Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval to a Proposed Rule Change, as Modified by Amendment No. 1, To Establish Trading Rules for the New York Block Exchange, 5009-5014 [E9-1805]
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Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59282; File No. SR–NYSE–
2008–119]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval to a
Proposed Rule Change, as Modified by
Amendment No. 1, To Establish
Trading Rules for the New York Block
Exchange
January 22, 2009.
I. Introduction
On November 13, 2008, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt Exchange Rule 1600
governing the New York Block
Exchange (‘‘NYBX’’), an electronic
facility for the posting and trading of
undisplayed orders. The proposed rule
change was published for comment in
the Federal Register on November 24,
2008.3 The Exchange filed Amendment
No. 1 on January 22, 2009. The
Commission received no comments on
the proposal. This notice and order
provides notice of filing of Amendment
No. 1 and grants accelerated approval to
the proposed rule change, as modified
by Amendment No. 1.
II. Background
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A. General
The NYBX facility will offer NYSE
members and member organizations a
means for posting and executing
undisplayed orders. It is designed to
facilitate trading in block-sized orders,
although orders submitted to NYBX can
be as small as one round lot. These
orders would not be displayed to the
public or NYSE members. Only NYSElisted securities will trade in NYBX. All
NYSE members and member
organizations are automatically eligible
to access NYBX, although they must
complete a connectivity authorization
process. A non-member who wishes to
access the NYBX facility may do so as
a ‘‘Sponsored Participant’’ pursuant to
NYSE Rule 123B.
Trading in the facility will occur only
when trading is occurring on the
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 58969
(November 24, 2008), 73 FR 71050 (‘‘Notice’’).
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17:30 Jan 27, 2009
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5009
Exchange.4 However, orders submitted
to the facility will not participate in any
openings, re-openings, or closings on
the Exchange, or in any trades resulting
from a liquidity refreshment point or a
gap quote situation.5 Trading on the
facility will be halted or suspended
whenever the NYSE halts or suspends
trading in a particular security.6
In a separate action today, the
Commission is also approving a
proposed rule change by NYSE relating
to the corporate governance of the
NYBX facility.7
The facility will reject any pegging order
priced below $1.00.13
The facility will accept orders with
round lots and partial round lots.14
Orders that are initially submitted with
an odd-lot size would be rejected.
However, if the execution of an NYBX
order results in an odd-lot remainder,
that remainder would not be canceled
and would continue to be processed by
the facility.
Orders submitted to the NYBX facility
may include a ‘‘Minimum Trading
Volume’’ (‘‘MTV’’) parameter, which is
designed to prevent an execution unless
B. Order Entry and Order Parameters
the resulting fill would be of at least the
Users may transmit orders to NYBX
designated size.15 The facility would not
by means of an electronic interface. The initiate the execution of an order unless
facility can be accessed through an
the MTV is met at the time the order is
electronic FIX application or an
evaluated for execution. If no MTV is
Internet-based, password-protected
designated, an order would be treated as
order-entry application. Orders can be
if the MTV is zero. The facility would
entered, canceled, and replaced from
act upon market information available
3:30 a.m. ET until the close of the
to it at the time an order is entered into
regular hours of the Exchange on any
the facility, taking a ‘‘snapshot’’ of the
day that the Exchange is open for
market. Contraside orders resting in the
business. The facility will support a
Display Book (whether displayed or
variety of order types—including limit,
non-displayed) and contraside orders in
midpoint, and pegging orders—but not
the facility would automatically be
market orders.8 An order may be
considered for MTV purposes. In
pegged, for example, to the national best addition, the system default would be to
bid or best offer (‘‘NBBO’’) or to the
include protected quotations of
NBBO plus or minus the Exchange’s
automated trading centers for MTV
minimum price variation.9 The facility
purposes, although an MTV could not
will accept day orders, which expire at
be met solely by protected bids or offers.
the end of the regular trading session on A user could elect to have protected
the day of entry, and ‘‘Good til a
bids and offers of automated trading
Specified Time’’ orders, which are
centers excluded for MTV purposes.
available for execution until a specified
Therefore, if an NYBX order is
time. Unless otherwise specified, the
marketable against a protected bid or
facility will treat all incoming orders as
offer displayed by an away market but
day orders.
For an order priced equal to or greater not against any order in the facility or
on the Display Book, the facility would
than $1.00, the minimum quoting
not route the order to the away market
increment in the facility is one penny
to seek an execution (even if the NYBX
10 For an order priced less than
($0.01).
order’s MTV were met by the size of the
$1.00, the minimum quoting increment
protected bid or offer). Regardless of an
11 When
is one-tenth of a penny ($0.001).
order’s MTV designation, the facility
there is an odd-increment spread, a
would always route to away markets as
midpoint execution on the facility will
necessary to comply with Rule 611 of
occur in a smaller increment ($x.xx5 if
Regulation NMS.16 The facility would
12
above $1.00, $0.xxx5 if below $1.00).
not consider for MTV purposes any
marketable interest on an away market
4 NYSE’s regular trading hours are 9:30 a.m.
that is priced inferior to that market’s
Eastern Time (‘‘ET’’) to 4 p.m. ET. If the Exchange
closes for business at a time other than 4:00 p.m.,
protected quotation.
NYBX will close at the same time. See proposed
The MTV designation does not
NYSE Rule 1600(a)(2).
guarantee that a user would receive the
5 See e-mail from Bob Hill, Senior Vice President,
NYSE Euronext, to Michael Gaw, Assistant Director, full size of the MTV from any resulting
execution(s). For example, when the
Division of Trading and Markets, Commission
(January 21, 2009).
MTV of an NYBX order is met, the
6 See proposed NYSE Rule 1600(g)(1).
facility might route parts of that order to
7 See Securities Exchange Act Release No. 59281
the Display Book or to one or more away
(January 22, 2009) (SR–NYSE–2008–120).
markets for execution. Those contraside
8 See proposed NYSE Rules 1600(c)(2) and
1600(c)(3)(A).
9 See NYSE Rule 62 (describing the minimum
price variation).
10 See proposed NYSE Rule 1600(d)(2)(A).
11 See proposed NYSE Rule 1600(d)(2)(B).
12 See proposed NYSE Rule 1600(d)(3)–(4).
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13 See
proposed NYSE Rule 1600(d)(2)(C).
proposed NYSE Rule 1600(c)(4).
15 See proposed NYSE Rules 1600(b)(2)(E) and
1600(c)(3)(B)(ii).
16 17 CFR 242.611.
14 See
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MTV is met. If so, the facility would
attempt to execute the order, routing
parts of the order to the Display Book
C. Priority, Execution, and Relationship
or to away markets as necessary.
to the Display Book
Orders in the Display Book, whether
All orders entered into the NYBX
displayed or undisplayed, have priority
facility are prioritized in order of price,
over orders in the facility at the same
then time.17 In addition, execution is
price. Therefore, no trade could take
conditioned on all applicable MTVs
place in the facility until all equal- or
being met.
better-priced orders in the Display Book
The NYBX facility and the Display
had been executed (or canceled), subject
Book, the Exchange’s principal facility
to any applicable MTV being met.
for the trading of equity securities, are
Although, as noted above, the NYBX
separate electronic systems. When it
facility will monitor orders resting in
receives an order, the NYBX facility will the Display Book and route orders to the
check for contraside interest on the
Display Book as appropriate, the
facility, the Display Book (both
Display Book will not monitor the
displayed and undisplayed orders), and undisplayed orders resting in the NYBX
away markets to ascertain whether to
facility. Thus, marketable orders entered
attempt to execute the order.18 Where an into the Display Book would execute
NYBX order is marketable against
without regard to any undisplayed
eligible contraside liquidity and its
orders that may be resting in the NYBX
MTV is met, the facility will attempt to
facility. In effect, submitting an order to
execute that order against the eligible
the NYBX facility is equivalent to
contraside liquidity at the order’s limit
submitting an undisplayed order to the
price or better. If there is eligible
Exchange with the conditions that it not
contraside liquidity in the facility at a
execute against any market or
better price than any liquidity on the
marketable limit orders submitted to the
Display Book, the order will attempt to
Display Book, and that it not execute
execute in the facility until it is
unless any applicable MTV is met.20
exhausted, expired, or canceled back to
Where an NYBX order executes in
the user pursuant to its time-in-force
part but is not exhausted, the unfilled
conditions, or until that contraside
portion of the order (the ‘‘residual
liquidity in the facility is exhausted.19 If order’’) would be held in the facility
eligible contraside liquidity is available
where it would attempt to execute
on the Display Book, an order would be against later-submitted eligible
sent to the Display Book to attempt to
contraside liquidity until the residual
execute against that liquidity. NYBX
order is exhausted, expired, or
orders that are routed to the Display
canceled.21 If the residual order is larger
Book will be prioritized and executed
than the original MTV of the order, the
pursuant to NYSE Rule 72.
original MTV would remain on the
In all cases, the facility would not
order. If the residual order is smaller
effect an execution except as permitted
than the original MTV, the facility
by Rule 611 of Regulation NMS. Thus,
would modify the MTV to equal the size
if the execution of an NYBX order
of the residual order. A residual order
would trade through a protected bid or
maintains its original time stamp unless
offer of an automated trading center, the it is modified. If a user modifies the
facility would route the applicable size
price, size, side, MTV, or time-in-force
of the order to the automated trading
condition of a residual order, it would
center to attempt to execute against that be considered a newly submitted order
protected bid or offer.
and receive a new time stamp.22
If an order submitted to the facility
D. Clearance and Settlement
cannot immediately be executed, it
would remain on the NYBX book
Details of each trade occurring in the
pursuant to its time-in-force conditions. facility will be automatically compared
As new orders are submitted to the
and matched by the Exchange, and
facility or the Display Book, or the
20 In addition, as noted above, NYBX orders will
NBBO changes, the NYBX facility will
re-evaluate whether the booked order is not participate in any openings, closings, or reopenings, or in any trades resulting from a liquidity
marketable and whether any applicable
refreshment point or a gap quote situation. NYSE
orders might be executed or canceled
before the NYBX order can access them.
