Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Commentary .01 to NYSE Arca Rule 6.35, 38877-38879 [2012-15938]
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Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices
simultaneously routing the remaining
4,000 shares to other venues for
execution. In the event that the amount
of shares on other markets is insufficient
to completely fill the order, or the order
fails to completely execute, NASDAQ
would then post the remaining shares
on the NASDAQ book or cancel the
remaining shares per the routed order’s
instructions. NASDAQ believes that this
simultaneous execution against
NASDAQ available shares and routing
to other venues’ shares will avoid the
deleterious effect of market impact
discussed above and result in overall
faster and better executions of its
members’ routable orders.
NASDAQ notes that it is not changing
the execution and routing sequence of
all routable orders. The TFTY, SAVE,
SOLV, and CART orders are designed to
execute serially as part of their
strategies, which is generally to reduce
the blended fees associated with
transacting on multiple markets. As
such, simultaneous routing of such
orders would not result in a better
execution in terms of the goals of these
routable order types.
2. Statutory Basis
mstockstill on DSK4VPTVN1PROD with NOTICES
The statutory basis for the proposed
rule change is Section 6(b)(5) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),5 which requires the rules of an
exchange 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 Exchange believes
that the proposed rule meets these
requirements in that it promotes
efficiency in the market, and increases
the speed of execution and likelihood
that a routable order will be filled at the
best price possible. In this regard,
NASDAQ notes that simultaneous
execution minimizes the market impact
a routable order has on the markets
under the current multi-step execution
and routing process, thus improving fill
rates. Accordingly, the proposed rule
change will serve to improve execution
quality for investors sending their
routable orders to NASDAQ.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
5 15
U.S.C. 78f(b)(5).
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
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–NASDAQ–2012–071 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–NASDAQ–2012–071. 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
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38877
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
10:00 a.m. and 3:00 p.m. The text of the
proposed rule change is available on the
Commission’s Web site at https://
www.sec.gov. 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
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2012–071, and should be
submitted on or before July 20, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–15955 Filed 6–28–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67248; File No. SR–
NYSEArca–2012–19]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Amend
Commentary .01 to NYSE Arca Rule
6.35
June 25, 2012.
I. Introduction
On March 9, 2012, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 allow certain cross trades
effected on the trading floor to count
toward a market maker’s inappointment trading requirement and to
make certain non-substantive changes to
its rules. The proposed rule change was
published for comment in the Federal
Register on March 28, 2012.3 The
Commission received no comment
letters on the proposed rule change. On
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66642
(March 22, 2012), 77 FR 18875 (‘‘Notice’’).
1 15
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38878
Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices
May 8, 2012, the Commission extended
the time period for Commission action
to June 26, 2012.4 On June 13, 2012, the
Exchange filed Amendment No. 1 to the
proposed rule change.5 This order
approves the proposed rule change, as
modified by Amendment No. 1 thereto.
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Description of the Proposal
Under NYSE Arca Rule 6.35, a market
maker is required to effect at least 75%
of its trading activity (measured in terms
of contract volume per quarter) in
classes within its appointment.
Commentary .01 to NYSE Arca Rule
6.35 clarifies that a market maker’s
trades effected on the trading floor to
accommodate cross trades executed
pursuant to NYSE Arca Rule 6.47 do not
count for or against the market maker’s
75% requirement, regardless of whether
the trades are in issues within or
without the market maker’s
appointment. The Exchange proposes to
amend Commentary .01 to NYSE Arca
Rule 6.35 to allow a market maker’s
trades effected on the trading floor to
accommodate cross trades executed
pursuant to NYSE Arca Rule 6.47 to
count toward the market maker’s 75%
requirement, regardless of whether the
trades are in issues within or without
the market maker’s appointment.
