Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change Amending NYSE Arca Equities Rule 7.31(h)(7) To Permit PL Select Orders To Interact With Incoming Orders Larger Than the Size of the PL Select Order, 6385 [2013-01971]
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Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68725; File No. SR–
NYSEARCA–2012–133]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change Amending
NYSE Arca Equities Rule 7.31(h)(7) To
Permit PL Select Orders To Interact
With Incoming Orders Larger Than the
Size of the PL Select Order
January 24, 2013.
I. Introduction
On November 27, 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 amend NYSE Arca Equities
Rule 7.31(h)(7) to permit PL Select
Orders to interact with incoming orders
larger than the size of the PL Select
Order. The proposed rule change was
published for comment in the Federal
Register on December 14, 2012.3 The
Commission received no comment
letters regarding the proposed rule
change. This order approves the
proposed rule change.
II. Description of the Proposal
The Exchange proposes to amend
NYSE Arca Equities Rule 7.31(h)(7) to
permit PL Select Orders to interact with
incoming orders larger than the size of
the PL Select Order. Currently the PL
Select Order type does not interact with
incoming orders that: (i) Have an
immediate-or-cancel (‘‘IOC’’) time in
force condition,4 (ii) is an ISO,5 or (iii)
is larger than the size of the PL Select
Order.6
The Exchange has identified an
unintended consequence related to the
implementation of PL Select Orders.
Specifically, as described in greater
detail in the Notice,7 in certain
instances an incoming Adding Liquidity
Only Order (‘‘ALO Order’’) is unable to
post to the NYSE Arca Book as required
by NYSE Arca Equities Rule 7.31(nn) 8
if there is a resident, contra-side PL
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 68385
(December 7, 2012), 77 FR 74528 (December 14,
2012) (SR–NYSEARCA–2012–133) (‘‘Notice’’).
4 See NYSE Arca Equities Rule 7.31(e).
5 See NYSE Arca Equities Rule 7.31(jj).
6 See Securities Exchange Act Release No. 67785
(Sept. 5, 2012), 77 FR 55888 (September 11, 2012)
(SR–NYSEArca–2012–48) (‘‘Approval Order’’).
7 See Notice, supra note 3.
8 See NYSE Arca Equities Rule 7.31(nn).
mstockstill on DSK4VPTVN1PROD with
2 17
VerDate Mar<15>2010
20:43 Jan 29, 2013
Jkt 229001
Select Order.9 For example, if an ETP
Holder has entered a PL Select Order to
sell shares and the Exchange receives a
larger incoming buy order at the same
price, because the arriving buy order is
larger than the resting PL Select Order,
the PL Select Order (unlike a regular PL
order) would not execute against the
arriving buy order and would remain
undisplayed on the Arca Book. Further,
an incoming ALO Order to buy at the
same price, which is seeking to add to
the existing bid would be rejected. In
such scenario, an ETP Holder seeking to
add liquidity to the Arca Book with an
ALO order would be unable to do so,
even though there is resting interest
posted at the same price.
The Exchange proposes to amend
NYSE Arca Equities Rule 7.31(h)(7) to
delete the requirement that prohibits PL
Select Order interaction with largersized, incoming orders.
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.10 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,11 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; and
are not designed to permit unfair
discrimination between customers,
issuers, brokers or dealers.
The Commission finds the proposed
rule change to be consistent with the
Act. The Commission notes that the
Exchange continues to believe that its
rationale for preventing PL Select
Orders from interacting with incoming
orders larger in size remains valid. In
this regard, the Exchange continues to
believe that preventing executions with
larger-sized incoming interest would
incentivize Users to route PL Select
Orders to the Exchange because such
orders would remain available to
provide price improvement and would
not be ‘‘swept’’ by such larger-sized
Notice, 77 FR at 74528.
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).
11 15 U.S.C. 78f(b)(5).
incoming orders. In addition, the
Exchange believes that because such PL
Select Orders would remain available to
provide price improvement, it could
similarly incentivize Users to route
displayable interest to the Exchange
because the likelihood of receiving price
improvement could increase.
The Commission notes that the
Exchange believes, however, that the
potential for liquidity-posting interest to
be rejected, albeit rare, outweighs the
Exchange’s stated benefit of allowing
the PL Select Order not interact with
incoming orders that are larger in size
than the PL Select Order. In addition,
the Commission notes that the Exchange
has represented that institutional
investors have raised concerns to the
Exchange that PL Select Orders
currently may bypass trading interest
entered on behalf of institutional
investors by not executing against
larger-sized orders. In this regard, the
Commission notes that the Exchange
states that its goal is not to prevent the
interaction of legitimate trading interest,
and to the extent there is a perception
that this may be the case, the Exchange
believes that the restriction on PL Select
Orders should be lifted.
Based on the Exchange’s statements,
the Commission believes that removing
the restriction on PL Select Order as
proposed and thereby allowing ALO
Orders to post to the Arca Book, as
intended, NYSE Arca should help to
ensure that trading interest is able to
interact on its market in an efficient
manner.