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17 See
proposed NYSE Rule 1600(d)(1)(A).
18 The facility would route orders to the Display
Book or to away markets as necessary via the NYSE
Routing Broker. See NYSE Rule 17(b) (describing
operation of the Routing Broker).
19 If the prices of two NYBX orders are crossed,
the execution will occur at the price of the order
that is nearest to or at the midpoint of the NBBO.
See proposed NYSE Rule 1600(d)(1)(C)(vi).
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17:30 Jan 27, 2009
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has represented that it will disclose to users of the
NYBX facility the implied conditions of NYBX
orders. See Amendment No. 1.
21 See proposed NYSE Rules 1600(d)(1)(C) and
1600(d)(1)(D).
22 Similarly, a pegging order that is repriced with
a change in the NBBO also would lose its original
priority and go behind previously submitted orders
in the NYBX queue at the new price. See proposed
NYSE Rule 1600(d)(1)(A)(ii).
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locked-in trades will be submitted to the
National Securities Clearing Corporation
(‘‘NSCC’’) for clearance and
settlement.23 NYBX transaction reports
will not reveal contraparty and clearing
firm identities, except under the
following circumstances: (1) for
regulatory purposes or to comply with
an order of a court or arbitrator; and (2)
if NSCC will not act on behalf of a
member or its clearing firm.24 The trade
reports that NSCC will receive from the
facility will contain the identities of the
parties to the trade—thus enabling
NSCC to conduct its risk management
functions and settle trades between the
appropriate parties—but will contain an
indicator noting that the trade is
anonymous. On the contract sheets that
NSCC issues to its participants, NSCC
will substitute ‘‘ANON’’ for the acronym
of each counterparty.
E. Recordkeeping
Users of the facility will be required
to comply with all relevant rules of the
Exchange and Commission in relation to
reports and records of transactions.25
Such rules include, but are not limited
to, NYSE Rules 132B (Order Tracking
Requirements), 342 (Supervision), and
440 (Books and Records), and Section
17 of the Exchange Act 26 and Rules
17a–3, 17a–4, and 17a–6 thereunder.27
The Exchange will retain the identity of
each user that executes an anonymous
transaction on the facility, thus enabling
the user to satisfy its recordkeeping
obligations under Exchange Act Rules
17a–3(a)(1) and 17a–4(a).28
F. Limitations on the Use of the Facility
Designated Market Maker (‘‘DMMs’’)
and Registered Competitive Market
Makers (‘‘RCMMs’’) on the floor of the
Exchange may not submit orders to the
NYBX facility.29 The off-floor unit of a
DMM or RMM may submit orders to the
facility if it has policies and procedures
that are designed to prohibit
inappropriate sharing of information
23 See proposed NYSE Rule 1600(e)(1). NYBX
executions will be compared through the Regional
Interface Organization Online process (‘‘RIO
Online’’). RIO Online is NYSE Arca’s internal
processing interface that sends order execution
information to DTCC. RIO Online gathers the trades
that are executed on any given day, places the
trades into the appropriate message format and
sends them to DTCC. RIO Online provides a record
of all trades that were sent to DTCC. RIO Online is
also used to manage any approved trade
corrections.
24 See proposed NYSE Rule 1600(e)(2)–(3).
25 See proposed NYSE Rule 1600(i).
26 See 15 U.S.C. 78q.
27 17 CFR 240.17a–3, 240.17a–4, and 240.17a–6.
28 17 CFR 240.17a–3(a)(1) and 240.17a–4(a).
29 See proposed NYSE Rule 1600(h).
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Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
between the floor personnel and the offfloor personnel.30
In addition, NYSE has proposed
certain restrictions on entering orders
into the facility designed to promote
compliance with Section 11(a) of the
Exchange Act.31 A member may not
enter an order into the facility from the
floor of the Exchange when such order
is for its own account, the account of an
associated person, or an account over
which it or an associated person
exercises investment discretion.32 Also,
a member on the floor may not have an
order entered into the facility by
sending it to an off-floor facility for
entry. However, a member may submit
a proprietary or customer order to the
facility from off the floor of the
Exchange.
G. NYBX-Only Trades
A trade that results from the
execution of two NYBX orders (an
‘‘NYBX-Only Trade’’) will print with a
special modifier (‘‘N.X’’) to identify it as
occurring outside the Display Book.33
The same ‘‘N.X’’ modifier is also used
to identify executions in MatchPoint,
which is a separate trading facility of
the Exchange that matches nondisplayed orders.34 A trade that results
from an NYBX order that is routed to
the Display Book and executes against
one or more Display Book orders will
print as a regular-way NYSE trade
(‘‘N’’).
The Exchange proposes to amend
certain of its rules that apply to or take
account of executions on the Display
Book by carving out NYBX-Only Trades
from their scope. Thus, for example, a
trade effected in the NYBX facility
would not be deemed the ‘‘last different
round lot price’’ for purposes of NYSE
Rule 100, which relates to executions of
odd-lot orders. NYSE believes that a
DMM, who takes the contraside for all
executions of odd-lot orders in its
securities, could be inappropriately
disadvantaged if it were required to
execute at last different round lot prices
that included the prices of NYBX-Only
Trades. In this situation, the DMM
would be bound as the contraside of
odd-lot orders up to the size of the print
in the NYBX facility even though it
would have no knowledge of the size of
the orders that made up the print. NYSE
also has argued that, because a DMM
30 See
proposed NYSE Rule 1600(h)(A).
U.S.C. 78k(a). Section 11(a) provides that a
member of an exchange may not trade for its own
account on that exchange unless an exemption
applies.
32 See proposed NYSE Rule 1600(h)(B).
33 See proposed NYSE Rule 1600(f).
34 See NYSE Rule 1500. NYBX orders will not
interact with MatchPoint orders, and vice versa.
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31 15
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has market re-entry obligations for
stabilization purposes, such obligations
should not apply to NYBX-Only Trades,
as the DMM will have no information
about orders within NYBX.
5011
public interest. Moreover, the
Commission believes that the proposed
rule change is consistent with Section
11A(a)(1)(C) of the Exchange Act,38 in
which Congress found that it is in the
public interest and appropriate for the
H. Amendment No. 1
protection of investors and the
In Amendment No. 1, the Exchange
maintenance of fair and orderly markets
deleted the proposed carve-out relating
to assure, among other things,
to NYSE Rule 15A (Order Protection
economically efficient execution of
Rule). The Exchange believes that this
securities transactions and the
carve-out is ‘‘not necessary to ensure the practicability of brokers executing
effective operation of the NYBX
investors’ orders in the best market. The
Facility.’’ In addition, the Exchange
ability to post undisplayed interest to
represented that it would publish an
the NYBX facility will provide
informational memorandum for its
additional opportunities for block-sized
members describing the NYBX facility
orders, in particular, to interact with
and how orders entered into NYBX will both displayed interest (on the Display
interact with orders entered into the
Book and away markets) and
Display Book. The memorandum will
undisplayed interest (in the facility and
describe, among other things, the
the Display Book). The MTV
implied trading conditions of the NYBX designation permits order senders to
trading platform. Finally, the Exchange
limit information leakage and the
in Amendment No. 1 made certain
resulting market impact. A user
selecting a large MTV could choose to
technical, non-substantive changes to
execute only when significant
the proposed rule text. The text of
contraside interest can be identified by
Amendment No. 1 is available from the
the NYBX facility. A user selecting a
Exchange’s Web site (https://
www.nyx.com), the Exchange’s principal smaller MTV could choose to obtain a
series of more rapid partial executions
office, and the Commission’s Public
while accepting a greater risk that
Reference Room.
market participants could infer the
III. Discussion
existence of the user’s order before
achieving a meaningful amount of
A. Generally
executed volume. This functionality
After careful review, the Commission
appears reasonably designed to give
finds that the proposed rule change is
brokers additional opportunities to
consistent with the requirements of the
execute investors’ orders in the best
Exchange Act and the rules and
market and to promote the efficient
regulations thereunder applicable to a
execution of securities transactions,
35 In
national securities exchange.
particular, the Commission believes that particularly transactions of block size.