Specifically, the Exchange asserts that
the proposed rule change would not
diminish a market maker’s obligation
when trading in open outcry or when
trading electronically. The Exchange
states that whenever market makers
trade in classes of options outside of
their appointment, they must fulfill the
same obligations as they do in their
appointed classes. The Exchange also
states that, when trading in open outcry
in option classes outside of their
appointment, market makers may not
engage in transactions that are
disproportionate in relation to or in
derogation of the performance of their
obligations in their appointed classes. In
addition, while all option classes listed
on the Exchange have appointed market
makers, not all of those appointed
market makers are located on the
trading floor, and therefore market
makers may be called upon to provide
liquidity via open outcry in issues
outside of their appointment. According
to the Exchange, the proposed rule
change will thus help to encourage
4 See
Securities Exchange Act Release No. 66945
(May 8, 2012), 77 FR 28413 (May 14, 2012).
5 In Amendment No. 1, the Exchange made a
technical change to Exhibit 5 and provided
additional justifications for the proposed rule
change. Because Amendment No. 1 does not
materially alter the substance of the proposed rule
change, Amendment No. 1 is not subject to notice
and comment.
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Jkt 226001
market maker participation in open
outcry, which will promote liquidity
and price improvement on the
Exchange. The Exchange also notes that
the proposed rule change is only
applicable to trades where a market
maker is trading with a floor broker
representing agency orders, and not
when a market maker is trading with
another market maker. Finally, the
Exchange states its belief that the
proposed rule change could lead to a
decrease in internalization of orders
because of the potential for greater
participation by competing market
makers on open outcry trades.
In addition, the Exchange proposes to
make non-substantive changes to NYSE
Arca Rules 6.35, 6.37, 6.84, and 10.12.
Specifically, the Exchange proposes to
replace the term ‘‘Primary
Appointment,’’ which is not a defined
term, with the word ‘‘appointment’’ as
it is used elsewhere in NYSE Arca Rule
6.35.
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.6 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,7 which requires, among other
things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange proposes to allow a
market maker’s trades effected on the
trading floor to accommodate cross
trades executed pursuant to NYSE Arca
Rule 6.47 to count toward the 75% inappointment requirement, regardless of
whether the trades are in issues within
or without the market maker’s
appointment. The Commission believes
that the proposal is consistent with the
Act. According to the Exchange, while
all option classes listed on the Exchange
have appointed market makers, not all
of those market makers are located on
the trading floor. Thus, at times the
Exchange may need to call upon a
market maker to provide liquidity via
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(5).
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Sfmt 4703
open outcry in issues outside of the
market maker’s appointment. The
Commission notes that the proposed
rule change may provide an incentive
for market makers to provide liquidity
to the trading floor. Market makers may
be encouraged to increase participation
in open outcry trading, because the
trades effected on the trading floor to
accommodate cross trades executed
pursuant to NYSE Arca Rule 6.47 will
be counted towards a market maker’s
75% in-appointment requirement.
Greater market maker participation in
cross trades executed pursuant to NYSE
Arca Rule 6.47 may also present
opportunities for price improvement on
the trading floor.8
The Commission notes that whenever
market makers enter the trading crowd
for a class of options in which they do
not hold an appointment in other than
a floor brokerage capacity, they must
fulfill the market maker obligations
established by Exchange rules.9 In
addition, when present anywhere on the
options trading floor, with regard to all
securities traded on the trading floor
and not just those to which they are
appointed, market makers are expected
to undertake the obligations of a market
maker in response to a demand from a
trading official.10 Also, with respect to
classes of option contracts outside of
their appointment, market makers
should not engage in transactions for an
account in which they have an interest
that are disproportionate in relation to,
or in derogation of, the performance of
their obligations with respect to those
classes within their appointment.11
Further, the Commission believes that
the proposal to replace the undefined
term ‘‘Primary Appointment’’ with the
term ‘‘appointment’’ is consistent with
the Act because using consistent
terminology should provide clarity and
reduce confusion with respect to the
application of Exchange rules regarding
market makers.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,12 that the
proposed rule change (SR–NYSEArca–
2012–19), as modified by Amendment
No. 1 thereto, be, and hereby is,
approved.
8 In this regard, the Exchange notes that the
proposal is applicable to trades where a market
maker is trading with a floor broker representing
agency orders, and not when a market maker is
trading with another market maker.
9 See NYSE Arca Rules 6.37(c) and 6.37A(d).
10 See id.
11 See id.
12 15 U.S.C. 78s(b)(2).
