Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt a New Order Type Called the “Auto-Ex Only” Order, 9094-9098 [2013-02708]
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Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
Down Plan will be operational during
the same time period as the proposed
extended pilot, the Exchange believes
that maintaining the pilot for at least
through the phased implementation of
the Plan is operational will help to
protect against unanticipated
consequences. To that end, the
extension will allow the Exchange to
determine whether Article 20, Rule 10
is necessary once the Plan is operational
and, if so, whether improvements can be
made. Further, the Exchange believes it
consistent with the protection of
investors and the public interest to
adopt objective criteria to nullify
transactions that occur outside of the
Plan’s price bands when such
transactions should not have been made
but were due to a systems or technology
issue.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change implicates any
competitive issues. To the contrary, the
Exchange believes that FINRA and other
national securities exchanges are also
filing similar proposals, and thus, that
the proposal will help to ensure
consistent rules across market centers.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and Rule 19b–4(f)(6)(iii)
thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative for 30 days after the
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
14 17 CFR 240.19b–4(f)(6).
13 17
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date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 15 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest, as it
will allow the pilot program to continue
uninterrupted, thereby avoiding the
investor confusion that could result
from a temporary interruption in the
pilot program. For this reason, the
Commission designates the proposed
rule change to be operative upon
filing.16
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–CHX–2013–04 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–CHX–2013–04. 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
15 17
CFR 240.19b–4(f)(6)(iii).
purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
16 For
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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
10:00 a.m. and 3:00 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–CHX–
2013–04 and should be submitted on or
before February 28, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02706 Filed 2–6–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68807; File No. SR–NSX–
2013–02]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing of a Proposed Rule Change
To Adopt a New Order Type Called the
‘‘Auto-Ex Only’’ Order
February 1, 2013.
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 January
23, 2013, National Stock Exchange, Inc.
(‘‘NSX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to: (1) add
new definitions to clarify its Automatic
Execution Mode of order interaction
(‘‘Auto-Ex’’); and (2) implement a new
order type called ‘‘Auto-Ex Only,’’
which would only interact with orders
entered though Auto-Ex mode.
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 these
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 is proposing to: (1) add
new definitions to clarify Auto-Ex
mode; and (2) implement a new order
type called the ‘‘Auto-Ex Only’’ order
under NSX Rule 11.11(c)(13), which
would allow a User 3 to submit an order
that will only interact with orders
entered through NSX’s Auto-Ex mode.
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Auto-Ex Only Order Type
On August 31, 2006, the Securities
and Exchange Commission (the ‘‘SEC’’
or ‘‘Commission’’) approved
amendments to NSX trading rules to
provide for a price-time priority market
with two modes of order interaction: (1)
Auto-Ex and (2) Order Delivery.4 Every
User of the Exchange’s trading system,
NSX BLADE® (‘‘Blade’’), is eligible to
3 A ‘‘User’’ is any ETP Holder or Sponsored
Participant who is authorized to obtain access to the
System pursuant to Rule 11.9. See Exchange Rule
1.5(U).
4 See Securities Exchange Act Release No. 54391
(August 31, 2006), 71 FR 52836 (September 7, 2006)
(SR–NSX–2006–08). The Exchange’s two modes of
order interaction are described in NSX Rule
11.13(b).
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use the Auto-Ex mode, under which
Blade matches and executes like-priced
orders (including against orders entered
via Order Delivery mode) that are
resting on the NSX Book 5 in accordance
with the process described in Exchange
Rule 11.13(b)(1). Unlike Auto-Ex, a User
must meet certain eligibility standards
prior to submitting displayed and
undisplayed orders using Order
Delivery Mode (‘‘Order Delivery
Participant’’).6
An incoming marketable order would
be executed immediately against contraside orders entered via Auto-Ex mode
resting in the NSX Book. However, that
same incoming marketable order may
experience a delay if matched against an
order resting on the NSX Book that was
entered by an Order Delivery Participant
via Order Delivery mode. The potential
delays are due to [sic] Exchange sending
an Order Delivery Notification 7 to the
Order Delivery Participant that posted
the order requiring them to execute a
potential match. The Order Delivery
Participant must respond within
defined time frames set by the Exchange
with a complete fill, a partial fill, or
instruction to cancel in full.8
To avoid such delays, the Exchange
proposes to implement the Auto-Ex
Only order, a new order type that would
allow Users to submit an immediate-orcancel (‘‘IOC’’) limit or market order
with ‘‘Auto-Ex Only’’ handling
instructions. Auto-Ex Only orders
would be executed solely against orders
with price-time priority entered via
Auto-Ex mode and posted to the NSX
Book. An Auto-Ex Only order would not
interact with any orders resting on the
NSX Book entered via Order Delivery
Mode nor would it be routed away to
another trading center. Like an IOC
order,9 an unexecuted portion of an
Auto-Ex Only order would be cancelled
if not fully matched for execution
5 Exchange Rule 1.5 defines ‘‘NSX Book’’ as ‘‘the
System’s electronic fie [sic] of orders.’’
6 See NSX Rule 11.13(b)(2) and the Interpretations
and Policies thereto. Order Delivery Participants
typically submit their orders as ‘‘Post Only’’ in
order to preclude acting as a liquidity taker (in
Auto-Ex) and to prevent the Exchange from routing
the order away.
7 An Order Delivery Notification refers to a
message sent by the Exchange to the Order Delivery
Participant communicating the details of the full or
partial quantity of an inbound contra-side order that
potentially may be matched within the System for
execution against an order entered via Order
Delivery mode.
