For these
reasons, the Commission designates the
proposed rule change as operative upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
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
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 (https://www.sec.gov/
rules/sro.shtml); or
6 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
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 fulfilled this requirement.
8 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s effect on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
9 See Securities Exchange Act Release No. 56072
(July 13, 2007), 72 FR 39867 (July 20, 2007), (SR–
NYSEArca–2007–61) (adopting Mid-Point Passive
Liquidity Order with minimum quantity; Securities
Exchange Act Release No. 56790 (November 15,
2007), 72 FR 65797 (November 23, 2007), (SR–
NYSEArca–2007–113) (reducing Mid-Point Passive
Liquidity Order’s minimum executable size from
1000 to 100).
10 15 U.S.C. 78s(b)(3)(C).
jlentini on PROD1PC65 with NOTICES
7 17
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18:10 Oct 07, 2008
Jkt 217001
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NSX–2008–16 on the
subject line.
Paper Comments
59017
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58708; File No. SR-NYSE–
2008–92]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Extend
the Operation of Reserve Orders on
All submissions should refer to File
the Exchange to the Earlier of
Number SR–NSX–2008–16. This file
December 31, 2008 or the Date on
number should be included on the
Which the Commission Approves the
subject line if e-mail is used. To help the Exchange’s Filing Pursuant to SR–
Commission process and review your
NYSE–2008–46
comments more efficiently, please use
only one method. The Commission will October 1, 2008.
post all comments on the Commission’s
Pursuant to Section 19(b)(1) of the
Internet Web site (https://www.sec.gov/
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule19b-4 thereunder,2
rules/sro.shtml). Copies of the
notice is hereby given that on
submission, all subsequent
September 29, 2008, New York Stock
amendments, all written statements
Exchange LLC (‘‘NYSE’’ or the
with respect to the proposed rule
‘‘Exchange’’) filed with the Securities
change that are filed with the
and Exchange Commission
Commission, and all written
(‘‘Commission’’) the proposed rule
communications relating to the
change as described in Items I and II
proposed rule change between the
Commission and any person, other than below, which Items have been prepared
by the Exchange. The Commission is
those that may be withheld from the
publishing this notice to solicit
public in accordance with the
comments on the proposed rule change
provisions of 5 U.S.C. 552, will be
from interested persons.
available for inspection and copying in
the Commission’s Public Reference
I. Self-Regulatory Organization’s
Room, 100 F Street, NE., Washington,
Statement of the Terms of Substance of
DC 20549, on official business days
the Proposed Rule Change
between the hours of 10 a.m. and 3 p.m.
The Exchange proposes to extend the
Copies of the filing will also be available
operation of Reserve Orders on the
for inspection and copying at the
Exchange to the earlier of December 31,
principal office of the self-regulatory
2008 or the date on which the
organization. All comments received
Commission approves the Exchange’s
will be posted without change; the
filing pursuant to SR–NYSE–2008–46.
Commission does not edit personal
The text of the proposed rule change is
identifying information from
available at NYSE, https://
submissions. You should submit only
www.nyse.com, and the Commission’s
information that you wish to make
Public Reference Room.
available publicly. All submissions
II. Self-Regulatory Organization’s
should refer to File Number SR–NSX–
2008–16 and should be submitted on or Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
before October 29, 2008.
Change
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23765 Filed 10–7–08; 8:45 am]
BILLING CODE 8011–01–P
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.
1 15
11 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00094
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Sfmt 4703
2 17
E:\FR\FM\08OCN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b-4.
08OCN1
]]>Agencies
[Federal Register Volume 73, Number 196 (Wednesday, October 8, 2008)]
[Notices]
[Pages 59014-59017]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23765]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58702; File No. SR-NSX-2008-16]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend NSX Rules To Provide for a Minimum Execution Quantity Instruction
on Certain Pegged Zero Display Reserve Orders
October 1, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on
[[Page 59015]]
September 19, 2008, National Stock Exchange, Inc. (``NSX'' 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 Exchange. The
Commission is publishing this notice to solicit comment on the proposed
rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend NSX Rules to allow ETP Holders
the option of submitting a minimum execution quantity requirement on
any Midpoint or Market Peg Zero Display Reserve Order resting in the
NSX Book.
The text of the proposed rule change is below. Proposed new
language is in italics. Material proposed to be deleted is enclosed in
brackets.
RULES OF NATIONAL STOCK EXCHANGE, INC.
CHAPTER XI
Trading Rules
* * * * *
Rule 11.11. Orders and Modifiers
Users may enter into the System the types of orders listed in this
Rule 11.11, subject to the limitations set forth in this Rule or
elsewhere in these Rules.
(a)-(b) No change.
(c) Other Types of Orders and Order Modifiers
(1) No change.
(2) Reserve Order. A limit order with a portion of the quantity
displayed (``display quantity'') and with a reserve portion of the
quantity (``reserve quantity'') that is not displayed.
