Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Rule 72 Priority of Bids and Offers and Allocation of Executions, 77040-77042 [2011-31604]
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77040
Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not 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 Section
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6) thereunder.11
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 email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAmex–2011–91 on the subject
line.
srobinson on DSK4SPTVN1PROD with NOTICES
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–NYSEAmex–2011–91. This
file number should be included on the
subject line if email 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
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
11 17
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18:35 Dec 08, 2011
Jkt 226001
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 the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEAmex–2011–91 and should be
submitted on or before December 30,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31602 Filed 12–8–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65889; File No. SR–NYSE–
2011–60]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending
NYSE Rule 72 Priority of Bids and
Offers and Allocation of Executions
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b-4 thereunder,2
notice is hereby given that, on
November 21, 2011, New York Stock
Exchange LLC (the ‘‘Exchange’’ or
‘‘NYSE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00107
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Rule 72 (Priority of Bids and
Offers and Allocation of Executions).
The text of the proposed rule change is
available at the Exchange, at https://
www.nyse.com, at the Commission’s
Public Reference Room, and at https://
www.sec.gov.
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
self-regulatory organization 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
The Exchange proposes to amend
NYSE Rule 72 (Priority of Bids and
Offers and Allocation of Executions).5
As provided under Rule 72(a)(ii), a
bid or offer is considered the ‘‘setting
interest’’ when it is established as the
only displayable bid or offer made at a
particular price and is the only
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b-4(f)(6).
5 The provisions of Rule 72 are in effect during
a pilot (‘‘New Market Model Pilot’’) that is set to
end on January 31, 2012. See Securities Exchange
Act Release No. 58845 (October 24, 2008), 73 FR
64379 (October 29, 2008) (SR–NYSE–2008–46). See
also Securities Exchange Act Release Nos. 60756
(October 1, 2009), 74 FR 51628 (October 7, 2009)
(SR–NYSE–2009–100) (extending Pilot to November
30, 2009); 61031 (November 19, 2009), 74 FR 62368
(November 27, 2009) (SR–NYSE–2009–113)
(extending Pilot to March 30, 2010); 61724 (March
17, 2010), 75 FR 14221 (March 24, 2010) (SR–
NYSE–2010–25) (extending Pilot to September 30,
2010); 62819 (September 1, 2010), 75 FR 54937
(September 9, 2010) (SR–NYSE–2010–61)
(extending Pilot to January 31, 2011); 63616
(December 29, 2010), 76 FR 612 (January 5, 2011)
(SR–NYSE–2010–86) (extending Pilot to August 1,
2011); and 64761 (June 28, 2011), 76 FR 39147 (July
5, 2011) (SR–NYSE–2011–29) (extending Pilot to
January 31, 2012).
4 17
December 5, 2011.
PO 00000
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b-4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Sfmt 4703
E:\FR\FM\09DEN1.SGM
09DEN1
Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
displayable interest when such price is
or becomes the Exchange best bid or
offer (‘‘BBO’’). Setting interest is entitled
to priority for allocation of executions at
that price, as provided for under NYSE
Rule 72. In this regard, and as currently
provided for under NYSE Rule
72(a)(ii)(G), if non-pegging interest is the
setting interest, it retains its priority
even if joined at that price by a pegging
e-Quote.6 If, however, at the time nonpegging interest becomes the Exchange
BBO, an e-Quote is pegging to such nonpegging interest, all such interest is
considered to be entered simultaneously
and, therefore, no interest is considered
the setting interest.
Since implementing this rule as part
of the New Market Model Pilot, the
Exchange has determined that Rule
72(a)(ii) may currently disincentivize
aggressive displayed quoting by
permitting pegging e-Quotes to
eliminate the priority to which a nonpegging e-Quote might otherwise be
entitled. Specifically, because pegging
interest is not displayed until it joins
non-pegging interest, the participant
entering the non-pegging interest is
unaware that one or more pegging eQuotes at that price may exist. Because
the goal of the setting interest, and
related priority given to such interest, is
to create an incentive for participants to
display aggressive prices, a participant
may be reluctant to enter such displayed
interest if a non-displayed pegging eQuote could impede such displayed
interest from receiving priority. The
Exchange therefore proposes to amend
NYSE Rule 72(a)(ii)(G) to reflect that
non-pegging interest that becomes the
Exchange BBO will be considered the
setting interest even if an e-Quote is
pegging to such non-pegging interest.7
In this regard, the Exchange believes
that this proposed change would
enhance the New Market Model’s
positive impact on the Exchange’s
market, on the Exchange’s members,
and on investors generally.