8 See NSX Rule 11.13(b)(2) and the Interpretations
and Policies thereto.
9 Under NSX Rule 11.11(b)(1), an IOC order is a
limit order that is to be executed in whole or in part
as soon as such order is received, and the portion
not so executed is to be treated as cancelled. An
order designated as IOC is not eligible to be routed
away pursuant to NSX Rule 11.15.
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against Auto-Ex orders with price/time
priority on the NSX Book.
The Exchange notes that its price/time
priority and order execution rules 10
would limit an Auto-Ex Only Order’s
ability to interact with certain
undisplayed orders. In addition, orders
entered via Order Delivery mode with
price time priority may also inhibit an
Auto-Ex Only order’s ability to interact
with undisplayed liquidity. Specifically,
an Auto-Ex Only order would first
execute against displayed orders on the
NSX Book. An Auto-Ex Only order
could be precluded from interacting
with an undisplayed order (i.e., a Zero
Display Reserve Order 11) entered via
Auto-Ex mode if the undisplayed order
shares a price point with an order
entered via Order Delivery mode.12
Similarly, an order entered via Order
Delivery mode could also prevent an
incoming Auto-Ex Only order from
interacting with the undisplayed
portion of a Reserve Order 13 under
circumstances in which the order
entered via Order Delivery mode has
price/time priority. Like displayed
orders, the displayed portion of a
Reserve Order will interact against
incoming Auto-Ex Only orders only to
the extent that there are no orders
entered via Order Delivery mode in the
NSX Book with price/time priority.
Lastly, the Exchange notes that Users
may not rely on the Auto-Ex Only order
for compliance with Rule 611 of
Regulation NMS because the Auto-Ex
Only order will not interact with orders
entered via Order Delivery mode that
may be deemed ‘‘protected quotations’’
on the Exchange.14
The following examples describe the
functionality of the proposed Auto-Ex
Only order. Each example lists orders
10 See NSX Rule 11.14(a) and, with respect to
Reserve Orders (including Zero Display Reserve
Orders), NSX Rule 11.14(a)(4).
11 See NSX Rule 11.11(c)(2)(A). A User may enter
a Reserve Order with zero display quantity, in
which case the Reserve Order will be known as a
‘‘Zero Display Reserve Order.’’
12 An Auto-Ex Only order would interact with an
undisplayed order where an order entered via Order
Delivery mode is also undisplayed and has priority
behind a displayed order not entered via Order
Delivery mode. See Example 4 infra.
13 Under Exchange Rule 11.11(c)(2), a Reserve
Order is defined as a ‘‘limit order with a portion
of the quantity displayed (‘‘displayed quantity’’)
and with a reserve portion of the quantity (‘‘reserve
quantity’’) that is not displayed.’’
14 Rule 611 of Regulation NMS, among other
things, requires a trading center to establish,
maintain, and enforce written policies and
procedures reasonably designed to prevent ‘‘tradethroughs’’—the execution of trades at prices inferior
to protected quotations displayed by other trading
centers. To be protected, a quotation must be
immediately and automatically accessible. 17 CFR
242.611. An Auto-Ex-Only order cannot be used as
an Inter-market Sweep Order.
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Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
resting in the NSX Book in price/time
priority.
Example One:
National Best Bid and Offer (‘‘NBBO’’):
134.50–134.51
Bids on the NSX Book:
134.50 × 400 (Order Delivery)
134.50 × 200 (Auto-Ex)
Incoming Order:
Limit Order to sell 400 at 134.50
Result: Currently, the Exchange
would match the incoming limit order
to sell 400 shares at 134.50 against the
order entered via Order Delivery mode
and send an Order Delivery Notification
to the Order Delivery Participant that
posted the order. A potential delay may
occur while awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full.
If submitted as a proposed Auto-Ex
Only order, the entire order will be
cancelled (like an IOC order) because
the order is not eligible to execute
against the order entered via Order
Delivery mode with price/time priority
ahead of the Auto-Ex order resting on
the NSX Book. A User sending an AutoEx Only order would receive an
immediate cancellation and avoid the
delay inherent in otherwise interacting
with an order entered via Order
Delivery.
Example Two:
NBBO: 134.50–134.51
Bids on the Exchange Book:
134.50 × 400 (Auto-Ex mode)
134.50 × 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 400 at 134.50
Result: Currently, an incoming limit
order to sell 400 shares at 134.50 will
be fully executed at 134.50 against the
displayed Auto-Ex order of 400 shares
that is resting at the top of the NSX
Book. The system would operate the
same under these circumstances,
regardless of which order type was
selected, because the only resting order
that could interact with the incoming
order was entered via Auto-Ex mode.
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Example Three:
NBBO: 134.50–134.51
Bids on the Exchange Book:
134.50 × 400 (Auto-Ex mode)
134.50 × 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 600 at 134.50
Result: Currently, an incoming limit
order to sell 600 shares will execute at
134.50 against the 400 share Auto-Ex
order resting at the top of the NSX Book.
The Exchange would then match the
remaining 200 shares against the order
entered via Order Delivery mode and
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send an Order Delivery Notification to
the Order Delivery Participant that
posted the order. A potential delay may
occur while awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full.
If submitted as a proposed Auto-Ex
Only order, the incoming limit order to
sell 600 shares will receive a partial fill
of 400 shares at 134.50 against the order
entered via Auto-Ex mode at the top of
the NSX Book, and the remaining
balance will be cancelled because, as
per its instructions, it could not interact
with the resting order entered via Order
Delivery mode with second-in-time
priority.