(A) A User may enter a Reserve Order with zero display quantity, in
which case the Reserve Order will be known as a ``Zero Display Reserve
Order.'' The price of a Zero Display Reserve Order may be set
(``pegged'') to track the buy-side of the Protected BBO, the sell-side
of the Protected BBO, or the midpoint of the Protected BBO. A pegged
Zero Display Reserve Order which tracks the inside quote of the
opposite side of the market is defined as a Market Peg and a pegged
Zero Display Reserve Order that tracks the midpoint is defined as a
Midpoint Peg. A pegged Zero Display Reserve Order may have an optional
limit price (``Cap'') beyond which the order shall not be executed.
(B) For Market Peg and Midpoint Peg Zero Display Reserve Orders, a
User may enter an optional minimum transaction quantity instruction of
at least a round lot for an execution (hereinafter ``Minimum Execution
Quantity''). Orders with the Minimum Execution Quantity instruction
will not execute unless the minimum quantity can be satisfied. However,
if the residual shares of a Zero Display Reserve Order with a Minimum
Execution Quantity instruction is less than the Minimum Execution
Quantity on the order, the order may be executed even if the resulting
execution is an odd lot.
([B]C) A Zero Display Reserve Order, pegged or otherwise, may be
designated as a Post Only Order by a User. If a Zero Display Reserve
Order is not designated as a Post Only Order and is entered using the
Order Delivery mode of interaction described in Rule 11.13(b)(2) and
the order is immediately marketable upon entry into the System, the
order will have its mode of order interaction converted to Automatic
Execution as described in Rule 11.13(b)(1). A Zero Display Reserve
Order with a Minimum Execution Quantity instruction will be deemed a
Post Only Order regardless of whether the order is designated as a Post
Only Order.
([C]D) Zero Display Reserve Orders will not be eligible for routing
to away trading centers pursuant to Rule 11.15(a)(ii).
(3)-(4) No change.
(5) Post Only Order. A limit order that is to be posted on the
Exchange and not routed away to another trading center.
(A) No change.
(B) A Post Only Order that is a Zero Display Reserve Order and
which would interact immediately with a contra-side round lot order
will:
(i) execute against a contra-side round lot order if the contra-
side order is a Zero Display Reserve Order that is not designated as a
Post Only Order. Upon execution, the contra-side Zero Display Reserve
Order (which was not designated as a Post Only Order) will be deemed as
taking liquidity from the Post Only Order that is a Zero Display
Reserve Order and be liable for the applicable fee for taking liquidity
that is set forth in the NSX [BLADE] Fee and Rebate Schedule even if
the contra-side Zero Display Reserve Order was placed in the NSX Book
prior to the Post Only Order that is a Zero Display Reserve Order;
(ii) not execute against a contra-side round lot order if (x) the
contra-side order is a displayed order that is already contained in the
NSX Book or (y) the contra-side order is another Post Only Order that
is a Zero Display Reserve Order that is already contained in the NSX
Book. The Post Only Order that is a Zero Display Reserve Order will
instead be placed in the NSX Book.
(6)-(9) No change.
(d) No change.
* * * * *
Rule 11.14. Priority of Orders
(a) Ranking. Orders of Users shall be ranked and maintained in the
NSX Book based on the following priority:
(1) No Change.
(2) Where orders to buy (or sell) are made at the same price, the
order clearly established as the first entered into the System at such
particular price shall have precedence at that price, up to the number
of shares of stock specified in the order, provided that the priority
between displayed and Reserve orders is set forth in subsection (4)
below. A cancel and replace of an order will result in a new timestamp
and change in time priority.
(3) No Change.
(4) The displayed quantity of a Reserve Order shall have time
priority as of the time of display. If the displayed quantity of the
Reserve Order is decremented such that 99 shares or fewer would be
displayed, the displayed portion of the Reserve Order shall be
refreshed for (i) the original displayed quantity, or (ii) the entire
reserve quantity, if the remaining reserve quantity is smaller than the
original displayed quantity. After the refresh, the displayed portion
of the Reserve Order shall have time priority as of the time of the
refresh. The reserve quantity of a Reserve Order shall have no time
priority against other displayed orders at the same price until
displayed. If all displayed orders and displayed portions of Reserve
Orders at a given price are executed, and following such execution any
marketable contra-side orders remain outstanding, then such contra-side
orders shall be executed against the reserve portions of Reserve Orders
at such price based on the time priority as determined by this
paragraph (4). For purposes of the preceding sentence, a Zero Display
Reserve Order without a Minimum Execution Quantity instruction will be
deemed to have a displayed portion equal to one round lot. A Zero
Display Reserve Order with a Minimum Execution Quantity instruction
will be deemed to have a displayed portion equal to its Minimum
Execution Quantity for the first pass, and for each additional pass,
will be deemed to have a displayed portion equal to one round lot.
Following satisfaction of the marketable contra-side orders, the NSX
Book will be refreshed.
(b) No Change.
