Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enable the Use of a Replace Message To Modify the Display Quantity of a Reserve Order, and Certain Other Conforming Changes to Exchange Rules, 19171-19173 [2011-8122]
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Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–8123 Filed 4–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64158; File No. SR–NSX–
2011–03]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Enable
the Use of a Replace Message To
Modify the Display Quantity of a
Reserve Order, and Certain Other
Conforming Changes to Exchange
Rules
March 31, 2011.
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 March
30, 2011, National Stock Exchange, Inc.
filed with the Securities and Exchange
Commission (the ‘‘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 comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
National Stock Exchange, Inc.
(‘‘NSX®’’ or ‘‘Exchange’’) is proposing to
enable a Replace Message to be used to
modify the display quantity of a Reserve
Order (as defined in Rule 11.11(c)(2)),
and proposes certain other conforming
changes to its rules.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nsx.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
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 those
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
With this rule change, the Exchange is
proposing to enable the Replace
Message under NSX Rule 11.11(d) to be
used to modify the display quantity of
a Reserve Order (as defined in Rule
11.11(c)(2)). In addition, certain
conforming modifications to the text
and interpretation of Rule 11.14(a)(2)
are proposed.
The proposed rule change would
allow the Exchange’s current ‘‘Cancel/
Replace’’ order modifier functionality
under Rule 11.11(d) to apply to the
display quantity of Reserve Orders (such
field being Tag 111 3). Currently, the
Cancel/Replace functionality under
Rule 11.11(d)(iii) allows only an
adjustment to an order’s price and
quantity. As applied to Reserve Orders,
the Exchange’s trading system currently
allows a Replace Message to be used to
adjust only the reserve quantity, but not
the display quantity. The proposed rule
change would allow ETP Holders the
ability to use the Replace Message to
also adjust the display quantity of
Reserve Orders (the Tag 111 field).
Under the proposed rule change, the
Replace Message could adjust both the
display and non-display portion of a
Reserve Order, including where the
aggregate size of the order remains
unchanged. Accordingly, the instant
rule filing proposes to add an
explanatory ‘‘Interpretation and Policy’’
to Rule 11.11(d) to clarify that the term
‘‘quantity term’’ in Rule 11.11(d)(iii)
shall include either, or both, the display
and non-display portion of a Reserve
Order, including in cases where the
aggregate size of the Reserve Order is
not changed. The identical use of the
Replace Message to adjust the Tag 111
field is similarly offered by at least one
other exchange.4
The instant rule change also proposes
to modify the language of NSX Rule
11.14 (Priority of Orders) with respect to
how the use of cancel/replace affects an
order’s priority. The instant rule filing
modifies Rule 11.14(a)(2) to provide
that, where the quantity of an order has
been reduced pursuant to a Replace
Message, such order maintains price/
time priority. This constitutes no
changes to current Exchange system
practice and is consistent with the
trading systems of other markets.5 An
Interpretation and Policy is also
proposed to be added to rule 11.14 to
clarify how a Reserve Order’s priority is
impacted by quantity adjustments (to
either the display or the non-display
portion) through use of a Replace
Message. Specifically, Interpretation
and Policy .01 provides that a Replace
Message’s size decrement of a Reserve
Order’s display quantity (Tag 111) will
not affect the order’s priority only if
total order size remains the same or
decreases. Similarly, a Replace Message
size decrement of a Reserve Order’s total
quantity will not affect the order’s
priority only if the display quantity also
remains constant or decreases. Any
increase in size of either the display
portion or the total size of a Reserve
Order will result in a new timestamp
and cause that order to lose time
priority.
The following chart summarizes the
above-described impact on a Reserve
Order’s time priority, if any, due to the
use of a Replace Message to adjust the
quantity.
Display qty (Tag 111) increases
mstockstill on DSKH9S0YB1PROD with NOTICES
Total Order Qty Increases ................
Total Order Qty Decreases ...............
Total Order Qty Same ......................
Display qty (Tag 111) decreases
Lose Book Priority ............................
Lose Book Priority ............................