the proposed rule change is consistent
B. Relationship of NYBX Facility to the
with Section 6(b)(1) of the Exchange
Exchange
Act,36 which requires a national
The Commission believes that the
securities exchange, among other things, Exchange’s rules of execution priority as
to be so organized to carry out the
they relate to the interaction of orders
purposes of the Exchange Act. The
between the NYBX facility and the
Commission further believes that the
Display Book, the Exchange’s main
proposed rule change is consistent with trading facility, are consistent with the
37
Section 6(b)(5) of the Exchange Act,
Exchange Act. The Commission notes,
which requires, among other things, that however, that the two facilities do not
an exchange have rules designed to
constitute a completely integrated
promote just and equitable principles of liquidity pool. For example, orders
trade; to foster cooperation and
submitted to the NYBX facility would
coordination with persons engaged in
not participate in any openings,
regulating, clearing, settling, processing closings, or re-openings on the
information with respect to, and
Exchange, or in any trades resulting
facilitating transactions in securities; to
from a liquidity refreshment point or
remove impediments to and perfect the
gap quote. Furthermore, by submitting
mechanism of a free and open market
an order to the NYBX facility rather
and a national market system; and, in
than to the Display Book, the order
general, to protect investors and the
sender is electing not to interact with
certain marketable order flow that may
35 In approving the proposed rule change, the
be submitted to the Display Book. For
Commission has considered its impact on
example, while an order resting in the
efficiency, competition, and capital formation. See
NYBX facility could interact with
15 U.S.C. 78c(f).
36 15
37 15
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U.S.C. 78f(b)(1)
U.S.C. 78f(b)(5).
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38 15
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U.S.C. 78k–1(a)(1)(C).
28JAN1
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resting orders in the Display Book, it
could not interact with marketable
orders entered into the Display Book or
participate in openings, closings, reopenings, and certain other discrete
events. Orders that are marketable
against interest in the Display Book
when they are submitted would interact
only with contraside interest in the
Display Book (or be routed to access one
or more protected quotations).
The Commission believes that the
Exchange’s manner of operating the
NYBX facility in relation to the Display
Book is consistent with the Exchange
Act. The NYBX facility appears
reasonably designed to permit members’
orders, particularly large ones, to
interact with each other and with
certain orders in the Display Book,
while preserving members’ ability to
limit information leakage and
consequent market impact with respect
to such orders. The Exchange would
route these orders to away markets as
necessary to avoid trade-throughs of
protected quotations. The Exchange also
would route these orders to interact
with any displayed or undisplayed
interest resting in the Display Book so
long as any applicable MTV is met.
Although orders entered into the NYBX
facility would not interact with
marketable orders entered into the
Display Book, participate in certain
discrete NYSE trading events, or execute
unless any applicable MTV is met, the
Commission has previously approved
the use of discretionary orders that are
undisplayed and that elect to interact
only with certain kinds of order flow or
if certain conditions are met. The
Commission concludes, therefore, that it
is consistent with the Exchange Act for
the Exchange to offer its members this
discretion over the display and
execution of orders submitted to the
NYBX facility.
The Exchange also proposes to amend
certain NYSE rules to exclude
transactions that occur solely within the
NYBX facility from the operation of the
traditional NYSE market. For example,
certain responsibilities of the
Exchange’s DMMs and RCMMs are
keyed off the last sale on the Exchange.
Under this proposal, an NYBX-Only
Trade would not be deemed a last sale
for purposes of those rules. In addition,
stop orders and stop-stock provisions of
the Exchange rules would not be
triggered by NYSE-Only Trades. The
Commission does not believe that the
Exchange Act requires NYSE’s rules to
treat Display Book trades and NYBXOnly Trades the same for all purposes,
and that excluding NYBX-Only Trades
as triggering events for certain Exchange
rules is broadly within the Exchange’s
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17:30 Jan 27, 2009
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discretion. The Commission concludes,
therefore, that these exclusions for
NYBX-Only Trades are consistent with
the Exchange Act.
C. Trading Ahead of Customer Orders
Because orders in the NYBX facility
could be executed at the midpoint of the
NBBO, it is possible that an NYSE
member would trade ahead of a held
customer order by less than $0.01 (i.e.,
$ 0.005). If an NYBX order executes at
the midpoint of the NBBO and results
in a member or member organization’s
trading ahead of a held customer order
at the same price, NYSE Rule 92
(Limitations on Member’s Trading
Because of Customers’ Orders) may be
implicated. Rule 92(a) generally restricts
a member or member organization from
entering a proprietary order while in
possession of a customer order. Rule
92(b) through (d) provides several
exceptions to the general restrictions of
Rule 92(a).39 The Exchange has stated
that all users will be expected to comply
with Rule 92(a) when trading on the
NYBX facility unless such trading falls
within an applicable exception in NYSE
Rule 92(b) through (d).
D. Section 11(a) of the Exchange Act
Section 11(a) of the Exchange Act
prohibits a member of a national
securities exchange from effecting a
transaction on that exchange for its own
account, the account of an associated
person, or an account over which it or
its associated persons exercises
discretion (each a ‘‘Covered Account’’)
unless an exemption applies.40 Rule
11a2–2(T) under the Exchange Act,41
known as the ‘‘effect versus execute’’
rule, provides exchange members with
one exemption from the Section 11(a)
prohibition. To comply with Rule 11a2–
2(T)’s conditions, a member: (1) Must
transmit the order from off the exchange
floor; (2) may not participate in the
execution of the transaction once it has
been transmitted to the member
performing the execution; (3) may not
be affiliated with the executing member;
and (4) with respect to an account over
which the member has investment
discretion, neither the member not its
associated person may retain any
compensation in connection with
effecting the transaction without express
written consent from the person
authorized to transact business for the
account in accordance with the rule.
The Exchange believes that orders
39 See NYSE Information Memo 2001–33 (October
8, 2001); Securities Exchange Act Release No. 44139
(March 30, 2001), 66 FR 18339 (April 6, 2001) (SR–
NYSE–94–34).
40 15 U.S.C. 78k(a).
41 17 CFR 240.11a2–2(T).
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entered into the NYBX facility from off
the floor will comply with these
provisions of Rule 11a2–2(T).
Off-Floor Transmission. The
requirement in Rule 11a2–2(T) for
orders to be transmitted from off the
exchange floor reflects Congress’ intent
that Section 11(a) should operate to put
member money managers and nonmember money managers on the same
footing for purposes of their transactions
for Covered Accounts. In considering
other automated systems, the
Commission and the staff have stated
that the off-floor transmission
requirement would be met if a Covered
Account order is transmitted from off
the floor directly to the exchange floor
by electronic means.42 Orders will be
electronically entered into the NYBX
facility from on and off the floor of the
Exchange; however, a member is not
permitted to enter an order into the
NYBX facility from the floor of the
Exchange when such order is for a
Covered Account.43 Similarly, a
42 See Securities Exchange Act Release No. 57058
(December 28, 2007), 73 FR 903 (January 4, 2008)
(approving MatchPoint) (‘‘MatchPoint Order’’) at
908, note 54. See Securities Exchange Act Release
Nos. 54552 (September 29, 2006), 71 FR 59546
(October 10, 2006) (order approving proposed rule
change of the American Stock Exchange (‘‘Amex’’)
to establish new hybrid market); 29237 (May 31,
1991) (regarding NYSE’s Off-Hours Trading
Facility); and 15533 (January 29, 1979) (‘‘1979
Release’’), 44 FR 6084 (January 31, 1979) (regarding
the Amex Post Execution Reporting System, the
Amex Switching System, the Intermarket Trading
System, the Multiple Dealer Trading Facility of the
Cincinnati Stock Exchange, the PCX’s
Communications and Execution System, and the
Phlx’s Automated Communications and Execution
System). See also letter from Paula R. Jensen,
Deputy Chief Counsel, Division of Market
Regulation, Commission, to Angelo Evangelou,
Senior Attorney, Chicago Board Options Exchange,
(‘‘CBOE’’), (March 31, 2003) (regarding CBOEdirect
system); letter from Paula R. Jenson, Deputy Chief
Counsel, Division of Market Regulation,
Commission, to Jeffrey P. Burns, Assistant General
Counsel, Amex (July 9, 2002) (regarding Amex’s
auto-ex system for options); letter from Paula R.
Jenson, Deputy Chief Counsel, Division of Market
Regulation, Commission, to Richard S. Rudolph,
Counsel, Philadelphia Stock Exchange (‘‘Phlx’’)
(April 15, 2002) (regarding Phlx’s AUTOM System
and its automatic execution feature AUTO–X); letter
from Paula R. Jenson, Deputy Chief Counsel,
Division of Market Regulation, Commission, to
Kathryn L. Beck, Senior Vice President, Special
Counsel and Antitrust Compliance Officer, Pacific
Exchange (October 25, 2001) (regarding Archipelago
Exchange); letter from Brandon Becker, Director,
Division of Market Regulation, Commission, to
George T. Simon, Foley & Lardner (November 30,
1994) (regarding Chicago Match).