13 17 CFR 200.30–3(a)(12).
E:\FR\FM\29JNN1.SGM
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Federal Register / Vol. 77, No. 126 / Friday, June 29, 2012 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–15938 Filed 6–28–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67252; File No. SR–
NYSEArca–2012–05]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Adding New
Paragraph (cc) to NYSE Arca Options
Rule 6.62 To Provide for a Post No
Preference Light Only Quotation
June 25, 2012.
I. Introduction
On May 3, 2012, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 add new paragraph (cc) to
NYSE Arca Options Rule 6.62 to
provide for a Post No Preference Light
Only Quotation (‘‘PNPLO Quotation’’).
The proposed rule change was
published for comment in the Federal
Register on May 11, 2012.3 The
Commission received no comments on
the proposal. This order approves the
proposed rule change.
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Description of the Proposal
The Exchange has proposed to
provide a new quotation type—the
PNPLO Quotation. The PNPLO
Quotation would be an electronic
Market Maker 4 quotation that, upon
initial entry into the Exchange’s trading
system, would only be eligible to
execute against displayed liquidity on
Arca’s Consolidated Book.5 If a PNPLO
Quotation, upon entry, would: (1)
Execute exclusively against nondisplayed liquidity on the Consolidated
Book, it would be rejected; (2) execute
against both displayed and nondisplayed liquidity on the Consolidated
Book, it would immediately execute
against such displayed liquidity, but not
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66937
(May 7, 2012), 77 FR 27820 (May 11, 2012)
(‘‘Notice’’).
4 See NYSE Arca Options Rule 6.32 (defining
‘‘Market Maker’’).
5 See new NYSE Arca Options Rule 6.62(cc); see
also NYSE Arca Options Rule 6.1(b)(37) (defining
‘‘Consolidated Book’’).
2 17
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Jkt 226001
against the non-displayed liquidity, and
any remaining size would be rejected;
(3) execute exclusively against
displayed liquidity on the Consolidated
Book, it would immediately execute and
any remaining size would be placed on
the Consolidated Book and treated as a
standard Market Maker quotation; and
(4) not execute against either displayed
or non-displayed liquidity, it would be
placed on the Consolidated Book and
treated as a standard Market Maker
quotation.6 The entry of a PNPLO
Quotation would cause the automatic
removal of the pre-existing quotation(s)
of a Market Maker, regardless of
whether the PNPLO Quotation is
accepted or rejected by the NYSE Arca
System.7 Accordingly, in instances
where the PNPLO Quotation is rejected
by the system because of the presence
of otherwise marketable non-displayed
interest, the Market Maker would be
required to re-enter a quotation for
purposes of satisfying any applicable
quoting obligations under NYSE Arca
Options Rule 6.37B.8
The PNPLO Quotation may only be
submitted for options in penny pilot
issues.9 On the Exchange, penny pilot
issues are subject to a make/take fee
structure, under which Market Makers
receive credits for posting liquidity and
incur fees for taking liquidity.10 By
preventing interactions with resting,
non-displayed liquidity through use of
the PNPLO Quotation, Market Makers in
penny pilot issues would be able to
avoid incurring unexpectedly the fees
associated with such interactions. The
Exchange notes that this is desirable for
Market Makers because it is difficult for
them to account for this risk of
interacting with non-displayed liquidity
in their quoting models.11
6 See
new NYSE Arca Options Rule 6.62(cc).
supra note 3, at 27821.
8 See id.
9 See new NYSE Arca Options Rule 6.62(cc); see
also Securities Exchange Act Release Nos. 55156
(January 23, 2007), 72 FR 4759 (February 21, 2007)
(order approving penny pilot program); 56568
(September 27, 2007), 72 FR 56422 (October 3,
2007) (order approving expansion and extension of
penny pilot); 59628 (March 26, 2009), 74 FR 15025
(April 2, 2009) (notice of extension of penny pilot);
60224 (July 1, 2009), 74 FR 32991 (July 9, 2009)
(notice of extension of penny pilot); 60711
(September 23, 2009), 74 FR 49419 (September 28,
2009) (order partially approving expansion of
penny pilot); 61061 (November 24, 2009), 74 FR
62857 (December 1, 2009) (order partially
approving expansion of penny pilot); 63376
(November 24, 2010), 75 FR 75527 (December 3,
2010) (notice of extension of penny pilot); 65977
(December 15, 2011), 76 FR 79234 (December 21,
2011) (notice of extension of penny pilot).