Lose Book Priority ............................
Lose Book Priority ............................
Maintain Book Priority ......................
Maintain Book Priority. .....................
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Tag 111, also known as Max Floor, is a standard
FIX protocol.
4 See DirectEdge (EDGA and EDGX) Rule 11.5(e)
and DirectEdge FIX Specifications Version 1.11
1 15
VerDate Mar<15>2010
16:52 Apr 05, 2011
Jkt 223001
(https://www.directedge.com/Portals/0/docs/
Direct%20Edge%20Next%20Gen%20FIX%
20Manual.pdf ), at section 3.6.2 (providing that the
Cancel/Replace functionality may be used to
modify tag 111 (the displayed quantity of a Reserve
Order)). The Exchange notes that, unlike the text of
the cancel/replace rules of DirectEdge, the use of
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19171
Display qty (Tag 111) same
Lose Book Priority.
Maintain Book Priority.
n/a.
the Replace Message to adjust Tag 111 under the
instant rule filing is proposed to be reflected in an
Interpretation and Policy to NSX Rule 11.11(e) and
not only in the Exchange’s FIX specification.
5 BATS (BZX and BYX) Rule 11.12(a)(3). See also
DirectEdge (EDGA and EDGX) Rule 11.8(a)(4); Arca
Rule 7.36(a)(3); and CBOE Rule 52.1(e).
E:\FR\FM\06APN1.SGM
06APN1
mstockstill on DSKH9S0YB1PROD with NOTICES
19172
Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices
The following examples illustrate the
effect on a Reserve Order’s time priority,
if any, due to the use of a Replace
Message to adjust the quantity. Each
example assumes ETP Holder A has a
first-in-time priority resting Reserve
Order to sell 1000 shares total, with a
display quantity of 500 (denoted as
‘‘1000/500’’).
Example 1 (Tag 111 Increases, Total
Order Increases):
ETP Holder A submits a Replace
Message to adjust quantity to 1100/600.
Example 1 Result: The order loses
time priority because display quantity is
increased.
Example 2 (Tag 111 Increases, Total
Order Decreases):
ETP Holder A submits a Replace
Message to adjust quantity to 900/600.
Example 2 Result: The order loses
time priority because display quantity is
increased, notwithstanding that total
quantity is decreased.
Example 3 (Tag 111 Increases, Total
Order Remains Same):
ETP Holder A submits a Replace
Message to adjust quantity to 1000/600.
Example 3 Result: The order loses
time priority because display quantity is
increased, notwithstanding that total
quantity remains the same.
Example 4 (Tag 111 Decreases, Total
Order Increases):
ETP Holder A submits a Replace
Message to adjust quantity to 1100/300.
Example 4 Result: The order loses
time priority because total quantity is
increased, notwithstanding that display
quantity is decreased.
Example 5 (Tag 111 Decreases, Total
Order Decreases):
ETP Holder A submits a Replace
Message to adjust quantity to 800/400.
Example 5 Result: The order’s time
priority is maintained because display
quantity is decreased and total quantity
is not increased.
Example 6 (Tag 111 Decreases, Total
Order Remains Same):
ETP Holder A submits a Replace
Message to adjust quantity to 1000/400.
Example 6 Result: The order’s time
priority is maintained because display
quantity is decreased and total quantity
is not increased.
Example 7 (Tag 111 Remains Same,
Total Order Increases):
ETP Holder A submits a Replace
Message to adjust quantity to 1100/500.
Example 7 Result: The order loses
time priority because total quantity is
increased, notwithstanding that display
quantity remains the same.
Example 8 (Tag 111 Remains Same,
Total Order Decreases):
ETP Holder A submits a Replace
Message to adjust quantity to 900/500.