43 See Notice, supra note 3, 73 FR at 71061. The
Commission notes that proposed NYSE Rule
1600(h) (Limitations on the Use of the New York
Block Exchange) will prohibit a member from
entering an order into the NYBX facility from the
floor of the Exchange when such order is for a
Covered Account. Further, the rule also prohibits a
member from having such order entered into the
facility by sending it to an off-floor facility for entry.
A member with authorized access to the facility
may enter only customer orders into the NYBX
facility from the floor of the Exchange.
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28JAN1
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
member on the floor may not enter into
the facility an order sent to it by an
affiliated member from off the floor, if
the order is for such affiliated member’s
own account, an account of an
associated person, or an account over
which it or an associated person
exercises investment discretion.
Consequently, the Commission believes
orders transmitted for execution on the
NYBX facility satisfy the off-floor
transmission requirement.
Non-Participation in Order Execution.
Rule 11a2–2(T) further provides that a
member and its associated persons may
not participate in the execution of an
order once it has been transmitted to the
exchange floor.44 This requirement was
included to prevent members with their
own brokers on the exchange floor from
using those persons to influence or
guide their orders’ execution. This
requirement does not preclude a
member from canceling or modifying an
order, or from modifying the
instructions for executing the order after
it has been transmitted to the floor.
However, such cancellations or
modifications must be transmitted from
off the exchange floor.45
The Commission has stated that the
non-participation requirement is
satisfied by an automated system when
the member’s use of such a system
entails relinquishing the ability to
influence or guide the execution of a
Covered Account order once transmitted
into the system.46 Once an order is
entered into the NYBX facility, a
member may not participate in, guide,
or influence the execution of such order.
NYBX orders are sent by electronic
means directly into the NYBX facility. A
user may enter and cancel an NYBX
order any time during the regular
trading day of the Exchange. NYSE has
represented that matching, trading, and
routing of orders are effectuated through
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44 See
Securities Exchange Act Release No. 44983
(October 25, 2001), 66 FR 55225 (November 1, 2001)
(approving ArcaEx as the equities trading facility of
PCX Equities). See also MatchPoint Order, supra
note 42, 73 FR at 908 note 56 and accompanying
text.
45 See MatchPoint Order, supra note 42, 73 FR at
908. See also Securities Exchange Act Release No.
14563 (March 14, 1978), 43 FR 11542 (March 17,
1978); see also Securities Exchange Act Release No.
53128 (January 13, 2006), 71 FR 3550 (January 23,
2006) (order approving Nasdaq Stock Market LLC’s
registration as a national securities exchange)
(‘‘Nasdaq Exchange Order’’).
46 See 1979 Release, supra note 42; see also, e.g.,
Securities Exchange Act Release Nos. 54422
(September 11, 2006), 71 FR 54537 (September 15,
2006) (order approving proposed rule change of
CBOE to establish a screen based trading system for
non-option securities); 51666 (May 9, 2005), 70 FR
25631, 25633 (May 13, 2005) (order approving
proposed rule change by International Securities
Exchange to establish facilitation, block order, and
solicited order mechanisms).
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17:30 Jan 27, 2009
Jkt 217001
an algorithm, which does not permit a
user to affect the order or its execution
in any way; thus, the member
relinquishes all control of an NYBX
order when trading commences. The
Commission believes that, because a
member relinquishes control of an order
upon transmission to the facility and
will not be able to influence or guide the
execution of that order, the nonparticipation requirement is met with
respect to orders that are executed
automatically in the facility.
Execution through Unaffiliated
Member. Although Rule 11a2–2(T)
contemplates having an order executed
by an exchange member who is
unaffiliated with the member initiating
the order, the Commission has
recognized that the requirement is not
applicable when an automated exchange
system is used, if the execution of the
order is automatic once it has been
transmitted into the system, and if the
design of the system ensures that
members do not possess any special or
unique trading advantages in handling
their orders after transmitting them to
the system.47 The Commission has
stated that, in such instances,
executions obtained through these
systems satisfy the independent
execution requirement of Rule 11a2–
2(T).48 NYBX orders are sent by
electronic means to the NYBX facility.
The Exchange has represented that the
design of the NYBX facility ensures that
members do not posses any special or
unique trading advantages in the
handling of the orders.
Non-Retention of Compensation. The
Commission notes that members that
intend to rely on Rule 11a2–2(T) in
connection with orders submitted to the
NYBX facility must comply with the
requirements of paragraph (a)(2)(iv) of
that rule.
47 In considering the operation of an automated
execution system operated by an exchange, the
Commission has noted that, while there is no
independent executing exchange member, the
execution of an order is automatic once it has been
transmitted into the system. The Commission has
stated that, because the design of these systems
ensures that members do not possess any special or
unique trading advantages in handling their orders
after transmitting them to the exchange, executions
obtained through these systems satisfy the
independent execution requirement of Rule 11a2–
2(T). See 1979 Release, supra note 42; see also
MatchPoint Order supra note 42, 73 FR at 908, note
59 and accompanying text; Securities Exchange Act
Release No. 49068 (January 13, 2004), 69 FR 2775
(January 20, 2004) (order approving the Boston
Options Exchange as an options trading facility of
the Boston Stock Exchange).
48 See 1979 Release, supra note 42; see also e.g.,
MatchPoint Order, supra note 42; Securities
Exchange Act Release No. 54238 (July 28, 2005), 71
FR 44758 (August 7, 2006) (order approving
proposed rule change of NYSE Arca to establish the
OX trading platform); Nasdaq Exchange Order,
supra note 45.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
5013
In reliance on NYSE’s representations
and for the reasons set forth above, the
Commission believes that members
entering orders into the NYBX facility
would satisfy the requirements of Rule
11a2–2(T) under the Exchange Act.
E. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Exchange Act,49 for approving the
proposed rule change, as modified by
Amendment No. 1, prior to the thirtieth
day after publication of notice of filing
of Amendment No. 1 in the Federal
Register. In Amendment No. 1, the
Exchange proposes to delete the carveout relating to NYSE Rule 15A (Order
Protection Rule). The Exchange has
stated that this carve-out is ‘‘not
necessary to ensure the effective
operation of the NYBX Facility,’’ and
elimination of the proposed change to
Rule 15A clarifies that the operation of
the NYBX facility would not affect the
Exchange’s obligation to comply with
Rule 611 of the Exchange Act. The
Exchange also represented that it would
disclose to NYBX users the implied
conditions on NYBX orders. The other
changes made by Amendment No. 1 are
technical corrections to the proposed
rule text. The rest of the proposed rule
text, which has been subject to a full
comment period, is unaffected. The
Commission believes, therefore, that
good cause exists to approve the
proposed rule change, as amended, on
an accelerated basis.
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 rulecomments@sec.gov. Please include File
Number SR–NYSE–2008–119 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSE–2008–119. This file
number should be included on the
49 15
E:\FR\FM\28JAN1.SGM
U.S.C. 78s(b)(2).
28JAN1
5014
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices
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 such filing also will be
available for inspection and copying at
the principal office of NYSE. 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–NYSE–2008–119 and
should be submitted on or before
February 18, 2009.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,50
that the proposed rule change (SR–
NYSE–2008–119), as modified by
Amendment No. 1, be, and it hereby is,
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–1805 Filed 1–27–09; 8:45 am]
sroberts on PROD1PC70 with NOTICES
BILLING CODE 8011–01–P
50 15
51 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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17:30 Jan 27, 2009
Jkt 217001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59281; File No. SR–NYSE–
2008–120]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving Proposed Rule Change
Relating to the Limited Liability
Company Agreement of New York
Block Exchange, a Facility of NYSE
January 22, 2009.
I. Introduction
On November 14, 2008, the New York
Stock Exchange, LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change, pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 in connection with the
formation of a joint venture between
NYSE and BIDS Holdings L.P. (‘‘BIDS’’),
a Delaware limited partnership, to
establish a new electronic trading
facility of the Exchange, the New York
Block Exchange (‘‘NYBX’’). The
proposed rule change was published for
comment in the Federal Register on
November 24, 2008.3 The Commission
received no comments on the proposal.
This order approves the proposed rule
change.
II. Overview
NYSE proposes to establish NYBX as
a facility 4 of the Exchange. NYBX
would provide for electronic matching
and execution of non-displayed orders
with the aggregate of all displayed and
non-displayed orders residing within
NYBX and the NYSE Display Book. The
Exchange represents that NYBX would
consider protected quotations of all
automated trading centers.5 Only
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 58970
(November 17, 2007), 73 FR 71062 (November 24,
2008) (‘‘Notice’’).
4 Pursuant to Section 3(a)(2) of the Act, 15 U.S.C.
78c(a)(2), the term ‘‘facility’’ when used with
respect to an exchange, includes ‘‘its premises,
tangible or intangible property whether on the
premises or not, any right to the use of such
premises or property or any service thereof for the
purpose of effecting or reporting a transaction on an
exchange (including, among other things, any
system of communication to or from the exchange,
by ticker or otherwise, maintained by or with the
consent of the exchange), and any right of the
exchange to the use of any property or service.’’
5 See Notice, supra note 3, 73 FR at 71062. The
terms ‘‘protected quotations’’ and ‘‘automated
trading centers’’ will have the same meanings as
defined in Rule 600 of Regulation NMS, 17 CFR
242.600.