Example Four:
NBBO: 134.50–134.51
Bids on the Exchange Book:
Midpoint Peg × 500 (Auto-Ex mode/
Dark)
134.50 × 400 (Order Delivery mode)
134.50 × 200 (Auto-Ex mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
Result: Currently, an incoming limit
order to sell 1000 shares priced at
134.50 would execute against the
Midpoint Peg Dark Auto-Ex order of 500
shares at 134.505.
The Exchange would then match the
400 shares at a price of 134.50 against
the order entered via Order Delivery
mode and send an Order Delivery
Notification to the Order Delivery
Participant that posted the order. A
potential delay may occur while
awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full. The 100 shares at a price of
134.50 would then execute against the
200 share order ender [sic] via Auto-Ex
mode with third-in-time priority.
If submitted as an Auto-Ex Only
order, the incoming limit order to sell
1000 shares will receive a partial fill of
500 shares at 134.505 against the
Midpoint Peg Dark Auto-Ex order with
first price priority on the NSX Book and
the remaining balance of 500 shares will
be canceled because, as per its
instructions, it cannot interact with the
order entered via Order Delivery mode
that has next price/time priority. The
Midpoint Peg Dark Auto-Ex order
executes first because, even though it is
a Dark order, it is an Auto-Ex order with
first (price) priority.
Example Five:
NBBO: 134.51–134.52
Bids on the Exchange Book:
134.50 × 400 (Auto-Ex mode)
134.50 × 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
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Result: Currently, an incoming limit
order to sell 1000 shares at 134.50
would be routed to the away market to
be matched against the protected NBBO.
If submitted as an Auto-Ex Only order,
an incoming limit order to sell any
amount, will be cancelled because it
would otherwise trade through the
NBBO in violation of Rule 611 of
Regulation NMS 15 and Auto-Ex Only
orders, as per their instructions, are not
to be routed away to another market
center.
Example Six:
NBBO: 134.50–134.51
Bids on the Exchange Book:
134.50 × 400 (Auto-Ex mode)
134.50 × 800 (Auto-Ex mode)
134.50 × 600 (Auto-Ex mode)
134.50 × 200 (Order Delivery mode)
134.50 × 400 (Auto-Ex mode)
Incoming Order:
Limit Order to sell 5000 shares at 134.50
Result: Currently, an incoming limit
order to sell 5000 shares at 134.50
would execute 2200 shares in the NSX
Book at 134.50. The Exchange would
then match 200 shares at a price of
134.50 against the order entered via
Order Delivery mode and send an Order
Delivery Notification to the Order
Delivery Participant that posted the
order. A potential delay may occur
while awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full. The remaining 2600 shares
would route to an away market to be
matched against the protected NBBO in
compliance with Rule 611 of Regulation
NMS.16
If submitted as an Auto-Ex Only
order, an incoming limit order to sell
5000 shares at 134.50 will receive a
partial fill for 1800 shares at 134.50 by
being matched against the top three
orders on NSX Book, each of which was
entered via Auto-Ex mode. The
remaining shares will be canceled
because the order, as per its
instructions, is not eligible for execution
against the order entered via Order
Delivery that is next in priority.
Example Seven:
NBBO: 134.50–134.52
Bids on the NSX Book:
134.50 × 400 (Auto-Ex mode)
134.50 × 200 (Order Delivery mode)
Incoming Order:
Market Order to sell 600 shares at
134.50
Result: Currently, an incoming market
order to sell 600 shares at 134.50 would
execute 400 shares against the order
15 17
16 17
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CFR 242.611.
CFR 242.611.
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entered via Auto-Ex mode resting in the
NSX Book at 134.50. The Exchange
would then match the remaining 200
shares at a price of 134.50 against the
order entered via Order Delivery mode
and send an Order Delivery Notification
to the Order Delivery Participant that
posted the order. A potential delay may
occur while awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full.
If submitted as an Auto-Ex Only
order, an incoming market order to sell
600 shares will execute only against the
Auto-Ex order for 400 shares at 134.50.
The remaining unexecuted shares will
cancelled because the order, as per its
instructions, is not eligible for execution
against the order entered via Order
Delivery mode that is next in priority.
mstockstill on DSK4VPTVN1PROD with NOTICES
Example Eight:
NBBO: 134.50–134.51
Bids on the Exchange Book:
134.50 × 100/500 (Auto-Ex mode/
Reserve Order showing 100 displayed
and 500 undisplayed)
134.50 × 200 (Auto-Ex mode)
134.50 × 400 (Order Delivery mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
Result: Currently, an incoming limit
order to sell 1000 shares priced at
134.50 would execute 100 shares at
134.50 against the Reserve Order’s
displayed quantity; would execute 200
at 134.50 against the second-priority
Auto-Ex order. The Exchange would
then match 400 shares at a price of
134.50 against the order entered via
Order Delivery mode and send an Order
Delivery Notification to the Order
Delivery Participant that posted the
order. A potential delay may occur
while awaiting the Order Delivery
Participant’s response with a complete
fill, a partial fill, or instruction to cancel
in full. On the next three passes through
the NSX Book (and assuming a fill of
400 shares against the order entered via
Order Delivery mode), the balance of the
incoming order of 300 shares would be
filled (in 100 lot increments on each
pass/refresh) at 134.50 against the
refreshed, displayed portion of the
Reserve Order.
