[Federal Register Volume 75, Number 237 (Friday, December 10, 2010)]
[Notices]
[Pages 77031-77032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31097]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63440; File No. SR-NYSEArca-2010-112]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rules 7.31(k) and 7.23(a)(1) To Modify Certain Characteristics
of the Q Order and Clarify the Interest Eligible for Satisfaction of a
Market Maker's Two-Sided Obligation
December 6, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on December 3, 2010, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Equities Rules 7.31(k) and
7.23(a)(1) to modify certain characteristics of the Q Order and clarify
the interest eligible for satisfaction of a Market Maker's Two-Sided
Obligation, respectively. The text of the proposed rule change is
available at the Exchange, the Commission's Public Reference Room, and
http://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NYSE Arca Equities Rules 7.31(k) and
7.23(a)(1) to modify certain characteristics of the Q Order and clarify
the interest eligible for satisfaction of a Market Maker's Two-Sided
Obligation, respectively.
A Market Maker is currently able to satisfy its Two-Sided
Obligation \3\ by instructing the NYSE Arca Marketplace to enter a Q
Order on its behalf either (1) at the last price and size entered by
the Market Maker during the previous trading day, including or
excluding reserve size, or (2) at a specified percentage from the best
bid or offer.\4\ Currently, upon execution, a Q Order entered with
reserve size pursuant to NYSE Arca Equities Rule 7.31(k)(1)(A)(1) will
automatically repost with the original display size and $10 below
(above) the original bid (offer).\5\ This particular automatic
reposting could result in a Q Order with a price that is significantly
worse than the published National Best Bid or Offer (``NBBO'').
Moreover, depending on the price of the security at issue, the
automatic reposting could result in a Market Maker posting a Q Order at
a price that is not in compliance with the new Market Maker pricing
obligations set forth in amended NYSE Arca Equities Rule 7.23(a)(1)(B),
which are to be implemented on December 6, 2010.
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\3\ See NYSE Arca Equities Rule 7.23(a)(1).
\4\ See NYSE Arca Equities 7.31(k)(1)(A)(1)-(2).
\5\ See NYSE Arca Equities Rule 7.31(k)(1)(B)(1). If the Market
Maker specifies a reserve size for the Q Order, it will not
automatically repost once the reserve size is exhausted.
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Accordingly, the Exchange proposes to delete the text of NYSE Arca
Equities Rule 7.31(k)(1)(B)(1) in its entirety \6\ and delete the text
``entered without reserve size'' from NYSE Arca Equities Rule
7.31(k)(1)(B)(2) to provide that a Market Maker, upon execution of its
Q Order entered with reserve size, would be responsible for immediately
posting a new Q order, rather than the Q order automatically reposting
$10 below (above) the original bid (offer). The Exchange notes that
Market Makers are currently required to post a new Q order upon
execution of Q orders entered without reserve size. Requiring the same
of Q orders originally entered with reserve size would encourage Q
order prices that bear a closer relationship to the NBBO than the
current $10 above/below reposting price, thus promoting fair and
orderly markets and the protection of investors and reducing the risk
of executions at illogical prices.
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\6\ The Exchange proposes the place NYSE Arca Equities Rule
7.31(k)(1)(B)(1) in `Reserve' for possible use at a later date.
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The Exchange previously represented to the Commission, in filing
SR-NYSEArca-2010-83, that it would submit a filing with the changes
proposed herein, including a proposed implementation date of Monday,
December 6, 2010, consistent with the implementation date for the new
Market Maker pricing obligations.\7\
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\7\ See Securities Exchange Act Release No. 63255 (November 5,
2010), 75 FR 69484 (November 12, 2010) (SR-NYSEArca-2010-83).
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The Exchange further proposes clarifying revisions to recently
amended Rule 7.23(a)(1). In filing SR-NYSEArca-2010-83, the Exchange
noted that Market Makers would use Q orders to meet the new Two-Sided
Obligation under Rule 7.23(a)(1).\8\ The Exchange proposes to amend
Rule 7.23(a)(1) to delete the requirement that Market Makers
exclusively use Q orders to meet their Two-Sided Obligation. Rule
7.23(a)(1) would continue to require that Market Makers identify to the
Exchange the interest that is being used to satisfy the Two-Sided
Obligation. While Market Makers may continue to use Q orders to satisfy
the Two-Sided Obligation, the Exchange believes that Market Makers
should be permitted to use other types of interest to satisfy this
obligation, provided that the interest is displayed and identified to
the Exchange. The proposed revision to Rule 7.23(a)(1) is consistent
with the rules adopted by other exchanges.\9\
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\8\ Id.
\9\ See, e.g., Nasdaq Rule 4613.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\10\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\11\
in particular, in that it is 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. Specifically,
the Exchange believes that the change
[[Page 77032]]
proposed herein would encourage Market Maker Q order prices that bear a
closer relationship to the NBBO, thus promoting fair and orderly
markets and the protection of investors and reducing the risk of
executions at illogical prices. The Exchange also believes that the
change propose herein would provide Market Makers with a more
appropriate level of flexibility with which to satisfy their Two-Sided
Obligation by permitting interest other than Q order interest to be
identified to the Exchange as meeting such obligation.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (1)
Significantly affect the protection of investors or the public
interest; (2) impose any significant burden on competition; and (3)
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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change
pursuant to Rule 19b-4(f)(6) under the Act, an exchange is required
to give the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Commission notes that the Exchange
has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\14\
However, Rule 19b-4(f)(6) \15\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. NYSE Arca has requested that the
Commission waive the 30-day operative delay.
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\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ Id.
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The Commission has considered NYSE Arca's request to waive the 30-
day operative delay. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest, as it will enable the Exchange to implement the
proposed change consistent with the implementation date for the new
market maker pricing obligations.\16\
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\16\ For the purposes only of waiving the operative date of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form http://www.sec.gov/rules/sro.shtml; or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-112 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-NYSEArca-2010-112. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site http://www.sec.gov/rules/sro.shtml. Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of the filing also will be
available for inspection and 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-
NYSEArca-2010-112 and should be submitted on or before January 3, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31097 Filed 12-9-10; 8:45 am]
BILLING CODE 8011-01-P