Example 8 Result: The order’s time
priority is maintained because display
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16:52 Apr 05, 2011
Jkt 223001
quantity remains the same and total
quantity is decreased.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) of the
Act,6 in general, and Section 6(b)(5) of
the Act,7 in particular, in that it is
designed, among other things, to
promote clarity, transparency and full
disclosure, in so doing, to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The proposed rule
change advances these objectives by
making available to ETP Holders an
order modifier that is currently in use
elsewhere within the national market
system and by clarifying order priority.8
Moreover, the proposed rule change is
not discriminatory in that it applies
equally to those ETP Holders that
choose to utilize such functionality.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
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 does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 9 and Rule 19b–4(f)(6)
thereunder.10
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
8 See supra, footnotes 2 and 3 [sic].
9 15 U.S.C. 78s(b)(3)(A).
10 17 CFR 240.19b–4(f)(6). In addition, Rule
19b–4(f)(6) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change at least five business
days prior to the date of filing of the proposed rule
7 15
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At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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–NSX–2011–03 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–NSX–2011–03. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of
10 a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
change, or such shorter time as designated by the
Commission. NSX has satisfied this requirement.
E:\FR\FM\06APN1.SGM
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Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices
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–
2011–03 and should be submitted on or
before April 27, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–8122 Filed 4–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64154; File No. SR–ODD–
2011–02]
Self-Regulatory Organizations; the
Options Clearing Corporation; Order
Granting Approval of Accelerated
Delivery of Supplement to the Options
Disclosure Document Reflecting
Certain Changes to Disclosure
Regarding Variability Index Options
and Relative Performance Index
Options and Amendment to the
Options Disclosure Document Inside
Front Cover
March 31, 2011.
On May 21, 2010, the Options
Clearing Corporation (‘‘OCC’’) submitted
to the Securities and Exchange
Commission (‘‘ Commission’’), pursuant
to Rule 9b–1 under the Securities
Exchange Act of 1934 (‘‘Act’’),1 five
preliminary copies of a supplement to
amend its options disclosure document
(‘‘ODD’’) to reflect certain changes to
disclosure regarding variability index
options.2 On January 20, 2011, the OCC
submitted to the Commission five
preliminary copies of a supplement to
amend its ODD to add disclosure
regarding relative performance index
options.3 The OCC is also updating the
front inside cover page of the ODD so
that it contains a current list of the U.S.
exchanges that trade options issued by
the OCC, and the current names and
corporate addresses of these options
exchanges. On March 16, 2011, the OCC
submitted to the Commission five
definitive copies of the March 2011
mstockstill on DSKH9S0YB1PROD with NOTICES
11 17
CFR 200.30–3(a)(12).
CFR 240.9b–1.
2 See letter from Jean M. Cawley, Senior Vice
President and Deputy General Counsel, OCC, to
Sharon Lawson, Senior Special Counsel, Division of
Trading and Markets (‘‘Division’’), Commission,
dated May 20, 2010.
3 See letter from Jean M. Cawley, Senior Vice
President and Deputy General Counsel, OCC, to
Sharon Lawson, Senior Special Counsel, Division,
Commission, dated January 19, 2011.
1 17
VerDate Mar<15>2010
16:52 Apr 05, 2011
Jkt 223001
Supplement 4 to reflect all these
changes, as described in more detail
below.5
Variability Indexes
The ODD currently contains general
disclosures on the characteristics and
risks of trading standardized options on
variability indexes. The current ODD
states that variability indexes are
indexes intended to measure the
implied volatility, or the realized
variance or volatility, of specified stock
indexes. In May of 2010, the
Commission approved the Chicago
Board Options Exchange’s (‘‘CBOE’’)
proposal to list and trade options on the
CBOE Gold ETF Volatility Index.6 The
March 2011 Supplement amends
disclosures in the ODD regarding
variability index options to
accommodate the listing and trading of
options on the CBOE Gold ETF
Volatility Index and similarly structured
equity-based volatility indexes that are
intended to measure the volatility of a
single reference security. Specifically,
the proposed March 2011 Supplement
amends the discussion of variability
index options to provide disclosure
regarding the characteristics of options
on equity-based volatility indexes 7 and
their special risks.
Relative Performance Indexes
Currently, the ODD states that indexes
that may underlie options include stock
indexes, variability indexes, strategybased indexes, and dividend indexes.