If submitted as An Auto-Ex Only
order, an incoming limit order to sell
1000 shares will receive a fill of 100
shares at 134.50 against the displayed
portion of the Auto-Ex Reserve Order; a
fill of 200 shares at 134.50 against the
next Auto-Ex order with second-in-time
priority; and the remaining balance of
700 shares will cancelled because, as
per its instructions, it cannot interact
with the order entered via Order
Delivery mode that has next price/time
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priority. The displayed portion only of
the Auto-Ex Reserve Order executes first
because it has first time priority, but the
balance of the Reserve Order is not
matched for execution because the
remaining portions of the Reserve Order
would refresh and become displayed
with a time priority after the resting
order entered via Order Delivery mode,
the presence of which cancels the
unfilled balance of the Auto-Ex Only
order before it can be matched against
the refreshed portions of the Reserve
Order.
Rationale for Auto-Ex Only Order
The proposed Auto-Ex Only order
will benefit Users by allowing them to
interact only with orders entered via
Auto-Ex mode, thereby avoiding the
delays associated with interacting with
orders entered via Order Delivery mode.
Currently, when an incoming Auto-Ex
order is matched against an order
entered via Order Delivery mode, the
Exchange sends an Order Delivery
Notification to the Order Delivery
Participant that posted the order. The
incoming Auto-Ex order may experience
a potential delay while awaiting the
Order Delivery Participant’s response
with a complete fill, a partial fill, or
instruction to cancel in full. Conversely,
an Auto-Ex Only order would provide
Users with a quicker response by
avoiding the processing time associated
with potential interaction with [sic]
resting order entered via Order Delivery
mode.
Proposed Definitions
Lastly, the Exchange proposes to
amend NSX Rule 1.5 and 11.11 to
include definitions for Auto-Ex Mode
and Auto-Ex Orders. First, the Exchange
proposes to define ‘‘Automatic
Execution Mode’’ under Exchange Rule
1.5 as ‘‘[t]he mode of order interaction
on the Exchange as described in Rule
11.13(b)(1).’’ Second, the Exchange
proposes to define ‘‘Auto-Ex Order’’
under Exchange Rule 11.11(c)(11) as
‘‘[a] limit or market order that is
automatically executed by the System
against any marketable contra side order
as in the manner described in Rule
11.13(b)(1).’’ As discussed earlier, the
Commission approved in 2006
amendments to NSX trading rules to
provide for a price-time priority market
with two modes of order interaction: (1)
Auto-Ex and (2) Order Delivery.17 These
definitions are meant to add clarity to
Exchange Rules and improve the ability
17 See Exchange Act Release No. 54391, supra
note 4.
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9097
to reference Auto-Ex mode elsewhere in
future amendments to Exchange rules.
2. Statutory Basis
The Exchange believes the proposed
Auto-Ex Only order is consistent with
Section 6 of the Act,18 and the rules and
regulations thereunder and, in
particular, the requirements of Section
6(b) of the Act.19 Specifically, the
Exchange believes the proposed AutoEx Only order furthers the objective of
Section 6(b)(5) of the Act 20 because it
promotes just and equitable principles
of trade, removes impediments to, and
perfects the mechanism of a free and
open market and a national market
system. The proposed Auto-Ex Only
order allows Users to choose to only
interact with orders entered via Auto-Ex
mode, thereby avoiding the delays
associated with interacting with orders
entered via Order Delivery mode.
Currently, when an incoming Auto-Ex
order is matched against an order
entered via Order Delivery mode, the
Exchange sends an Order Delivery
Notification to the Order Delivery
Participant who posted the order
alerting them of a potential match. The
incoming Auto-Ex order may experience
a potential delay while awaiting the
Order Delivery Participant’s response
with a complete fill, a partial fill, or
instruction to cancel in full. On the
contrary, an Auto-Ex Only order would
provide Users with a quicker response
by interacting only with orders entered
via Auto-Ex mode, thereby avoiding the
processing delays associated with [sic]
potential interaction with [sic] resting
order entered via Order Delivery mode.
Therefore, the Exchange believes the
quicker response times resulting from
the use of the Auto-Ex Only order
promotes just and equitable principles
of trade, removes impediments to, and
perfects the mechanism of a free and
open market and a national market
system.
Lastly, the Exchange believes the
proposed definitions under Exchange
Rules 1.5 and 11.11 are consistent with
Section 6(b) 21 of the Act, in general, and
furthers the objectives of Section
6(b)(5) 22 in that they are designed 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. The Exchange believes that
adding these definitions will add clarity
to the Exchange’s Rules and, therefore,
18 15
U.S.C. 78f.
U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
19 15
E:\FR\FM\07FEN1.SGM
07FEN1
9098
Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
promotes just and equitable principles
of trade, removes impediments to, and
perfects the mechanism of a free and
open market and a national market
system.
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. The
proposed Auto-Ex Only order will
benefit Users by allowing them to
interact only with orders entered via
Auto-Ex mode, thereby avoiding the
delays associated with interacting with
orders entered via Order Delivery mode.
The proposed definitions under
Exchange Rules 1.5 and 11.11 are meant
to simply add clarity to Exchange rules.
Therefore, the Exchange believes the
proposed Auto-Ex Only Order and
definitions under Exchange Rules 1.5
and 11.11 do not 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
Written comments on the proposed
rule change 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
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
mstockstill on DSK4VPTVN1PROD with NOTICES
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:
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NSX–2013–02 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–2013–02. 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
10:00 a.m. and 3:00 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–NSX–
2013–02 and should be submitted on or
before February 28, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02708 Filed 2–6–13; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
VerDate Mar<15>2010
17:45 Feb 06, 2013
Jkt 229001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68817; File No. SR–MIAX–
2013–03]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend the MIAX Options
Fee Schedule
February 1, 2013.