2 17
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
securities listed on NYSE would be
eligible to trade on NYBX.
NYBX would be owned and operated
by the New York Block Exchange LLC
(‘‘Company’’), a Delaware limited
liability company (‘‘LLC’’). With this
proposed rule change, the Exchange
seeks the Commission’s approval of the
proposed governance structure of the
Company as reflected in the Limited
Liability Company Agreement (‘‘LLC
Agreement’’). In a separate action today,
the Commission approved the
Exchange’s proposed rule change to
establish the trading rules for NYBX.6
NYSE and BIDS each would own a
50% economic interest (‘‘Interest’’) 7 in
the Company. In addition to its Interest,
NYSE would enter into an agreement
with the Company (‘‘Services
Agreement’’) pursuant to which NYSE
would perform certain financial,
operational, information technology,
and development services for the
Company.8 As a self-regulatory
organization (‘‘SRO’’), NYSE has
regulatory responsibility for all of its
facilities, including NYBX. The
Exchange has delegated certain of its
self-regulatory responsibilities to its
wholly owned subsidiary, NYSE
Regulation, Inc. (‘‘NYSE Regulation’’),
which performs the regulatory functions
of NYSE pursuant to a delegation
agreement. In the LLC Agreement, the
Members acknowledge and agree that
NYSE Regulation would carry out
certain regulatory oversight of NYBX.9
The board of directors of the
Company (‘‘Board of Directors’’) would
manage the business and affairs of the
Company 10 but would delegate the dayto-day operations of the Company and
the development of NYBX to the
Exchange pursuant to the Services
Agreement.11 The Board of Directors
would consist of two individuals
designated by NYSE (‘‘NYSE Directors’’)
and two individuals designated by BIDS
(‘‘BIDS Directors’’).12 The Members
would not otherwise participate in the
management or control of the
Company’s business.13
6 See Securities Exchange Act Release No. 59282
(SR–NYSE–2008–119).
7 ‘‘Interest’’ means the ownership interest in the
Company, including its interest in the capital,
profits, losses, and distributions of the Company.
See Section 2.1 of the LLC Agreement. A person
that holds an economic interest in an LLC generally
must become party to the LLC Agreement and is
referred to as a ‘‘Member.’’ See id.
8 See Notice, supra note 3, 73 FR at 71062.
9 See Section 8.1(c) of the LLC Agreement.
10 See Sections 8.1(a) and 8.3 of the LLC
Agreement.
11 See Section 8.1(b) of the LLC Agreement.
12 See Section 8.3(a) of the LLC Agreement.
13 See Section 7.1(a) of the LLC Agreement.
E:\FR\FM\28JAN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 17 (Wednesday, January 28, 2009)]
[Notices]
[Pages 5009-5014]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9]
[[Page 5009]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59282; File No. SR-NYSE-2008-119]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval to a Proposed Rule Change, as Modified by Amendment No. 1, To
Establish Trading Rules for the New York Block Exchange
January 22, 2009.
I. Introduction
On November 13, 2008, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt Exchange Rule 1600
governing the New York Block Exchange (``NYBX''), an electronic
facility for the posting and trading of undisplayed orders. The
proposed rule change was published for comment in the Federal Register
on November 24, 2008.\3\ The Exchange filed Amendment No. 1 on January
22, 2009. The Commission received no comments on the proposal. This
notice and order provides notice of filing of Amendment No. 1 and
grants accelerated approval to the proposed rule change, as modified by
Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 58969 (November 24,
2008), 73 FR 71050 (``Notice'').
---------------------------------------------------------------------------
II. Background
A. General
The NYBX facility will offer NYSE members and member organizations
a means for posting and executing undisplayed orders. It is designed to
facilitate trading in block-sized orders, although orders submitted to
NYBX can be as small as one round lot. These orders would not be
displayed to the public or NYSE members. Only NYSE-listed securities
will trade in NYBX. All NYSE members and member organizations are
automatically eligible to access NYBX, although they must complete a
connectivity authorization process. A non-member who wishes to access
the NYBX facility may do so as a ``Sponsored Participant'' pursuant to
NYSE Rule 123B.
Trading in the facility will occur only when trading is occurring
on the Exchange.\4\ However, orders submitted to the facility will not
participate in any openings, re-openings, or closings on the Exchange,
or in any trades resulting from a liquidity refreshment point or a gap
quote situation.\5\ Trading on the facility will be halted or suspended
whenever the NYSE halts or suspends trading in a particular
security.\6\
---------------------------------------------------------------------------
\4\ NYSE's regular trading hours are 9:30 a.m. Eastern Time
(``ET'') to 4 p.m. ET. If the Exchange closes for business at a time
other than 4:00 p.m., NYBX will close at the same time. See proposed
NYSE Rule 1600(a)(2).
\5\ See e-mail from Bob Hill, Senior Vice President, NYSE
Euronext, to Michael Gaw, Assistant Director, Division of Trading
and Markets, Commission (January 21, 2009).
\6\ See proposed NYSE Rule 1600(g)(1).
---------------------------------------------------------------------------
In a separate action today, the Commission is also approving a
proposed rule change by NYSE relating to the corporate governance of
the NYBX facility.\7\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 59281 (January 22,
2009) (SR-NYSE-2008-120).
---------------------------------------------------------------------------
B. Order Entry and Order Parameters
Users may transmit orders to NYBX by means of an electronic
interface. The facility can be accessed through an electronic FIX
application or an Internet-based, password-protected order-entry
application. Orders can be entered, canceled, and replaced from 3:30
a.m. ET until the close of the regular hours of the Exchange on any day
that the Exchange is open for business. The facility will support a
variety of order types--including limit, midpoint, and pegging orders--
but not market orders.\8\ An order may be pegged, for example, to the
national best bid or best offer (``NBBO'') or to the NBBO plus or minus
the Exchange's minimum price variation.\9\ The facility will accept day
orders, which expire at the end of the regular trading session on the
day of entry, and ``Good til a Specified Time'' orders, which are
available for execution until a specified time. Unless otherwise
specified, the facility will treat all incoming orders as day orders.
---------------------------------------------------------------------------
\8\ See proposed NYSE Rules 1600(c)(2) and 1600(c)(3)(A).
\9\ See NYSE Rule 62 (describing the minimum price variation).
---------------------------------------------------------------------------
For an order priced equal to or greater than $1.00, the minimum
quoting increment in the facility is one penny ($0.01).\10\ For an
order priced less than $1.00, the minimum quoting increment is one-
tenth of a penny ($0.001).\11\ When there is an odd-increment spread, a
midpoint execution on the facility will occur in a smaller increment
($x.xx5 if above $1.00, $0.xxx5 if below $1.00).\12\ The facility will
reject any pegging order priced below $1.00.\13\
---------------------------------------------------------------------------
\10\ See proposed NYSE Rule 1600(d)(2)(A).
\11\ See proposed NYSE Rule 1600(d)(2)(B).
\12\ See proposed NYSE Rule 1600(d)(3)-(4).
\13\ See proposed NYSE Rule 1600(d)(2)(C).
---------------------------------------------------------------------------
The facility will accept orders with round lots and partial round
lots.\14\ Orders that are initially submitted with an odd-lot size
would be rejected. However, if the execution of an NYBX order results
in an odd-lot remainder, that remainder would not be canceled and would
continue to be processed by the facility.
---------------------------------------------------------------------------
\14\ See proposed NYSE Rule 1600(c)(4).
---------------------------------------------------------------------------
Orders submitted to the NYBX facility may include a ``Minimum
Trading Volume'' (``MTV'') parameter, which is designed to prevent an
execution unless the resulting fill would be of at least the designated
size.\15\ The facility would not initiate the execution of an order
unless the MTV is met at the time the order is evaluated for execution.
If no MTV is designated, an order would be treated as if the MTV is
zero. The facility would act upon market information available to it at
the time an order is entered into the facility, taking a ``snapshot''
of the market. Contraside orders resting in the Display Book (whether
displayed or non-displayed) and contraside orders in the facility would
automatically be considered for MTV purposes. In addition, the system
default would be to include protected quotations of automated trading
centers for MTV purposes, although an MTV could not be met solely by
protected bids or offers. A user could elect to have protected bids and
offers of automated trading centers excluded for MTV purposes.
Therefore, if an NYBX order is marketable against a protected bid or
offer displayed by an away market but not against any order in the
facility or on the Display Book, the facility would not route the order
to the away market to seek an execution (even if the NYBX order's MTV
were met by the size of the protected bid or offer). Regardless of an
order's MTV designation, the facility would always route to away
markets as necessary to comply with Rule 611 of Regulation NMS.\16\ The
facility would not consider for MTV purposes any marketable interest on
an away market that is priced inferior to that market's protected
quotation.
---------------------------------------------------------------------------
\15\ See proposed NYSE Rules 1600(b)(2)(E) and
1600(c)(3)(B)(ii).
\16\ 17 CFR 242.611.
---------------------------------------------------------------------------
The MTV designation does not guarantee that a user would receive
the full size of the MTV from any resulting execution(s). For example,
when the MTV of an NYBX order is met, the facility might route parts of
that order to the Display Book or to one or more away markets for
execution. Those contraside
[[Page 5010]]
orders might be executed or canceled before the NYBX order can access
them.