* * * * *
[[Page 59016]]
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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend Exchange Rule 11.11 to allow ETP
Holders the option of submitting a minimum round lot execution
instruction on certain Zero Display Reserve Orders posting in the NSX
Book. Under current Rule 11.11(c)(2), Zero Display Reserve Orders may
be entered with either a limit price or with a ``peg'', which, at the
ETP Holder's discretion is pegged to the buy-side, sell-side or
midpoint of the Protected Best Bid or Offer (``PBBO'').
In this proposal, NSX proposes to enhance its Zero Display Reserve
Order functionality to allow ETP Holders seeking to post Zero Display
Reserve Orders pegged to track the inside quote on the opposite side of
the market (hereinafter ``Market Peg'') or the midpoint (hereinafter
``Midpoint Peg'') to stipulate a minimum transaction size of at least
one round lot for an execution (hereinafter the ``Minimum Execution
Quantity'').\3\
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\3\ While the minimum quantity for a Minimum Execution Quantity
order is a round lot, mixed lots are permitted.
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Any Midpoint or Market Peg order with a Minimum Execution Quantity
instruction will be deemed a ``Post Only'' order, regardless of whether
the order is designated as such. Thus, any Zero Display Reserve Order
with a Minimum Execution Quantity instruction will never take liquidity
from the NSX Book.
A Zero Display Reserve Order with a Minimum Execution Quantity
instruction may only be executed if the quantity is equal to or greater
than the minimum quantity amount. Thus, if an order with the Minimum
Execution Quantity instruction is posted in the NSX Book and eligible
for matching, it will be allocated shares in the first matching pass in
accordance with the minimum quantity amount. However, in any subsequent
matching pass, these orders will be allocated shares in the same method
as other Zero Display Reserve Orders with a deemed display of one round
lot, according to its price and time priority under NSX Rule 11.14(a).
A chart reflecting the allocation method is reflected in Example 1
below.
Example 1:
Book
----------------------------------------------------------------------------------------------------------------
Time Bid Display Reserve Min Ex Qty
----------------------------------------------------------------------------------------------------------------
T1.................................... Market Peg.............. 0 2000 0
T2.................................... Mdpt Peg................ 0 5000 500
T3.................................... Mdpt Peg................ 0 3000 0
T4.................................... 9.80.................... 100 0 ..............
----------------------------------------------------------------------------------------------------------------
NBBO 10 X 10.10--Inbound Market Sell of 3000
------------------------------------------------------------------------
------------------------------------------------------------------------
Pass 1-20........................... T1 2,000 @ 10.10
(100 each pass) 10.05
Pass 21............................. T2 500 @ 10.05
T3 100 @ 10.05
Pass 22............................. T2 100 @ 10.05
T3 100 @ 10.05
Pass 23............................. T2 100 @ 10.05
T3 100 @ 10.05
------------------------------------------------------------------------
Zero Display Reserve Orders with a Minimum Execution Quantity
instruction will not execute unless the minimum quantity required can
be satisfied. In the event that following a partial execution the
residual order quantity is less than the Minimum Execution Quantity,
the Minimum Execution Quantity will be ignored and the order may be
executed, even if the resulting execution is an odd lot. In addition,
as with other Zero Display Reserve Order features, the Minimum
Execution Quantity instruction may be modified by entering a cancel/
replace of the Zero Display Reserve Order. However, in this case, a new
timestamp will be applied.
Finally, the Exchange proposes a technical change to conform Rule
11.11(c)(5)(B)(i) to the revised name of the NSX Fee and Rebate
Schedule.
Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\4\ in general, and
Section 6(b)(5) of the Act,\5\ in particular, which requires, among
other things, that the rules of an exchange be designed 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
feature proposed in this filing promotes the foregoing objectives by
facilitating executions with optional minimum quantity thresholds.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the
[[Page 59017]]
public interest, the proposed rule change has become effective pursuant
to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\
thereunder.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its 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 fulfilled this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.\8\
Previously, the Commission approved an order type similar to the one
proposed,\9\ and this proposal does not raise any novel issues. For
these reasons, the Commission designates the proposed rule change as
operative upon filing.
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\8\ For purposes only of waiving the 30-day operative delay, the
Commission has also considered the proposed rule's effect on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\9\ See Securities Exchange Act Release No. 56072 (July 13,
2007), 72 FR 39867 (July 20, 2007), (SR-NYSEArca-2007-61) (adopting
Mid-Point Passive Liquidity Order with minimum quantity; Securities
Exchange Act Release No. 56790 (November 15, 2007), 72 FR 65797
(November 23, 2007), (SR-NYSEArca-2007-113) (reducing Mid-Point
Passive Liquidity Order's minimum executable size from 1000 to 100).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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\
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\10\ 15 U.S.C. 78s(b)(3)(C).
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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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NSX-2008-16 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-NSX-2008-16. This file
number should be included on the subject line if e-mail 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 Web site (https://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 inspection and
copying in 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 will also be available for
inspection and copying at the principal office of the self-regulatory
organization. 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-NSX-
2008-16 and should be submitted on or before October 29, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23765 Filed 10-7-08; 8:45 am]
BILLING CODE 8011-01-P