Pursuant to the provisions of 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 January 29, 2013, Miami
International Securities Exchange LLC
(‘‘MIAX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III 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
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
(‘‘Fee Schedule’’) to establish fees for
the MIAX Clearing Trade Drop Port, a
connection to a messaging interface that
will provide real-time trade clearing
information to the participants to a trade
on MIAX and to the participants’
respective clearing firms.
While changes to the Fee Schedule
pursuant to this proposal are effective
upon filing, the Exchange has
designated these changes to be operative
on February 1, 2013.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rule_filing, at MIAX’s principal
office, 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 these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
1 15
23 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00072
Fmt 4703
Sfmt 4703
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
07FEN1
]]>Agencies
[Federal Register Volume 78, Number 26 (Thursday, February 7, 2013)]
[Notices]
[Pages 9094-9098]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02708]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68807; File No. SR-NSX-2013-02]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing of a Proposed Rule Change To Adopt a New Order Type
Called the ``Auto-Ex Only'' Order
February 1, 2013.
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 January 23, 2013, National Stock Exchange, Inc. (``NSX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
[[Page 9095]]
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
The Exchange is proposing to: (1) add new definitions to clarify
its Automatic Execution Mode of order interaction (``Auto-Ex''); and
(2) implement a new order type called ``Auto-Ex Only,'' which would
only interact with orders entered though Auto-Ex mode.
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 these 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 is proposing to: (1) add new definitions to clarify
Auto-Ex mode; and (2) implement a new order type called the ``Auto-Ex
Only'' order under NSX Rule 11.11(c)(13), which would allow a User \3\
to submit an order that will only interact with orders entered through
NSX's Auto-Ex mode.
---------------------------------------------------------------------------
\3\ A ``User'' is any ETP Holder or Sponsored Participant who is
authorized to obtain access to the System pursuant to Rule 11.9. See
Exchange Rule 1.5(U).
---------------------------------------------------------------------------
Auto-Ex Only Order Type
On August 31, 2006, the Securities and Exchange Commission (the
``SEC'' or ``Commission'') approved amendments to NSX trading rules to
provide for a price-time priority market with two modes of order
interaction: (1) Auto-Ex and (2) Order Delivery.\4\ Every User of the
Exchange's trading system, NSX BLADE[supreg] (``Blade''), is eligible
to use the Auto-Ex mode, under which Blade matches and executes like-
priced orders (including against orders entered via Order Delivery
mode) that are resting on the NSX Book \5\ in accordance with the
process described in Exchange Rule 11.13(b)(1). Unlike Auto-Ex, a User
must meet certain eligibility standards prior to submitting displayed
and undisplayed orders using Order Delivery Mode (``Order Delivery
Participant'').\6\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 54391 (August 31,
2006), 71 FR 52836 (September 7, 2006) (SR-NSX-2006-08). The
Exchange's two modes of order interaction are described in NSX Rule
11.13(b).
\5\ Exchange Rule 1.5 defines ``NSX Book'' as ``the System's
electronic fie [sic] of orders.''
\6\ See NSX Rule 11.13(b)(2) and the Interpretations and
Policies thereto. Order Delivery Participants typically submit their
orders as ``Post Only'' in order to preclude acting as a liquidity
taker (in Auto-Ex) and to prevent the Exchange from routing the
order away.
---------------------------------------------------------------------------
An incoming marketable order would be executed immediately against
contra-side orders entered via Auto-Ex mode resting in the NSX Book.
However, that same incoming marketable order may experience a delay if
matched against an order resting on the NSX Book that was entered by an
Order Delivery Participant via Order Delivery mode. The potential
delays are due to [sic] Exchange sending an Order Delivery Notification
\7\ to the Order Delivery Participant that posted the order requiring
them to execute a potential match. The Order Delivery Participant must
respond within defined time frames set by the Exchange with a complete
fill, a partial fill, or instruction to cancel in full.\8\
---------------------------------------------------------------------------
\7\ An Order Delivery Notification refers to a message sent by
the Exchange to the Order Delivery Participant communicating the
details of the full or partial quantity of an inbound contra-side
order that potentially may be matched within the System for
execution against an order entered via Order Delivery mode.
\8\ See NSX Rule 11.13(b)(2) and the Interpretations and
Policies thereto.
---------------------------------------------------------------------------
To avoid such delays, the Exchange proposes to implement the Auto-
Ex Only order, a new order type that would allow Users to submit an
immediate-or-cancel (``IOC'') limit or market order with ``Auto-Ex
Only'' handling instructions. Auto-Ex Only orders would be executed
solely against orders with price-time priority entered via Auto-Ex mode
and posted to the NSX Book. An Auto-Ex Only order would not interact
with any orders resting on the NSX Book entered via Order Delivery Mode
nor would it be routed away to another trading center. Like an IOC
order,\9\ an unexecuted portion of an Auto-Ex Only order would be
cancelled if not fully matched for execution against Auto-Ex orders
with price/time priority on the NSX Book.
---------------------------------------------------------------------------
\9\ Under NSX Rule 11.11(b)(1), an IOC order is a limit order
that is to be executed in whole or in part as soon as such order is
received, and the portion not so executed is to be treated as
cancelled. An order designated as IOC is not eligible to be routed
away pursuant to NSX Rule 11.15.