C. Priority, Execution, and Relationship to the Display Book
All orders entered into the NYBX facility are prioritized in order
of price, then time.\17\ In addition, execution is conditioned on all
applicable MTVs being met.
---------------------------------------------------------------------------
\17\ See proposed NYSE Rule 1600(d)(1)(A).
---------------------------------------------------------------------------
The NYBX facility and the Display Book, the Exchange's principal
facility for the trading of equity securities, are separate electronic
systems. When it receives an order, the NYBX facility will check for
contraside interest on the facility, the Display Book (both displayed
and undisplayed orders), and away markets to ascertain whether to
attempt to execute the order.\18\ Where an NYBX order is marketable
against eligible contraside liquidity and its MTV is met, the facility
will attempt to execute that order against the eligible contraside
liquidity at the order's limit price or better. If there is eligible
contraside liquidity in the facility at a better price than any
liquidity on the Display Book, the order will attempt to execute in the
facility until it is exhausted, expired, or canceled back to the user
pursuant to its time-in-force conditions, or until that contraside
liquidity in the facility is exhausted.\19\ If eligible contraside
liquidity is available on the Display Book, an order would be sent to
the Display Book to attempt to execute against that liquidity. NYBX
orders that are routed to the Display Book will be prioritized and
executed pursuant to NYSE Rule 72.
---------------------------------------------------------------------------
\18\ The facility would route orders to the Display Book or to
away markets as necessary via the NYSE Routing Broker. See NYSE Rule
17(b) (describing operation of the Routing Broker).
\19\ If the prices of two NYBX orders are crossed, the execution
will occur at the price of the order that is nearest to or at the
midpoint of the NBBO. See proposed NYSE Rule 1600(d)(1)(C)(vi).
---------------------------------------------------------------------------
In all cases, the facility would not effect an execution except as
permitted by Rule 611 of Regulation NMS. Thus, if the execution of an
NYBX order would trade through a protected bid or offer of an automated
trading center, the facility would route the applicable size of the
order to the automated trading center to attempt to execute against
that protected bid or offer.
If an order submitted to the facility cannot immediately be
executed, it would remain on the NYBX book pursuant to its time-in-
force conditions. As new orders are submitted to the facility or the
Display Book, or the NBBO changes, the NYBX facility will re-evaluate
whether the booked order is marketable and whether any applicable MTV
is met. If so, the facility would attempt to execute the order, routing
parts of the order to the Display Book or to away markets as necessary.
Orders in the Display Book, whether displayed or undisplayed, have
priority over orders in the facility at the same price. Therefore, no
trade could take place in the facility until all equal- or better-
priced orders in the Display Book had been executed (or canceled),
subject to any applicable MTV being met. Although, as noted above, the
NYBX facility will monitor orders resting in the Display Book and route
orders to the Display Book as appropriate, the Display Book will not
monitor the undisplayed orders resting in the NYBX facility. Thus,
marketable orders entered into the Display Book would execute without
regard to any undisplayed orders that may be resting in the NYBX
facility. In effect, submitting an order to the NYBX facility is
equivalent to submitting an undisplayed order to the Exchange with the
conditions that it not execute against any market or marketable limit
orders submitted to the Display Book, and that it not execute unless
any applicable MTV is met.\20\
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\20\ In addition, as noted above, NYBX orders will not
participate in any openings, closings, or re-openings, or in any
trades resulting from a liquidity refreshment point or a gap quote
situation. NYSE has represented that it will disclose to users of
the NYBX facility the implied conditions of NYBX orders. See
Amendment No. 1.
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Where an NYBX order executes in part but is not exhausted, the
unfilled portion of the order (the ``residual order'') would be held in
the facility where it would attempt to execute against later-submitted
eligible contraside liquidity until the residual order is exhausted,
expired, or canceled.\21\ If the residual order is larger than the
original MTV of the order, the original MTV would remain on the order.
If the residual order is smaller than the original MTV, the facility
would modify the MTV to equal the size of the residual order. A
residual order maintains its original time stamp unless it is modified.
If a user modifies the price, size, side, MTV, or time-in-force
condition of a residual order, it would be considered a newly submitted
order and receive a new time stamp.\22\
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\21\ See proposed NYSE Rules 1600(d)(1)(C) and 1600(d)(1)(D).
\22\ Similarly, a pegging order that is repriced with a change
in the NBBO also would lose its original priority and go behind
previously submitted orders in the NYBX queue at the new price. See
proposed NYSE Rule 1600(d)(1)(A)(ii).
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D. Clearance and Settlement
Details of each trade occurring in the facility will be
automatically compared and matched by the Exchange, and locked-in
trades will be submitted to the National Securities Clearing
Corporation (``NSCC'') for clearance and settlement.\23\ NYBX
transaction reports will not reveal contraparty and clearing firm
identities, except under the following circumstances: (1) for
regulatory purposes or to comply with an order of a court or
arbitrator; and (2) if NSCC will not act on behalf of a member or its
clearing firm.\24\ The trade reports that NSCC will receive from the
facility will contain the identities of the parties to the trade--thus
enabling NSCC to conduct its risk management functions and settle
trades between the appropriate parties--but will contain an indicator
noting that the trade is anonymous. On the contract sheets that NSCC
issues to its participants, NSCC will substitute ``ANON'' for the
acronym of each counterparty.
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\23\ See proposed NYSE Rule 1600(e)(1). NYBX executions will be
compared through the Regional Interface Organization Online process
(``RIO Online''). RIO Online is NYSE Arca's internal processing
interface that sends order execution information to DTCC. RIO Online
gathers the trades that are executed on any given day, places the
trades into the appropriate message format and sends them to DTCC.
RIO Online provides a record of all trades that were sent to DTCC.
RIO Online is also used to manage any approved trade corrections.
\24\ See proposed NYSE Rule 1600(e)(2)-(3).
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E. Recordkeeping
Users of the facility will be required to comply with all relevant
rules of the Exchange and Commission in relation to reports and records
of transactions.\25\ Such rules include, but are not limited to, NYSE
Rules 132B (Order Tracking Requirements), 342 (Supervision), and 440
(Books and Records), and Section 17 of the Exchange Act \26\ and Rules
17a-3, 17a-4, and 17a-6 thereunder.\27\ The Exchange will retain the
identity of each user that executes an anonymous transaction on the
facility, thus enabling the user to satisfy its recordkeeping
obligations under Exchange Act Rules 17a-3(a)(1) and 17a-4(a).\28\
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\25\ See proposed NYSE Rule 1600(i).
\26\ See 15 U.S.C. 78q.
\27\ 17 CFR 240.17a-3, 240.17a-4, and 240.17a-6.
\28\ 17 CFR 240.17a-3(a)(1) and 240.17a-4(a).
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F. Limitations on the Use of the Facility
Designated Market Maker (``DMMs'') and Registered Competitive
Market Makers (``RCMMs'') on the floor of the Exchange may not submit
orders to the NYBX facility.\29\ The off-floor unit of a DMM or RMM may
submit orders to the facility if it has policies and procedures that
are designed to prohibit inappropriate sharing of information
[[Page 5011]]
between the floor personnel and the off-floor personnel.\30\
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\29\ See proposed NYSE Rule 1600(h).
\30\ See proposed NYSE Rule 1600(h)(A).
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In addition, NYSE has proposed certain restrictions on entering
orders into the facility designed to promote compliance with Section
11(a) of the Exchange Act.\31\ A member may not enter an order into the
facility from the floor of the Exchange when such order is for its own
account, the account of an associated person, or an account over which
it or an associated person exercises investment discretion.\32\ Also, a
member on the floor may not have an order entered into the facility by
sending it to an off-floor facility for entry. However, a member may
submit a proprietary or customer order to the facility from off the
floor of the Exchange.
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\31\ 15 U.S.C. 78k(a). Section 11(a) provides that a member of
an exchange may not trade for its own account on that exchange
unless an exemption applies.
\32\ See proposed NYSE Rule 1600(h)(B).
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G. NYBX-Only Trades
A trade that results from the execution of two NYBX orders (an
``NYBX-Only Trade'') will print with a special modifier (``N.X'') to
identify it as occurring outside the Display Book.\33\ The same ``N.X''
modifier is also used to identify executions in MatchPoint, which is a
separate trading facility of the Exchange that matches non-displayed
orders.\34\ A trade that results from an NYBX order that is routed to
the Display Book and executes against one or more Display Book orders
will print as a regular-way NYSE trade (``N'').
---------------------------------------------------------------------------
\33\ See proposed NYSE Rule 1600(f).
\34\ See NYSE Rule 1500. NYBX orders will not interact with
MatchPoint orders, and vice versa.