Recently, the Commission approved the
NASDAQ OMX PHLX LLC’s (‘‘Phlx’’)
proposal to list and trade Alpha Index
options.8 Alpha Indexes measure the
relative total return of one stock and one
exchange-traded fund share. The
proposed March 2011 Supplement
amends disclosures in the ODD to add
4 See letter from Jean M. Cawley, Senior Vice
President and Deputy General Counsel, OCC, to
Sharon Lawson, Senior Special Counsel, Division,
Commission, dated March 15, 2011.
5 The proposed March 2011 Supplement to the
ODD amends the February 1994 version of the
booklet entitled ‘‘Characteristics and Risks of
Standardized Options,’’ and portions of the May
2007, June 2008, December 2009 and May 2010
Supplements.
6 See Securities Exchange Act Release No. 62139
(May 19, 2010), 75 FR 29597 (May 26, 2010) (SR–
CBOE–2010–018) (order approving CBOE’s
proposed rules to list and trade CBOE Gold ETF
Volatility Index options).
7 For purposes of the ODD, the disclosure will
make clear that an equity-based volatility index
measures the implied volatility, or the realized
variance or volatility of a specified reference
security.
8 See Securities Exchange Act Release No. 63860
(February 7, 2011), 76 FR 7888 (February 11, 2011)
(SR–Phlx–2010–176) (order approving Phlx’s
proposed rules to list and trade Alpha Index
options).
PO 00000
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19173
relative performance indexes as a type
of index that can underlie an option in
order to accommodate the listing and
trading of options on the Alpha Index
and similarly structured relative
performance indexes.9 Specifically, the
proposed March 2011 Supplement adds
new disclosure regarding the
characteristics of options on relative
performance indexes and their special
risks. The Commission notes that the
intent of this proposed March 2011
Supplement is to provide disclosure for
relative performance options on indexes
of which both index components are
equity securities, and one of which
could be a fund share.
Inside Cover of ODD
Lastly, the March 2011 Supplement
amends the ODD to revise the inside
front cover page. The revisions are as
follows: (1) Adding the C2 Options
Exchange, Incorporated and its
corporate address to the inside front
cover of the ODD; (2) updating Phlx’s
name to incorporate the Phlx’s recent
conversion to a limited liability
company; and (3) to reflect NASDAQ
OMX BX’s recent change in corporate
address. These changes will ensure that
the ODD accurately identifies the
markets on which options currently
trade and accurately reflects the
corporate name and address of those
entities.
The proposed supplement is intended
to be read in conjunction with the more
general ODD, which discusses the
characteristics and risks of options
generally.10 Rule 9b–1(b)(2)(i) under the
Act 11 provides that an options market
must file five copies of an amendment
or supplement to the ODD with the
9 For purposes of the ODD, relative performance
indexes are a special type of strategy-based indexes
that measure the relative performance—generally
the relative total return—of two index components
(the target component and the benchmark
component). The index is calculated by measuring
the total return of the target component relative to
the total return of the benchmark component. The
index will rise as and to the extent that the target
component outperforms the benchmark component,
and will fall as and to the extent that the opposite
occurs. As stated in the March 2011 Supplement,
as of the date of this Supplement, the only relative
performance options approved for trading are
options on indexes of which both index
components are equity securities, and one of which
could be a fund share.
10 The Commission notes that the options markets
must continue to ensure that the ODD is in
compliance with the requirements of Rule 9b–
1(b)(2)(i) under the Act, 17 CFR 240.9b–1(b)(2)(i),
including when changes regarding variability index
options and relative performance index options are
made in the future. Any future changes to the rules
of the options markets concerning variability index
options and relative performance index options
would need to be submitted to the Commission
under Section 19(b) of the Act. 15 U.S.C. 78s(b).
11 17 CFR 240.9b–1(b)(2)(i).