---------------------------------------------------------------------------
The Exchange notes that its price/time priority and order execution
rules \10\ would limit an Auto-Ex Only Order's ability to interact with
certain undisplayed orders. In addition, orders entered via Order
Delivery mode with price time priority may also inhibit an Auto-Ex Only
order's ability to interact with undisplayed liquidity. Specifically,
an Auto-Ex Only order would first execute against displayed orders on
the NSX Book. An Auto-Ex Only order could be precluded from interacting
with an undisplayed order (i.e., a Zero Display Reserve Order \11\)
entered via Auto-Ex mode if the undisplayed order shares a price point
with an order entered via Order Delivery mode.\12\ Similarly, an order
entered via Order Delivery mode could also prevent an incoming Auto-Ex
Only order from interacting with the undisplayed portion of a Reserve
Order \13\ under circumstances in which the order entered via Order
Delivery mode has price/time priority. Like displayed orders, the
displayed portion of a Reserve Order will interact against incoming
Auto-Ex Only orders only to the extent that there are no orders entered
via Order Delivery mode in the NSX Book with price/time priority.
---------------------------------------------------------------------------
\10\ See NSX Rule 11.14(a) and, with respect to Reserve Orders
(including Zero Display Reserve Orders), NSX Rule 11.14(a)(4).
\11\ See NSX Rule 11.11(c)(2)(A). A User may enter a Reserve
Order with zero display quantity, in which case the Reserve Order
will be known as a ``Zero Display Reserve Order.''
\12\ An Auto-Ex Only order would interact with an undisplayed
order where an order entered via Order Delivery mode is also
undisplayed and has priority behind a displayed order not entered
via Order Delivery mode. See Example 4 infra.
\13\ Under Exchange Rule 11.11(c)(2), a Reserve Order is defined
as a ``limit order with a portion of the quantity displayed
(``displayed quantity'') and with a reserve portion of the quantity
(``reserve quantity'') that is not displayed.''
---------------------------------------------------------------------------
Lastly, the Exchange notes that Users may not rely on the Auto-Ex
Only order for compliance with Rule 611 of Regulation NMS because the
Auto-Ex Only order will not interact with orders entered via Order
Delivery mode that may be deemed ``protected quotations'' on the
Exchange.\14\
---------------------------------------------------------------------------
\14\ Rule 611 of Regulation NMS, among other things, requires a
trading center to establish, maintain, and enforce written policies
and procedures reasonably designed to prevent ``trade-throughs''--
the execution of trades at prices inferior to protected quotations
displayed by other trading centers. To be protected, a quotation
must be immediately and automatically accessible. 17 CFR 242.611. An
Auto-Ex-Only order cannot be used as an Inter-market Sweep Order.
---------------------------------------------------------------------------
The following examples describe the functionality of the proposed
Auto-Ex Only order. Each example lists orders
[[Page 9096]]
---------------------------------------------------------------------------
resting in the NSX Book in price/time priority.
Example One:
National Best Bid and Offer (``NBBO''): 134.50-134.51
Bids on the NSX Book:
134.50 x 400 (Order Delivery)
134.50 x 200 (Auto-Ex)
Incoming Order:
Limit Order to sell 400 at 134.50
Result: Currently, the Exchange would match the incoming limit
order to sell 400 shares at 134.50 against the order entered via Order
Delivery mode and send an Order Delivery Notification to the Order
Delivery Participant that posted the order. A potential delay may occur
while awaiting the Order Delivery Participant's response with a
complete fill, a partial fill, or instruction to cancel in full.
If submitted as a proposed Auto-Ex Only order, the entire order
will be cancelled (like an IOC order) because the order is not eligible
to execute against the order entered via Order Delivery mode with
price/time priority ahead of the Auto-Ex order resting on the NSX Book.
A User sending an Auto-Ex Only order would receive an immediate
cancellation and avoid the delay inherent in otherwise interacting with
an order entered via Order Delivery.
Example Two:
NBBO: 134.50-134.51
Bids on the Exchange Book:
134.50 x 400 (Auto-Ex mode)
134.50 x 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 400 at 134.50
Result: Currently, an incoming limit order to sell 400 shares at
134.50 will be fully executed at 134.50 against the displayed Auto-Ex
order of 400 shares that is resting at the top of the NSX Book. The
system would operate the same under these circumstances, regardless of
which order type was selected, because the only resting order that
could interact with the incoming order was entered via Auto-Ex mode.
Example Three:
NBBO: 134.50-134.51
Bids on the Exchange Book:
134.50 x 400 (Auto-Ex mode)
134.50 x 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 600 at 134.50
Result: Currently, an incoming limit order to sell 600 shares will
execute at 134.50 against the 400 share Auto-Ex order resting at the
top of the NSX Book. The Exchange would then match the remaining 200
shares against the order entered via Order Delivery mode and send an
Order Delivery Notification to the Order Delivery Participant that
posted the order. A potential delay may occur while awaiting the Order
Delivery Participant's response with a complete fill, a partial fill,
or instruction to cancel in full.
If submitted as a proposed Auto-Ex Only order, the incoming limit
order to sell 600 shares will receive a partial fill of 400 shares at
134.50 against the order entered via Auto-Ex mode at the top of the NSX
Book, and the remaining balance will be cancelled because, as per its
instructions, it could not interact with the resting order entered via
Order Delivery mode with second-in-time priority.