10 See supra note 3, at 27821.
11 See id.
7 See
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
38879
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.12 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,13 which requires,
among other things, that the rules of a
national securities exchange be
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
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; and not be designed to
permit unfair discrimination between
customers, issuers, brokers or dealers.
The Exchange noted that the quoting
algorithms of Market Makers may not be
able to account accurately for the risk of
interacting with resting, non-displayed
liquidity in penny pilot issues and the
related take fees. The Exchange
represents that this challenge may result
in Market Makers widening their quotes
in penny pilot classes.14 The Exchange
further represents that use of the PNPLO
Quotation should allow Market Makers
to better control their execution costs by
avoiding unexpected take fees related to
executions with resting, non-displayed
liquidity in penny pilot issues. This cost
certainty, according to the Exchange,
could lead to narrower quote widths in
penny pilot issues, thereby improving
the Exchange’s market and benefiting
investors. Additionally, if the PNPLO
Quotation is rejected by the NYSE Arca
system because of the presence of
otherwise marketable non-displayed
interest, the Market Maker would be
required to re-enter a quotation for
purposes of satisfying any applicable
quoting obligations under NYSE Arca
Options Rule 6.37B. For these reasons,
the Commission believes that the
proposed PNPLO Quotation is
consistent with Section 6(b)(5) of the
Exchange Act as it is designed to
remove impediments to and perfect the
mechanisms of a free and open market
12 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78f(b)(5).
14 See supra note 3, at 27821.
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]]>Agencies
[Federal Register Volume 77, Number 126 (Friday, June 29, 2012)]
[Notices]
[Pages 38877-38879]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15938]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67248; File No. SR-NYSEArca-2012-19]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To Amend Commentary .01 to NYSE Arca Rule 6.35
June 25, 2012.
I. Introduction
On March 9, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
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
allow certain cross trades effected on the trading floor to count
toward a market maker's in-appointment trading requirement and to make
certain non-substantive changes to its rules. The proposed rule change
was published for comment in the Federal Register on March 28, 2012.\3\
The Commission received no comment letters on the proposed rule change.
On
[[Page 38878]]
May 8, 2012, the Commission extended the time period for Commission
action to June 26, 2012.\4\ On June 13, 2012, the Exchange filed
Amendment No. 1 to the proposed rule change.\5\ This order approves the
proposed rule change, as modified by Amendment No. 1 thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 66642 (March 22,
2012), 77 FR 18875 (``Notice'').
\4\ See Securities Exchange Act Release No. 66945 (May 8, 2012),
77 FR 28413 (May 14, 2012).
\5\ In Amendment No. 1, the Exchange made a technical change to
Exhibit 5 and provided additional justifications for the proposed
rule change. Because Amendment No. 1 does not materially alter the
substance of the proposed rule change, Amendment No. 1 is not
subject to notice and comment.
---------------------------------------------------------------------------
II. Description of the Proposal
Under NYSE Arca Rule 6.35, a market maker is required to effect at
least 75% of its trading activity (measured in terms of contract volume
per quarter) in classes within its appointment. Commentary .01 to NYSE
Arca Rule 6.35 clarifies that a market maker's trades effected on the
trading floor to accommodate cross trades executed pursuant to NYSE
Arca Rule 6.47 do not count for or against the market maker's 75%
requirement, regardless of whether the trades are in issues within or
without the market maker's appointment. The Exchange proposes to amend
Commentary .01 to NYSE Arca Rule 6.35 to allow a market maker's trades
effected on the trading floor to accommodate cross trades executed
pursuant to NYSE Arca Rule 6.47 to count toward the market maker's 75%
requirement, regardless of whether the trades are in issues within or
without the market maker's appointment.