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]]>Agencies
[Federal Register Volume 76, Number 66 (Wednesday, April 6, 2011)]
[Notices]
[Pages 19171-19173]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8122]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64158; File No. SR-NSX-2011-03]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Enable the Use of a Replace Message To Modify the Display Quantity of a
Reserve Order, and Certain Other Conforming Changes to Exchange Rules
March 31, 2011.
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 March 30, 2011, National Stock Exchange, Inc. filed with the
Securities and Exchange Commission (the ``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 comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is
proposing to enable a Replace Message to be used to modify the display
quantity of a Reserve Order (as defined in Rule 11.11(c)(2)), and
proposes certain other conforming changes to its rules.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nsx.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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 those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
With this rule change, the Exchange is proposing to enable the
Replace Message under NSX Rule 11.11(d) to be used to modify the
display quantity of a Reserve Order (as defined in Rule 11.11(c)(2)).
In addition, certain conforming modifications to the text and
interpretation of Rule 11.14(a)(2) are proposed.
The proposed rule change would allow the Exchange's current
``Cancel/Replace'' order modifier functionality under Rule 11.11(d) to
apply to the display quantity of Reserve Orders (such field being Tag
111 \3\). Currently, the Cancel/Replace functionality under Rule
11.11(d)(iii) allows only an adjustment to an order's price and
quantity. As applied to Reserve Orders, the Exchange's trading system
currently allows a Replace Message to be used to adjust only the
reserve quantity, but not the display quantity. The proposed rule
change would allow ETP Holders the ability to use the Replace Message
to also adjust the display quantity of Reserve Orders (the Tag 111
field). Under the proposed rule change, the Replace Message could
adjust both the display and non-display portion of a Reserve Order,
including where the aggregate size of the order remains unchanged.
Accordingly, the instant rule filing proposes to add an explanatory
``Interpretation and Policy'' to Rule 11.11(d) to clarify that the term
``quantity term'' in Rule 11.11(d)(iii) shall include either, or both,
the display and non-display portion of a Reserve Order, including in
cases where the aggregate size of the Reserve Order is not changed. The
identical use of the Replace Message to adjust the Tag 111 field is
similarly offered by at least one other exchange.\4\
---------------------------------------------------------------------------
\3\ Tag 111, also known as Max Floor, is a standard FIX
protocol.
\4\ See DirectEdge (EDGA and EDGX) Rule 11.5(e) and DirectEdge
FIX Specifications Version 1.11 (https://www.directedge.com/Portals/0/docs/Direct%20Edge%20Next%20Gen%20FIX%20Manual.pdf ), at section
3.6.2 (providing that the Cancel/Replace functionality may be used
to modify tag 111 (the displayed quantity of a Reserve Order)). The
Exchange notes that, unlike the text of the cancel/replace rules of
DirectEdge, the use of the Replace Message to adjust Tag 111 under
the instant rule filing is proposed to be reflected in an
Interpretation and Policy to NSX Rule 11.11(e) and not only in the
Exchange's FIX specification.
---------------------------------------------------------------------------
The instant rule change also proposes to modify the language of NSX
Rule 11.14 (Priority of Orders) with respect to how the use of cancel/
replace affects an order's priority. The instant rule filing modifies
Rule 11.14(a)(2) to provide that, where the quantity of an order has
been reduced pursuant to a Replace Message, such order maintains price/
time priority. This constitutes no changes to current Exchange system
practice and is consistent with the trading systems of other
markets.\5\ An Interpretation and Policy is also proposed to be added
to rule 11.14 to clarify how a Reserve Order's priority is impacted by
quantity adjustments (to either the display or the non-display portion)
through use of a Replace Message. Specifically, Interpretation and
Policy .01 provides that a Replace Message's size decrement of a
Reserve Order's display quantity (Tag 111) will not affect the order's
priority only if total order size remains the same or decreases.
Similarly, a Replace Message size decrement of a Reserve Order's total
quantity will not affect the order's priority only if the display
quantity also remains constant or decreases. Any increase in size of
either the display portion or the total size of a Reserve Order will
result in a new timestamp and cause that order to lose time priority.