Example Four:
NBBO: 134.50-134.51
Bids on the Exchange Book:
Midpoint Peg x 500 (Auto-Ex mode/Dark)
134.50 x 400 (Order Delivery mode)
134.50 x 200 (Auto-Ex mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
Result: Currently, an incoming limit order to sell 1000 shares
priced at 134.50 would execute against the Midpoint Peg Dark Auto-Ex
order of 500 shares at 134.505.
The Exchange would then match the 400 shares at a price of 134.50
against the order entered via Order Delivery mode and send an Order
Delivery Notification to the Order Delivery Participant that posted the
order. A potential delay may occur while awaiting the Order Delivery
Participant's response with a complete fill, a partial fill, or
instruction to cancel in full. The 100 shares at a price of 134.50
would then execute against the 200 share order ender [sic] via Auto-Ex
mode with third-in-time priority.
If submitted as an Auto-Ex Only order, the incoming limit order to
sell 1000 shares will receive a partial fill of 500 shares at 134.505
against the Midpoint Peg Dark Auto-Ex order with first price priority
on the NSX Book and the remaining balance of 500 shares will be
canceled because, as per its instructions, it cannot interact with the
order entered via Order Delivery mode that has next price/time
priority. The Midpoint Peg Dark Auto-Ex order executes first because,
even though it is a Dark order, it is an Auto-Ex order with first
(price) priority.
Example Five:
NBBO: 134.51-134.52
Bids on the Exchange Book:
134.50 x 400 (Auto-Ex mode)
134.50 x 200 (Order Delivery mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
Result: Currently, an incoming limit order to sell 1000 shares at
134.50 would be routed to the away market to be matched against the
protected NBBO. If submitted as an Auto-Ex Only order, an incoming
limit order to sell any amount, will be cancelled because it would
otherwise trade through the NBBO in violation of Rule 611 of Regulation
NMS \15\ and Auto-Ex Only orders, as per their instructions, are not to
be routed away to another market center.
---------------------------------------------------------------------------
\15\ 17 CFR 242.611.
---------------------------------------------------------------------------
Example Six:
NBBO: 134.50-134.51
Bids on the Exchange Book:
134.50 x 400 (Auto-Ex mode)
134.50 x 800 (Auto-Ex mode)
134.50 x 600 (Auto-Ex mode)
134.50 x 200 (Order Delivery mode)
134.50 x 400 (Auto-Ex mode)
Incoming Order:
Limit Order to sell 5000 shares at 134.50
Result: Currently, an incoming limit order to sell 5000 shares at
134.50 would execute 2200 shares in the NSX Book at 134.50. The
Exchange would then match 200 shares at a price of 134.50 against the
order entered via Order Delivery mode and send an Order Delivery
Notification to the Order Delivery Participant that posted the order. A
potential delay may occur while awaiting the Order Delivery
Participant's response with a complete fill, a partial fill, or
instruction to cancel in full. The remaining 2600 shares would route to
an away market to be matched against the protected NBBO in compliance
with Rule 611 of Regulation NMS.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 242.611.
---------------------------------------------------------------------------
If submitted as an Auto-Ex Only order, an incoming limit order to
sell 5000 shares at 134.50 will receive a partial fill for 1800 shares
at 134.50 by being matched against the top three orders on NSX Book,
each of which was entered via Auto-Ex mode. The remaining shares will
be canceled because the order, as per its instructions, is not eligible
for execution against the order entered via Order Delivery that is next
in priority.
Example Seven:
NBBO: 134.50-134.52
Bids on the NSX Book:
134.50 x 400 (Auto-Ex mode)
134.50 x 200 (Order Delivery mode)
Incoming Order:
Market Order to sell 600 shares at 134.50
Result: Currently, an incoming market order to sell 600 shares at
134.50 would execute 400 shares against the order
[[Page 9097]]
entered via Auto-Ex mode resting in the NSX Book at 134.50. The
Exchange would then match the remaining 200 shares at a price of 134.50
against the order entered via Order Delivery mode and send an Order
Delivery Notification to the Order Delivery Participant that posted the
order. A potential delay may occur while awaiting the Order Delivery
Participant's response with a complete fill, a partial fill, or
instruction to cancel in full.
If submitted as an Auto-Ex Only order, an incoming market order to
sell 600 shares will execute only against the Auto-Ex order for 400
shares at 134.50. The remaining unexecuted shares will cancelled
because the order, as per its instructions, is not eligible for
execution against the order entered via Order Delivery mode that is
next in priority.
Example Eight:
NBBO: 134.50-134.51
Bids on the Exchange Book:
134.50 x 100/500 (Auto-Ex mode/Reserve Order showing 100 displayed and
500 undisplayed)
134.50 x 200 (Auto-Ex mode)
134.50 x 400 (Order Delivery mode)
Incoming Order:
Limit Order to sell 1000 at 134.50
Result: Currently, an incoming limit order to sell 1000 shares
priced at 134.50 would execute 100 shares at 134.50 against the Reserve
Order's displayed quantity; would execute 200 at 134.50 against the
second-priority Auto-Ex order. The Exchange would then match 400 shares
at a price of 134.50 against the order entered via Order Delivery mode
and send an Order Delivery Notification to the Order Delivery
Participant that posted the order. A potential delay may occur while
awaiting the Order Delivery Participant's response with a complete
fill, a partial fill, or instruction to cancel in full. On the next
three passes through the NSX Book (and assuming a fill of 400 shares
against the order entered via Order Delivery mode), the balance of the
incoming order of 300 shares would be filled (in 100 lot increments on
each pass/refresh) at 134.50 against the refreshed, displayed portion
of the Reserve Order.