---------------------------------------------------------------------------
The Exchange proposes to amend certain of its rules that apply to
or take account of executions on the Display Book by carving out NYBX-
Only Trades from their scope. Thus, for example, a trade effected in
the NYBX facility would not be deemed the ``last different round lot
price'' for purposes of NYSE Rule 100, which relates to executions of
odd-lot orders. NYSE believes that a DMM, who takes the contraside for
all executions of odd-lot orders in its securities, could be
inappropriately disadvantaged if it were required to execute at last
different round lot prices that included the prices of NYBX-Only
Trades. In this situation, the DMM would be bound as the contraside of
odd-lot orders up to the size of the print in the NYBX facility even
though it would have no knowledge of the size of the orders that made
up the print. NYSE also has argued that, because a DMM has market re-
entry obligations for stabilization purposes, such obligations should
not apply to NYBX-Only Trades, as the DMM will have no information
about orders within NYBX.
H. Amendment No. 1
In Amendment No. 1, the Exchange deleted the proposed carve-out
relating to NYSE Rule 15A (Order Protection Rule). The Exchange
believes that this carve-out is ``not necessary to ensure the effective
operation of the NYBX Facility.'' In addition, the Exchange represented
that it would publish an informational memorandum for its members
describing the NYBX facility and how orders entered into NYBX will
interact with orders entered into the Display Book. The memorandum will
describe, among other things, the implied trading conditions of the
NYBX trading platform. Finally, the Exchange in Amendment No. 1 made
certain technical, non-substantive changes to the proposed rule text.
The text of Amendment No. 1 is available from the Exchange's Web site
(https://www.nyx.com), the Exchange's principal office, and the
Commission's Public Reference Room.
III. Discussion
A. Generally
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Exchange Act and the
rules and regulations thereunder applicable to a national securities
exchange.\35\ In particular, the Commission believes that the proposed
rule change is consistent with Section 6(b)(1) of the Exchange Act,\36\
which requires a national securities exchange, among other things, to
be so organized to carry out the purposes of the Exchange Act. The
Commission further believes that the proposed rule change is consistent
with Section 6(b)(5) of the Exchange Act,\37\ which requires, among
other things, that an exchange have rules designed to promote just and
equitable principles of trade; to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities; to remove impediments to and perfect the mechanism of a
free and open market and a national market system; and, in general, to
protect investors and the public interest. Moreover, the Commission
believes that the proposed rule change is consistent with Section
11A(a)(1)(C) of the Exchange Act,\38\ in which Congress found that it
is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure,
among other things, economically efficient execution of securities
transactions and the practicability of brokers executing investors'
orders in the best market. The ability to post undisplayed interest to
the NYBX facility will provide additional opportunities for block-sized
orders, in particular, to interact with both displayed interest (on the
Display Book and away markets) and undisplayed interest (in the
facility and the Display Book). The MTV designation permits order
senders to limit information leakage and the resulting market impact. A
user selecting a large MTV could choose to execute only when
significant contraside interest can be identified by the NYBX facility.
A user selecting a smaller MTV could choose to obtain a series of more
rapid partial executions while accepting a greater risk that market
participants could infer the existence of the user's order before
achieving a meaningful amount of executed volume. This functionality
appears reasonably designed to give brokers additional opportunities to
execute investors' orders in the best market and to promote the
efficient execution of securities transactions, particularly
transactions of block size.
---------------------------------------------------------------------------
\35\ In approving the proposed rule change, the Commission has
considered its impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\36\ 15 U.S.C. 78f(b)(1)
\37\ 15 U.S.C. 78f(b)(5).
\38\ 15 U.S.C. 78k-1(a)(1)(C).
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B. Relationship of NYBX Facility to the Exchange
The Commission believes that the Exchange's rules of execution
priority as they relate to the interaction of orders between the NYBX
facility and the Display Book, the Exchange's main trading facility,
are consistent with the Exchange Act. The Commission notes, however,
that the two facilities do not constitute a completely integrated
liquidity pool. For example, orders submitted to the NYBX facility
would not participate in any openings, closings, or re-openings on the
Exchange, or in any trades resulting from a liquidity refreshment point
or gap quote. Furthermore, by submitting an order to the NYBX facility
rather than to the Display Book, the order sender is electing not to
interact with certain marketable order flow that may be submitted to
the Display Book. For example, while an order resting in the NYBX
facility could interact with
[[Page 5012]]
resting orders in the Display Book, it could not interact with
marketable orders entered into the Display Book or participate in
openings, closings, re-openings, and certain other discrete events.
Orders that are marketable against interest in the Display Book when
they are submitted would interact only with contraside interest in the
Display Book (or be routed to access one or more protected quotations).
The Commission believes that the Exchange's manner of operating the
NYBX facility in relation to the Display Book is consistent with the
Exchange Act. The NYBX facility appears reasonably designed to permit
members' orders, particularly large ones, to interact with each other
and with certain orders in the Display Book, while preserving members'
ability to limit information leakage and consequent market impact with
respect to such orders. The Exchange would route these orders to away
markets as necessary to avoid trade-throughs of protected quotations.
The Exchange also would route these orders to interact with any
displayed or undisplayed interest resting in the Display Book so long
as any applicable MTV is met. Although orders entered into the NYBX
facility would not interact with marketable orders entered into the
Display Book, participate in certain discrete NYSE trading events, or
execute unless any applicable MTV is met, the Commission has previously
approved the use of discretionary orders that are undisplayed and that
elect to interact only with certain kinds of order flow or if certain
conditions are met. The Commission concludes, therefore, that it is
consistent with the Exchange Act for the Exchange to offer its members
this discretion over the display and execution of orders submitted to
the NYBX facility.
The Exchange also proposes to amend certain NYSE rules to exclude
transactions that occur solely within the NYBX facility from the
operation of the traditional NYSE market. For example, certain
responsibilities of the Exchange's DMMs and RCMMs are keyed off the
last sale on the Exchange. Under this proposal, an NYBX-Only Trade
would not be deemed a last sale for purposes of those rules. In
addition, stop orders and stop-stock provisions of the Exchange rules
would not be triggered by NYSE-Only Trades. The Commission does not
believe that the Exchange Act requires NYSE's rules to treat Display
Book trades and NYBX-Only Trades the same for all purposes, and that
excluding NYBX-Only Trades as triggering events for certain Exchange
rules is broadly within the Exchange's discretion. The Commission
concludes, therefore, that these exclusions for NYBX-Only Trades are
consistent with the Exchange Act.
C. Trading Ahead of Customer Orders
Because orders in the NYBX facility could be executed at the
midpoint of the NBBO, it is possible that an NYSE member would trade
ahead of a held customer order by less than $0.01 (i.e., $ 0.005). If
an NYBX order executes at the midpoint of the NBBO and results in a
member or member organization's trading ahead of a held customer order
at the same price, NYSE Rule 92 (Limitations on Member's Trading
Because of Customers' Orders) may be implicated. Rule 92(a) generally
restricts a member or member organization from entering a proprietary
order while in possession of a customer order. Rule 92(b) through (d)
provides several exceptions to the general restrictions of Rule
92(a).\39\ The Exchange has stated that all users will be expected to
comply with Rule 92(a) when trading on the NYBX facility unless such
trading falls within an applicable exception in NYSE Rule 92(b) through
(d).
---------------------------------------------------------------------------
\39\ See NYSE Information Memo 2001-33 (October 8, 2001);
Securities Exchange Act Release No. 44139 (March 30, 2001), 66 FR
18339 (April 6, 2001) (SR-NYSE-94-34).
---------------------------------------------------------------------------
D. Section 11(a) of the Exchange Act
Section 11(a) of the Exchange Act prohibits a member of a national
securities exchange from effecting a transaction on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated persons exercises discretion (each a
``Covered Account'') unless an exemption applies.\40\ Rule 11a2-2(T)
under the Exchange Act,\41\ known as the ``effect versus execute''
rule, provides exchange members with one exemption from the Section
11(a) prohibition. To comply with Rule 11a2-2(T)'s conditions, a
member: (1) Must transmit the order from off the exchange floor; (2)
may not participate in the execution of the transaction once it has
been transmitted to the member performing the execution; (3) may not be
affiliated with the executing member; and (4) with respect to an
account over which the member has investment discretion, neither the
member not its associated person may retain any compensation in
connection with effecting the transaction without express written
consent from the person authorized to transact business for the account
in accordance with the rule. The Exchange believes that orders entered
into the NYBX facility from off the floor will comply with these
provisions of Rule 11a2-2(T).
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78k(a).
\41\ 17 CFR 240.11a2-2(T).
---------------------------------------------------------------------------
Off-Floor Transmission. The requirement in Rule 11a2-2(T) for
orders to be transmitted from off the exchange floor reflects Congress'
intent that Section 11(a) should operate to put member money managers
and non-member money managers on the same footing for purposes of their
transactions for Covered Accounts. In considering other automated
systems, the Commission and the staff have stated that the off-floor
transmission requirement would be met if a Covered Account order is
transmitted from off the floor directly to the exchange floor by
electronic means.\42\ Orders will be electronically entered into the
NYBX facility from on and off the floor of the Exchange; however, a
member is not permitted to enter an order into the NYBX facility from
the floor of the Exchange when such order is for a Covered Account.\43\
Similarly, a
[[Page 5013]]
member on the floor may not enter into the facility an order sent to it
by an affiliated member from off the floor, if the order is for such
affiliated member's own account, an account of an associated person, or
an account over which it or an associated person exercises investment
discretion. Consequently, the Commission believes orders transmitted
for execution on the NYBX facility satisfy the off-floor transmission
requirement.