Accordingly, the Commission believes
that the proposed rule change is
consistent with Section 6(b)(5) of the
Act.12
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSEARCA–
2012–133) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–01971 Filed 1–29–13; 8:45 am]
BILLING CODE 8011–01–P
9 See
10 In
PO 00000
Frm 00097
Fmt 4703
Sfmt 9990
6385
12 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
14 17 CFR 200.30–3(a)(12).
13 15
E:\FR\FM\30JAN1.SGM
30JAN1
Agencies
[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Page 6385]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01971]
[[Page 6385]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68725; File No. SR-NYSEARCA-2012-133]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change Amending NYSE Arca Equities Rule 7.31(h)(7) To
Permit PL Select Orders To Interact With Incoming Orders Larger Than
the Size of the PL Select Order
January 24, 2013.
I. Introduction
On November 27, 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 amend NYSE Arca Equities Rule 7.31(h)(7) to
permit PL Select Orders to interact with incoming orders larger than
the size of the PL Select Order. The proposed rule change was published
for comment in the Federal Register on December 14, 2012.\3\ The
Commission received no comment letters regarding the proposed rule
change. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 68385 (December 7,
2012), 77 FR 74528 (December 14, 2012) (SR-NYSEARCA-2012-133)
(``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend NYSE Arca Equities Rule 7.31(h)(7)
to permit PL Select Orders to interact with incoming orders larger than
the size of the PL Select Order. Currently the PL Select Order type
does not interact with incoming orders that: (i) Have an immediate-or-
cancel (``IOC'') time in force condition,\4\ (ii) is an ISO,\5\ or
(iii) is larger than the size of the PL Select Order.\6\
---------------------------------------------------------------------------
\4\ See NYSE Arca Equities Rule 7.31(e).
\5\ See NYSE Arca Equities Rule 7.31(jj).
\6\ See Securities Exchange Act Release No. 67785 (Sept. 5,
2012), 77 FR 55888 (September 11, 2012) (SR-NYSEArca-2012-48)
(``Approval Order'').
---------------------------------------------------------------------------
The Exchange has identified an unintended consequence related to
the implementation of PL Select Orders. Specifically, as described in
greater detail in the Notice,\7\ in certain instances an incoming
Adding Liquidity Only Order (``ALO Order'') is unable to post to the
NYSE Arca Book as required by NYSE Arca Equities Rule 7.31(nn) \8\ if
there is a resident, contra-side PL Select Order.\9\ For example, if an
ETP Holder has entered a PL Select Order to sell shares and the
Exchange receives a larger incoming buy order at the same price,
because the arriving buy order is larger than the resting PL Select
Order, the PL Select Order (unlike a regular PL order) would not
execute against the arriving buy order and would remain undisplayed on
the Arca Book. Further, an incoming ALO Order to buy at the same price,
which is seeking to add to the existing bid would be rejected. In such
scenario, an ETP Holder seeking to add liquidity to the Arca Book with
an ALO order would be unable to do so, even though there is resting
interest posted at the same price.
---------------------------------------------------------------------------
\7\ See Notice, supra note 3.
\8\ See NYSE Arca Equities Rule 7.31(nn).
\9\ See Notice, 77 FR at 74528.
---------------------------------------------------------------------------
The Exchange proposes to amend NYSE Arca Equities Rule 7.31(h)(7)
to delete the requirement that prohibits PL Select Order interaction
with larger-sized, incoming orders.
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.\10\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\11\ 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; and are not designed to permit unfair discrimination
between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\10\ 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).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission finds the proposed rule change to be consistent with
the Act. The Commission notes that the Exchange continues to believe
that its rationale for preventing PL Select Orders from interacting
with incoming orders larger in size remains valid. In this regard, the
Exchange continues to believe that preventing executions with larger-
sized incoming interest would incentivize Users to route PL Select
Orders to the Exchange because such orders would remain available to
provide price improvement and would not be ``swept'' by such larger-
sized incoming orders. In addition, the Exchange believes that because
such PL Select Orders would remain available to provide price
improvement, it could similarly incentivize Users to route displayable
interest to the Exchange because the likelihood of receiving price
improvement could increase.
The Commission notes that the Exchange believes, however, that the
potential for liquidity-posting interest to be rejected, albeit rare,
outweighs the Exchange's stated benefit of allowing the PL Select Order
not interact with incoming orders that are larger in size than the PL
Select Order. In addition, the Commission notes that the Exchange has
represented that institutional investors have raised concerns to the
Exchange that PL Select Orders currently may bypass trading interest
entered on behalf of institutional investors by not executing against
larger-sized orders. In this regard, the Commission notes that the
Exchange states that its goal is not to prevent the interaction of
legitimate trading interest, and to the extent there is a perception
that this may be the case, the Exchange believes that the restriction
on PL Select Orders should be lifted.
Based on the Exchange's statements, the Commission believes that
removing the restriction on PL Select Order as proposed and thereby
allowing ALO Orders to post to the Arca Book, as intended, NYSE Arca
should help to ensure that trading interest is able to interact on its
market in an efficient manner.
Accordingly, the Commission believes that the proposed rule change
is consistent with Section 6(b)(5) of the Act.\12\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSEARCA-2012-133) be, and
it hereby is, approved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01971 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P