If submitted as An Auto-Ex Only order, an incoming limit order to
sell 1000 shares will receive a fill of 100 shares at 134.50 against
the displayed portion of the Auto-Ex Reserve Order; a fill of 200
shares at 134.50 against the next Auto-Ex order with second-in-time
priority; and the remaining balance of 700 shares will cancelled
because, as per its instructions, it cannot interact with the order
entered via Order Delivery mode that has next price/time priority. The
displayed portion only of the Auto-Ex Reserve Order executes first
because it has first time priority, but the balance of the Reserve
Order is not matched for execution because the remaining portions of
the Reserve Order would refresh and become displayed with a time
priority after the resting order entered via Order Delivery mode, the
presence of which cancels the unfilled balance of the Auto-Ex Only
order before it can be matched against the refreshed portions of the
Reserve Order.
Rationale for Auto-Ex Only Order
The proposed Auto-Ex Only order will benefit Users by allowing them
to interact only with orders entered via Auto-Ex mode, thereby avoiding
the delays associated with interacting with orders entered via Order
Delivery mode. Currently, when an incoming Auto-Ex order is matched
against an order entered via Order Delivery mode, the Exchange sends an
Order Delivery Notification to the Order Delivery Participant that
posted the order. The incoming Auto-Ex order may experience a potential
delay while awaiting the Order Delivery Participant's response with a
complete fill, a partial fill, or instruction to cancel in full.
Conversely, an Auto-Ex Only order would provide Users with a quicker
response by avoiding the processing time associated with potential
interaction with [sic] resting order entered via Order Delivery mode.
Proposed Definitions
Lastly, the Exchange proposes to amend NSX Rule 1.5 and 11.11 to
include definitions for Auto-Ex Mode and Auto-Ex Orders. First, the
Exchange proposes to define ``Automatic Execution Mode'' under Exchange
Rule 1.5 as ``[t]he mode of order interaction on the Exchange as
described in Rule 11.13(b)(1).'' Second, the Exchange proposes to
define ``Auto-Ex Order'' under Exchange Rule 11.11(c)(11) as ``[a]
limit or market order that is automatically executed by the System
against any marketable contra side order as in the manner described in
Rule 11.13(b)(1).'' As discussed earlier, the Commission approved in
2006 amendments to NSX trading rules to provide for a price-time
priority market with two modes of order interaction: (1) Auto-Ex and
(2) Order Delivery.\17\ These definitions are meant to add clarity to
Exchange Rules and improve the ability to reference Auto-Ex mode
elsewhere in future amendments to Exchange rules.
---------------------------------------------------------------------------
\17\ See Exchange Act Release No. 54391, supra note 4.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed Auto-Ex Only order is consistent
with Section 6 of the Act,\18\ and the rules and regulations thereunder
and, in particular, the requirements of Section 6(b) of the Act.\19\
Specifically, the Exchange believes the proposed Auto-Ex Only order
furthers the objective of Section 6(b)(5) of the Act \20\ because it
promotes just and equitable principles of trade, removes impediments
to, and perfects the mechanism of a free and open market and a national
market system. The proposed Auto-Ex Only order allows Users to choose
to only interact with orders entered via Auto-Ex mode, thereby avoiding
the delays associated with interacting with orders entered via Order
Delivery mode. Currently, when an incoming Auto-Ex order is matched
against an order entered via Order Delivery mode, the Exchange sends an
Order Delivery Notification to the Order Delivery Participant who
posted the order alerting them of a potential match. The incoming Auto-
Ex order may experience a potential delay while awaiting the Order
Delivery Participant's response with a complete fill, a partial fill,
or instruction to cancel in full. On the contrary, an Auto-Ex Only
order would provide Users with a quicker response by interacting only
with orders entered via Auto-Ex mode, thereby avoiding the processing
delays associated with [sic] potential interaction with [sic] resting
order entered via Order Delivery mode. Therefore, the Exchange believes
the quicker response times resulting from the use of the Auto-Ex Only
order promotes just and equitable principles of trade, removes
impediments to, and perfects the mechanism of a free and open market
and a national market system.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Lastly, the Exchange believes the proposed definitions under
Exchange Rules 1.5 and 11.11 are consistent with Section 6(b) \21\ of
the Act, in general, and furthers the objectives of Section 6(b)(5)
\22\ in that they are designed 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. The Exchange believes
that adding these definitions will add clarity to the Exchange's Rules
and, therefore,
[[Page 9098]]
promotes just and equitable principles of trade, removes impediments
to, and perfects the mechanism of a free and open market and a national
market system.
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\21\ 15 U.S.C. 78f(b).
\22\ 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. The proposed Auto-Ex Only
order will benefit Users by allowing them to interact only with orders
entered via Auto-Ex mode, thereby avoiding the delays associated with
interacting with orders entered via Order Delivery mode. The proposed
definitions under Exchange Rules 1.5 and 11.11 are meant to simply add
clarity to Exchange rules. Therefore, the Exchange believes the
proposed Auto-Ex Only Order and definitions under Exchange Rules 1.5
and 11.11 do not 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
Written comments on the proposed rule change 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 up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the 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 rule-comments@sec.gov. Please include
File Number SR-NSX-2013-02 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-2013-02. 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
10:00 a.m. and 3:00 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-NSX-2013-02 and should be
submitted on or before February 28, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02708 Filed 2-6-13; 8:45 am]
BILLING CODE 8011-01-P