Specifically, the Exchange asserts that the proposed rule change
would not diminish a market maker's obligation when trading in open
outcry or when trading electronically. The Exchange states that
whenever market makers trade in classes of options outside of their
appointment, they must fulfill the same obligations as they do in their
appointed classes. The Exchange also states that, when trading in open
outcry in option classes outside of their appointment, market makers
may not engage in transactions that are disproportionate in relation to
or in derogation of the performance of their obligations in their
appointed classes. In addition, while all option classes listed on the
Exchange have appointed market makers, not all of those appointed
market makers are located on the trading floor, and therefore market
makers may be called upon to provide liquidity via open outcry in
issues outside of their appointment. According to the Exchange, the
proposed rule change will thus help to encourage market maker
participation in open outcry, which will promote liquidity and price
improvement on the Exchange. The Exchange also notes that the proposed
rule change is only applicable to trades where a market maker is
trading with a floor broker representing agency orders, and not when a
market maker is trading with another market maker. Finally, the
Exchange states its belief that the proposed rule change could lead to
a decrease in internalization of orders because of the potential for
greater participation by competing market makers on open outcry trades.
In addition, the Exchange proposes to make non-substantive changes
to NYSE Arca Rules 6.35, 6.37, 6.84, and 10.12. Specifically, the
Exchange proposes to replace the term ``Primary Appointment,'' which is
not a defined term, with the word ``appointment'' as it is used
elsewhere in NYSE Arca Rule 6.35.
III. Discussion and Commission Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\6\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\7\ which requires, among other things, that
the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to allow a market maker's trades effected on
the trading floor to accommodate cross trades executed pursuant to NYSE
Arca Rule 6.47 to count toward the 75% in-appointment requirement,
regardless of whether the trades are in issues within or without the
market maker's appointment. The Commission believes that the proposal
is consistent with the Act. According to the Exchange, while all option
classes listed on the Exchange have appointed market makers, not all of
those market makers are located on the trading floor. Thus, at times
the Exchange may need to call upon a market maker to provide liquidity
via open outcry in issues outside of the market maker's appointment.
The Commission notes that the proposed rule change may provide an
incentive for market makers to provide liquidity to the trading floor.
Market makers may be encouraged to increase participation in open
outcry trading, because the trades effected on the trading floor to
accommodate cross trades executed pursuant to NYSE Arca Rule 6.47 will
be counted towards a market maker's 75% in-appointment requirement.
Greater market maker participation in cross trades executed pursuant to
NYSE Arca Rule 6.47 may also present opportunities for price
improvement on the trading floor.\8\
---------------------------------------------------------------------------
\8\ In this regard, the Exchange notes that the proposal is
applicable to trades where a market maker is trading with a floor
broker representing agency orders, and not when a market maker is
trading with another market maker.
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The Commission notes that whenever market makers enter the trading
crowd for a class of options in which they do not hold an appointment
in other than a floor brokerage capacity, they must fulfill the market
maker obligations established by Exchange rules.\9\ In addition, when
present anywhere on the options trading floor, with regard to all
securities traded on the trading floor and not just those to which they
are appointed, market makers are expected to undertake the obligations
of a market maker in response to a demand from a trading official.\10\
Also, with respect to classes of option contracts outside of their
appointment, market makers should not engage in transactions for an
account in which they have an interest that are disproportionate in
relation to, or in derogation of, the performance of their obligations
with respect to those classes within their appointment.\11\
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\9\ See NYSE Arca Rules 6.37(c) and 6.37A(d).
\10\ See id.
\11\ See id.
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Further, the Commission believes that the proposal to replace the
undefined term ``Primary Appointment'' with the term ``appointment'' is
consistent with the Act because using consistent terminology should
provide clarity and reduce confusion with respect to the application of
Exchange rules regarding market makers.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-NYSEArca-2012-19), as
modified by Amendment No. 1 thereto, be, and hereby is, approved.
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\12\ 15 U.S.C. 78s(b)(2).
\13\ 17 CFR 200.30-3(a)(12).
[[Page 38879]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15938 Filed 6-28-12; 8:45 am]
BILLING CODE 8011-01-P