Because of the related technology
changes that this proposed rule change
would require, the Exchange proposes
to announce the initial implementation
date and related roll-out schedule, if
applicable, via Trader Update.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),8 in general, and furthers the
6 See
Rule 70.26—Pegging for d-Quotes and eQuotes.
7 Non-pegging interest that is the setting interest
will continue to retain its priority even if joined at
that price by a pegging e-Quote. See id.
8 15 U.S.C. 78f(b).
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18:35 Dec 08, 2011
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objectives of Section 6(b)(5),9 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in 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. The Exchange believes
that the proposed rule change meets
these requirements because it would
permit non-pegging interest that sets a
new BBO to be considered the setting
interest and therefore retain priority, as
provided for under NYSE Rule 72, over
a pegging e-Quote that reacts and pegs
to such non-pegging interest.
Accordingly, the proposal is designed to
incentivize and reward aggressive
displayed quoting by market
participants, which contributes to the
market quality of the Exchange. In this
regard, the Exchange believes that this
proposed change would enhance the
New Market Model’s positive impact on
the Exchange’s market, on the
Exchange’s members, and on investors
generally.
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 Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to 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 significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not 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 Section
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6) thereunder.11
9 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
10 15
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
77041
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 email to rulecomments@sec.gov. Please include File
Number SR–NYSE–2011–60 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–2011–60. This file
number should be included on the
subject line if email 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 the filing also
will be available for inspection and
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
E:\FR\FM\09DEN1.SGM
09DEN1
77042
Federal Register / Vol. 76, No. 237 / Friday, December 9, 2011 / Notices
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2011–60 and should be submitted on or
before December 30, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–31604 Filed 12–8–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Granting
Approval of Proposed Rule Change To
Adopt NASD Rule 2320 (Best
Execution and Interpositioning) and
Interpretive Material (‘‘IM’’) 2320 as
FINRA Rule 5310 in the Consolidated
Rulebook
December 5, 2011.
srobinson on DSK4SPTVN1PROD with NOTICES
I. Introduction
On October 4, 2011, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) (f/k/a National Association
of Securities Dealers, Inc. (‘‘NASD’’))
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt NASD Rule 2320 (Best
Execution and Interpositioning) and
Interpretive Material (‘‘IM’’) 2320
(Interpretive Guidance with Respect to
Best Execution Requirements) as a
FINRA rule in the consolidated FINRA
rulebook with four notable changes. The
proposed rule change was published for
comment in the Federal Register on
October 21, 2011.3 The Commission
received one comment letter on the
proposal.4 FINRA filed a response to
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 65579
(October 17, 2011), 76 FR 65549 (‘‘Notice’’).
4 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from David T. Bellaire, Esq., General
Counsel and Director of Government Affairs,
Financial Services Institute, dated November 14,
2011 (‘‘FSI Letter’’).
1 15
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18:35 Dec 08, 2011
Jkt 226001
II. Description of the Proposal
As part of the process of developing
a new consolidated rulebook
(‘‘Consolidated FINRA Rulebook’’),6
FINRA is proposing to adopt NASD
Rule 2320 (Best Execution and
Interpositioning) and IM–2320
(Interpretive Guidance with Respect to
Best Execution Requirements) as a
FINRA rule in the consolidated FINRA
rulebook with four notable changes.7
Specifically, the proposed rule change
would combine and renumber NASD
Rule 2320 and IM–2320 as FINRA Rule
5310 in the Consolidated FINRA
Rulebook.
Current NASD Rule 2320 and IM–2320
[Release No. 34–65895; File No. SR–FINRA–
2011–052]
12 17
this comment on December 1, 2011.5
This order approves the proposed rule
change.
NASD Rule 2320 currently requires a
member, in any transaction for or with
a customer or a customer of another
broker-dealer, to use ‘‘reasonable
diligence’’ to ascertain the best market
for a security and to buy or sell in such
market so that the resultant price to the
customer is as favorable as possible
under prevailing market conditions. The
rule identifies five factors that are
among those to be considered in
determining whether the member has
used reasonable diligence.8 The rule
also includes provisions related to
interpositioning (i.e., interjecting a third
party between the member and the best
available market), the use of a broker’s
broker,9 the staffing of order rooms, and
5 See Letter from Brant K. Brown, Associate
General Counsel, FINRA, to Elizabeth M. Murphy,
Secretary, Commission, dated December 1, 2011
(‘‘FINRA Response to Comment’’).