---------------------------------------------------------------------------
\5\ BATS (BZX and BYX) Rule 11.12(a)(3). See also DirectEdge
(EDGA and EDGX) Rule 11.8(a)(4); Arca Rule 7.36(a)(3); and CBOE Rule
52.1(e).
---------------------------------------------------------------------------
The following chart summarizes the above-described impact on a
Reserve Order's time priority, if any, due to the use of a Replace
Message to adjust the quantity.
----------------------------------------------------------------------------------------------------------------
Display qty (Tag Display qty (Tag
111) increases 111) decreases Display qty (Tag 111) same
----------------------------------------------------------------------------------------------------------------
Total Order Qty Increases....... Lose Book Priority. Lose Book Priority. Lose Book Priority.
Total Order Qty Decreases....... Lose Book Priority. Maintain Book Maintain Book Priority.
Priority.
Total Order Qty Same............ Lose Book Priority. Maintain Book n/a.
Priority..
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[[Page 19172]]
The following examples illustrate the effect on a Reserve Order's
time priority, if any, due to the use of a Replace Message to adjust
the quantity. Each example assumes ETP Holder A has a first-in-time
priority resting Reserve Order to sell 1000 shares total, with a
display quantity of 500 (denoted as ``1000/500'').
Example 1 (Tag 111 Increases, Total Order Increases):
ETP Holder A submits a Replace Message to adjust quantity to 1100/
600.
Example 1 Result: The order loses time priority because display
quantity is increased.
Example 2 (Tag 111 Increases, Total Order Decreases):
ETP Holder A submits a Replace Message to adjust quantity to 900/
600.
Example 2 Result: The order loses time priority because display
quantity is increased, notwithstanding that total quantity is
decreased.
Example 3 (Tag 111 Increases, Total Order Remains Same):
ETP Holder A submits a Replace Message to adjust quantity to 1000/
600.
Example 3 Result: The order loses time priority because display
quantity is increased, notwithstanding that total quantity remains the
same.
Example 4 (Tag 111 Decreases, Total Order Increases):
ETP Holder A submits a Replace Message to adjust quantity to 1100/
300.
Example 4 Result: The order loses time priority because total
quantity is increased, notwithstanding that display quantity is
decreased.
Example 5 (Tag 111 Decreases, Total Order Decreases):
ETP Holder A submits a Replace Message to adjust quantity to 800/
400.
Example 5 Result: The order's time priority is maintained because
display quantity is decreased and total quantity is not increased.
Example 6 (Tag 111 Decreases, Total Order Remains Same):
ETP Holder A submits a Replace Message to adjust quantity to 1000/
400.
Example 6 Result: The order's time priority is maintained because
display quantity is decreased and total quantity is not increased.
Example 7 (Tag 111 Remains Same, Total Order Increases):
ETP Holder A submits a Replace Message to adjust quantity to 1100/
500.
Example 7 Result: The order loses time priority because total
quantity is increased, notwithstanding that display quantity remains
the same.
Example 8 (Tag 111 Remains Same, Total Order Decreases):
ETP Holder A submits a Replace Message to adjust quantity to 900/
500.
Example 8 Result: The order's time priority is maintained because
display quantity remains the same and total quantity is decreased.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\6\ in general, and
Section 6(b)(5) of the Act,\7\ in particular, in that it is designed,
among other things, to promote clarity, transparency and full
disclosure, in so doing, to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The proposed rule change advances
these objectives by making available to ETP Holders an order modifier
that is currently in use elsewhere within the national market system
and by clarifying order priority.\8\ Moreover, the proposed rule change
is not discriminatory in that it applies equally to those ETP Holders
that choose to utilize such functionality.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ See supra, footnotes 2 and 3 [sic].
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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 burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
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 does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
NSX has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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-2011-03 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-NSX-2011-03. 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 Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE., Washington,
DC 20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of the Exchange. All comments received
will be posted without change; the Commission does not edit personal
[[Page 19173]]
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-2011-03 and should be submitted on
or before April 27, 2011.
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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8122 Filed 4-5-11; 8:45 am]
BILLING CODE 8011-01-P