---------------------------------------------------------------------------
\42\ See Securities Exchange Act Release No. 57058 (December 28,
2007), 73 FR 903 (January 4, 2008) (approving MatchPoint)
(``MatchPoint Order'') at 908, note 54. See Securities Exchange Act
Release Nos. 54552 (September 29, 2006), 71 FR 59546 (October 10,
2006) (order approving proposed rule change of the American Stock
Exchange (``Amex'') to establish new hybrid market); 29237 (May 31,
1991) (regarding NYSE's Off-Hours Trading Facility); and 15533
(January 29, 1979) (``1979 Release''), 44 FR 6084 (January 31, 1979)
(regarding the Amex Post Execution Reporting System, the Amex
Switching System, the Intermarket Trading System, the Multiple
Dealer Trading Facility of the Cincinnati Stock Exchange, the PCX's
Communications and Execution System, and the Phlx's Automated
Communications and Execution System). See also letter from Paula R.
Jensen, Deputy Chief Counsel, Division of Market Regulation,
Commission, to Angelo Evangelou, Senior Attorney, Chicago Board
Options Exchange, (``CBOE''), (March 31, 2003) (regarding CBOEdirect
system); letter from Paula R. Jenson, Deputy Chief Counsel, Division
of Market Regulation, Commission, to Jeffrey P. Burns, Assistant
General Counsel, Amex (July 9, 2002) (regarding Amex's auto-ex
system for options); letter from Paula R. Jenson, Deputy Chief
Counsel, Division of Market Regulation, Commission, to Richard S.
Rudolph, Counsel, Philadelphia Stock Exchange (``Phlx'') (April 15,
2002) (regarding Phlx's AUTOM System and its automatic execution
feature AUTO-X); letter from Paula R. Jenson, Deputy Chief Counsel,
Division of Market Regulation, Commission, to Kathryn L. Beck,
Senior Vice President, Special Counsel and Antitrust Compliance
Officer, Pacific Exchange (October 25, 2001) (regarding Archipelago
Exchange); letter from Brandon Becker, Director, Division of Market
Regulation, Commission, to George T. Simon, Foley & Lardner
(November 30, 1994) (regarding Chicago Match).
\43\ See Notice, supra note 3, 73 FR at 71061. The Commission
notes that proposed NYSE Rule 1600(h) (Limitations on the Use of the
New York Block Exchange) will prohibit a member from entering an
order into the NYBX facility from the floor of the Exchange when
such order is for a Covered Account. Further, the rule also
prohibits a member from having such order entered into the facility
by sending it to an off-floor facility for entry. A member with
authorized access to the facility may enter only customer orders
into the NYBX facility from the floor of the Exchange.
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Non-Participation in Order Execution. Rule 11a2-2(T) further
provides that a member and its associated persons may not participate
in the execution of an order once it has been transmitted to the
exchange floor.\44\ This requirement was included to prevent members
with their own brokers on the exchange floor from using those persons
to influence or guide their orders' execution. This requirement does
not preclude a member from canceling or modifying an order, or from
modifying the instructions for executing the order after it has been
transmitted to the floor. However, such cancellations or modifications
must be transmitted from off the exchange floor.\45\
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\44\ See Securities Exchange Act Release No. 44983 (October 25,
2001), 66 FR 55225 (November 1, 2001) (approving ArcaEx as the
equities trading facility of PCX Equities). See also MatchPoint
Order, supra note 42, 73 FR at 908 note 56 and accompanying text.
\45\ See MatchPoint Order, supra note 42, 73 FR at 908. See also
Securities Exchange Act Release No. 14563 (March 14, 1978), 43 FR
11542 (March 17, 1978); see also Securities Exchange Act Release No.
53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (order
approving Nasdaq Stock Market LLC's registration as a national
securities exchange) (``Nasdaq Exchange Order'').
---------------------------------------------------------------------------
The Commission has stated that the non-participation requirement is
satisfied by an automated system when the member's use of such a system
entails relinquishing the ability to influence or guide the execution
of a Covered Account order once transmitted into the system.\46\ Once
an order is entered into the NYBX facility, a member may not
participate in, guide, or influence the execution of such order. NYBX
orders are sent by electronic means directly into the NYBX facility. A
user may enter and cancel an NYBX order any time during the regular
trading day of the Exchange. NYSE has represented that matching,
trading, and routing of orders are effectuated through an algorithm,
which does not permit a user to affect the order or its execution in
any way; thus, the member relinquishes all control of an NYBX order
when trading commences. The Commission believes that, because a member
relinquishes control of an order upon transmission to the facility and
will not be able to influence or guide the execution of that order, the
non-participation requirement is met with respect to orders that are
executed automatically in the facility.
---------------------------------------------------------------------------
\46\ See 1979 Release, supra note 42; see also, e.g., Securities
Exchange Act Release Nos. 54422 (September 11, 2006), 71 FR 54537
(September 15, 2006) (order approving proposed rule change of CBOE
to establish a screen based trading system for non-option
securities); 51666 (May 9, 2005), 70 FR 25631, 25633 (May 13, 2005)
(order approving proposed rule change by International Securities
Exchange to establish facilitation, block order, and solicited order
mechanisms).
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Execution through Unaffiliated Member. Although Rule 11a2-2(T)
contemplates having an order executed by an exchange member who is
unaffiliated with the member initiating the order, the Commission has
recognized that the requirement is not applicable when an automated
exchange system is used, if the execution of the order is automatic
once it has been transmitted into the system, and if the design of the
system ensures that members do not possess any special or unique
trading advantages in handling their orders after transmitting them to
the system.\47\ The Commission has stated that, in such instances,
executions obtained through these systems satisfy the independent
execution requirement of Rule 11a2-2(T).\48\ NYBX orders are sent by
electronic means to the NYBX facility. The Exchange has represented
that the design of the NYBX facility ensures that members do not posses
any special or unique trading advantages in the handling of the orders.
---------------------------------------------------------------------------
\47\ In considering the operation of an automated execution
system operated by an exchange, the Commission has noted that, while
there is no independent executing exchange member, the execution of
an order is automatic once it has been transmitted into the system.
The Commission has stated that, because the design of these systems
ensures that members do not possess any special or unique trading
advantages in handling their orders after transmitting them to the
exchange, executions obtained through these systems satisfy the
independent execution requirement of Rule 11a2-2(T). See 1979
Release, supra note 42; see also MatchPoint Order supra note 42, 73
FR at 908, note 59 and accompanying text; Securities Exchange Act
Release No. 49068 (January 13, 2004), 69 FR 2775 (January 20, 2004)
(order approving the Boston Options Exchange as an options trading
facility of the Boston Stock Exchange).
\48\ See 1979 Release, supra note 42; see also e.g., MatchPoint
Order, supra note 42; Securities Exchange Act Release No. 54238
(July 28, 2005), 71 FR 44758 (August 7, 2006) (order approving
proposed rule change of NYSE Arca to establish the OX trading
platform); Nasdaq Exchange Order, supra note 45.
---------------------------------------------------------------------------
Non-Retention of Compensation. The Commission notes that members
that intend to rely on Rule 11a2-2(T) in connection with orders
submitted to the NYBX facility must comply with the requirements of
paragraph (a)(2)(iv) of that rule.
In reliance on NYSE's representations and for the reasons set forth
above, the Commission believes that members entering orders into the
NYBX facility would satisfy the requirements of Rule 11a2-2(T) under
the Exchange Act.
E. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Exchange Act,\49\ for approving the proposed rule change, as
modified by Amendment No. 1, prior to the thirtieth day after
publication of notice of filing of Amendment No. 1 in the Federal
Register. In Amendment No. 1, the Exchange proposes to delete the
carve-out relating to NYSE Rule 15A (Order Protection Rule). The
Exchange has stated that this carve-out is ``not necessary to ensure
the effective operation of the NYBX Facility,'' and elimination of the
proposed change to Rule 15A clarifies that the operation of the NYBX
facility would not affect the Exchange's obligation to comply with Rule
611 of the Exchange Act. The Exchange also represented that it would
disclose to NYBX users the implied conditions on NYBX orders. The other
changes made by Amendment No. 1 are technical corrections to the
proposed rule text. The rest of the proposed rule text, which has been
subject to a full comment period, is unaffected. The Commission
believes, therefore, that good cause exists to approve the proposed
rule change, as amended, on an accelerated basis.
---------------------------------------------------------------------------
\49\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
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-NYSE-2008-119 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2008-119. This file
number should be included on the
[[Page 5014]]
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 such
filing also will be available for inspection and copying at the
principal office of NYSE. 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-NYSE-2008-119 and should be submitted on or before February 18,
2009.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\50\ that the proposed rule change (SR-NYSE-2008-119), as
modified by Amendment No. 1, be, and it hereby is, approved on an
accelerated basis.
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\50\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\51\
---------------------------------------------------------------------------
\51\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1805 Filed 1-27-09; 8:45 am]
BILLING CODE 8011-01-P