6 The current FINRA rulebook consists of (1)
FINRA Rules; (2) NASD Rules; and (3) rules
incorporated from NYSE (‘‘Incorporated NYSE
Rules’’) (together, the NASD Rules and Incorporated
NYSE Rules are referred to as the ‘‘Transitional
Rulebook’’). While the NASD Rules generally apply
to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that
are also members of the NYSE (‘‘Dual Members’’).
The FINRA Rules apply to all FINRA members,
unless such rules have a more limited application
by their terms. For more information about the
rulebook consolidation process, see Information
Notice, March 12, 2008 (Rulebook Consolidation
Process).
7 As part of adopting the NASD rule as a FINRA
rule, FINRA has also proposed various technical
and conforming changes.
8 These five factors are: (1) The character of the
market for the security; (2) the size and type of
transaction; (3) the number of markets checked; (4)
the accessibility of the quotation; and (5) the terms
and conditions of the order as communicated to the
member.
9 The proposed rule change moves part of the
provision concerning the use of a broker’s broker
from paragraph (b) of the rule to Supplementary
Material .05.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
the application of the best execution
requirements to other parties.
In addition to these provisions, NASD
Rule 2320(f) (commonly referred to as
the ‘‘Three Quote Rule’’) generally
requires members that execute
transactions in non-exchange-listed
securities on behalf of customers to
contact a minimum of three dealers (or
all dealers if three or fewer) and obtain
quotations from those dealers subject to
certain exclusions.10 The Three Quote
Rule establishes a minimum standard,
and compliance with the Three Quote
Rule, in and of itself, does not mean that
a member has met its best execution
obligations under NASD Rule 2320.11
IM–2320 was adopted in 2006 to
codify interpretive guidance that FINRA
staff had provided involving compliance
with NASD Rule 2320.12 Specifically,
IM–2320 addresses issues involving the
term ‘‘market’’ for purposes of the rule
as well as the application of the rule to
debt securities and to broker-dealers
that are executing a customer’s order
against the broker-dealer’s quote.
Proposed Adoption and Changes to
NASD Rule 2320 and IM–2320 as
FINRA Rule 2310
FINRA is proposing to adopt NASD
Rule 2320 (Best Execution and
Interpositioning) and IM–2320
(Interpretive Guidance with Respect to
Best Execution Requirements) as FINRA
rule 5310 in the Consolidated FINRA
Rulebook with four notable changes,
discussed in turn.
(1) Three Quote Rule
Although the original concerns the
Three Quote Rule was designed to
address are still valid, FINRA represents
that the current requirements in the
Three Quote Rule, even with the various
exclusions, are overly prescriptive and
can often result in unnecessary delay in
the execution of a customer’s order or
impose requirements that do not benefit
the customer.13 Accordingly, rather than
maintain the Three Quote Rule and the
various exclusions in their current
format, the proposed rule change
replaces the Three Quote Rule with
Supplementary Material emphasizing a
member’s best execution obligations
10 The Three Quote Rule does not apply, for
example, when two or more priced quotations for
a non-exchange-listed security are displayed in an
inter-dealer quotation system that permits quotation
updates on a real-time basis. Also excluded from
the Three Quote Rule are certain transactions in
non-exchange-listed securities of foreign issuers
that are part of the FTSE All-World Index.
11 See NASD Notice to Members 00–78
(November 2000).
12 See Securities Exchange Act Release No. 54339
(August 21, 2006), 71 FR 50959 (August 28, 2006).
13 See Notice at 65550.
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]]>Agencies
[Federal Register Volume 76, Number 237 (Friday, December 9, 2011)]
[Notices]
[Pages 77040-77042]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31604]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65889; File No. SR-NYSE-2011-60]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 72 Priority of Bids and Offers and Allocation of
Executions
December 5, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on November 21, 2011, New York Stock Exchange LLC (the
``Exchange'' or ``NYSE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Rule 72 (Priority of Bids and
Offers and Allocation of Executions). The text of the proposed rule
change is available at the Exchange, at https://www.nyse.com, at the
Commission's Public Reference Room, and at https://www.sec.gov.
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 self-regulatory organization
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
The Exchange proposes to amend NYSE Rule 72 (Priority of Bids and
Offers and Allocation of Executions).\5\
---------------------------------------------------------------------------
\5\ The provisions of Rule 72 are in effect during a pilot
(``New Market Model Pilot'') that is set to end on January 31, 2012.
See Securities Exchange Act Release No. 58845 (October 24, 2008), 73
FR 64379 (October 29, 2008) (SR-NYSE-2008-46). See also Securities
Exchange Act Release Nos. 60756 (October 1, 2009), 74 FR 51628
(October 7, 2009) (SR-NYSE-2009-100) (extending Pilot to November
30, 2009); 61031 (November 19, 2009), 74 FR 62368 (November 27,
2009) (SR-NYSE-2009-113) (extending Pilot to March 30, 2010); 61724
(March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-NYSE-2010-25)
(extending Pilot to September 30, 2010); 62819 (September 1, 2010),
75 FR 54937 (September 9, 2010) (SR-NYSE-2010-61) (extending Pilot
to January 31, 2011); 63616 (December 29, 2010), 76 FR 612 (January
5, 2011) (SR-NYSE-2010-86) (extending Pilot to August 1, 2011); and
64761 (June 28, 2011), 76 FR 39147 (July 5, 2011) (SR-NYSE-2011-29)
(extending Pilot to January 31, 2012).
---------------------------------------------------------------------------
As provided under Rule 72(a)(ii), a bid or offer is considered the
``setting interest'' when it is established as the only displayable bid
or offer made at a particular price and is the only
[[Page 77041]]
displayable interest when such price is or becomes the Exchange best
bid or offer (``BBO''). Setting interest is entitled to priority for
allocation of executions at that price, as provided for under NYSE Rule
72. In this regard, and as currently provided for under NYSE Rule
72(a)(ii)(G), if non-pegging interest is the setting interest, it
retains its priority even if joined at that price by a pegging e-
Quote.\6\ If, however, at the time non-pegging interest becomes the
Exchange BBO, an e-Quote is pegging to such non-pegging interest, all
such interest is considered to be entered simultaneously and,
therefore, no interest is considered the setting interest.
---------------------------------------------------------------------------
\6\ See Rule 70.26--Pegging for d-Quotes and e-Quotes.
---------------------------------------------------------------------------
Since implementing this rule as part of the New Market Model Pilot,
the Exchange has determined that Rule 72(a)(ii) may currently
disincentivize aggressive displayed quoting by permitting pegging e-
Quotes to eliminate the priority to which a non-pegging e-Quote might
otherwise be entitled. Specifically, because pegging interest is not
displayed until it joins non-pegging interest, the participant entering
the non-pegging interest is unaware that one or more pegging e-Quotes
at that price may exist. Because the goal of the setting interest, and
related priority given to such interest, is to create an incentive for
participants to display aggressive prices, a participant may be
reluctant to enter such displayed interest if a non-displayed pegging
e-Quote could impede such displayed interest from receiving priority.
The Exchange therefore proposes to amend NYSE Rule 72(a)(ii)(G) to
reflect that non-pegging interest that becomes the Exchange BBO will be
considered the setting interest even if an e-Quote is pegging to such
non-pegging interest.\7\ In this regard, the Exchange believes that
this proposed change would enhance the New Market Model's positive
impact on the Exchange's market, on the Exchange's members, and on
investors generally.
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\7\ Non-pegging interest that is the setting interest will
continue to retain its priority even if joined at that price by a
pegging e-Quote. See id.
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Because of the related technology changes that this proposed rule
change would require, the Exchange proposes to announce the initial
implementation date and related roll-out schedule, if applicable, via
Trader Update.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in 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. The Exchange
believes that the proposed rule change meets these requirements because
it would permit non-pegging interest that sets a new BBO to be
considered the setting interest and therefore retain priority, as
provided for under NYSE Rule 72, over a pegging e-Quote that reacts and
pegs to such non-pegging interest. Accordingly, the proposal is
designed to incentivize and reward aggressive displayed quoting by
market participants, which contributes to the market quality of the
Exchange. In this regard, the Exchange believes that this proposed
change would enhance the New Market Model's positive impact on the
Exchange's market, on the Exchange's members, and on investors
generally.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to 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 significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not 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 Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange 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 email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2011-60 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-2011-60. This file
number should be included on the subject line if email 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 the filing also will be available for
inspection and
[[Page 77042]]
copying at the principal office of the Exchange. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2011-60 and should be submitted on
or before December 30, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31604 Filed 12-8-11; 8:45 am]
BILLING CODE 8011-01-P
