[Federal Register Volume 76, Number 83 (Friday, April 29, 2011)]
[Notices]
[Pages 24078-24080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10409]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64334; File No. SR-NYSE-2011-18]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 72(d) Regarding Agency Cross Transactions
April 25, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 19, 2011, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``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
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 Rule 72(d) with respect to agency
cross transactions. The text of the proposed rule change is available
at the Exchange, at http://www.nyse.com, at the Commission's Public
Reference Room, and at http://www.sec.gov.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 72(d) with respect to agency
cross transactions.\3\ Legacy Rule 72(b) became current Rule 72(d) when
the Exchange adopted the New Market Model Pilot. Although the rule text
was renumbered as part of the New Market Model Pilot filing, the
substance of the rule was not changed from its prior version.
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\3\ The provisions of Rule 72 are in effect during a pilot set
to end on August 1, 2011. See Securities Exchange Act Release No.
58845 (October 24, 2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-
2008-46) (establishing the ``New Market Model Pilot'' or ``Pilot'').
See also Securities Exchange Act Release Nos. 60756 (October 1,
2009), 74 FR 51628 (October 7, 2009) (SR-NYSE-2009-100) (extending
Pilot to November 30, 2009); 61031 (November 19, 2009), 74 FR 62368
(November 27, 2009) (SR-NYSE-2009-113) (extending Pilot to March 30,
2010); 61724 (March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-
NYSE-2010-25) (extending Pilot to September 30, 2010); 62819
(September 1, 2010), 75 FR 54937 (September 9, 2010) (SR-NYSE-2010-
61) (extending Pilot to January 31, 2011); and 63618 (December 29,
2010), 76 FR 617 (January 5, 2011) (SR-NYSE-2010-85) (extending
Pilot to August 1, 2011).
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Under NYSE Rule 72(d), when a member \4\ has an order to buy and an
order to sell an equivalent amount of the same security, and both
orders are for 25,000 shares or more, the member may ``cross'' those
orders at a price at or within the Exchange best bid or offer and does
not have to break up the cross transaction to trade with any bids or
offers previously displayed at the Exchange best bid or offer,
including any interest with priority (a ``72(d) crossing
transaction'').\5\ NYSE Rule 72(d) further provides that a member can
effect a 72(d) crossing transaction only for the accounts of persons
who are not members or member organizations. Accordingly, a Floor
broker cannot use this provision for customers who are unaffiliated
NYSE members or member organizations.
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\4\ The reference to ``member'' in Rule 72(d) and this rule
proposal means only Floor broker members. Designated Market Makers
(``DMMs''), while members of the Exchange, do not have any agency
relationships, and are therefore not able to effect this type of
cross.
\5\ A transaction effected at the cross price in reliance on
NYSE Rule 72(d) is printed as a ``stopped stock'' to denote that the
transaction was outside of normal market procedures. See NYSE Rule
128A.16. See also Securities Exchange Act Release No. 31343 (October
21, 1992), 57 FR 48645 (October 27, 1992) (SR-NYSE-90-39). The
Exchange notes that block-sized crosses outside of the Exchange best
bid or offer are addressed under NYSE Rule 127.
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The Exchange proposes to amend Rule 72(d) to change the required
minimum share size from 25,000 and instead require that both the order
to buy and the order to sell be ``block'' orders, which the Exchange
proposes to define for purposes of Rule 72 as at least 10,000 shares or
a quantity of stock having a market value of $200,000 or more,
whichever is less.\6\ This proposed change would more closely align
agency cross transactions with other ``block'' orders with respect to
the minimum applicable order size.\7\
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\6\ The Exchange proposes to include the ``block'' definition as
new Supplementary Material .10 to Rule 72.
\7\ See, e.g., NYSE Rules 104 and 127, which provide that a
``block'' shall be at least 10,000 shares or a quantity of stock
having a market value of $200,000 or more, whichever is less.
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The Exchange further proposes to amend Rule 72(d) to modify the
current restriction that a member may not effect a 72(d) crossing
transaction for the account of a member or member organization. The
Exchange instead proposes to conform Rule 72(d) to Rule 90, and
restrict a member from effecting a 72(d) crossing transaction for the
account of such member or member organization, an account of an
associated person, or an account with respect to which the member,
member organization or associated person
[[Page 24079]]
thereof exercises investment discretion. This proposed change would
enable Floor brokers to effect 72(d) crossing transactions on behalf of
unaffiliated members or member organizations.
The Exchange also proposes to update a reference to the term
``priority'' within Rule 72(d), which was included in the rule based on
the definition of the term ``priority'' under Exchange rules before
adopting the New Market Model Pilot. NYSE Rule 72(d) currently provides
that a member who is providing a better price to one side of the cross
transaction must trade with all other market interest having priority
at that price before trading with any part of the cross transaction.
The Exchange proposes to modify this requirement so that the member
seeking to provide price improvement must instead trade with all other
displayed market interest on the Exchange at that price before trading
with the cross transaction. The proposed change would expand protection
for interest on the Display Book[reg] \8\ by requiring the member who
is providing price improvement to trade not only with priority
interest, but with all displayed interest in the Display Book.\9\ The
Exchange proposes to similarly incorporate this change in Example 1
within Rule 72(d) by deleting the clause related to ``priority'' and
replacing it with a reference to ``displayed.''
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\8\ The Display Book system is an order management and execution
facility. The Display Book receives and displays orders to the DMMs,
contains order information and provides a mechanism to execute and
report transactions and publish the results to the Consolidated
Tape. The Display Book is connected to a number of other Exchange
systems for the purposes of comparison, surveillance and reporting
information to customers and other market data and national market
systems.
\9\ The Exchange notes that displayed interest does not include
the reserve portion of any orders on the Display Book. This proposed
amendment to Rule 72(d) does not change the obligation of the member
providing price improvement to comply with Rule 90.
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Finally, the Exchange proposes to remove the reference to
``prevailing quotation'' within Rule 72(d) and replace it with a
reference to the ``Exchange best bid or offer.'' This change would
provide clarity regarding the price at which a member could effect a
72(d) crossing transaction, but does not alter the meaning of the
current rule or the mechanics of a 72(d) crossing transaction.
2. Statutory Basis
The proposed rule change 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),\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 foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
Specifically, the proposed rule change would more closely align Rule
72(d) with other Exchange rules concerning block-sized orders and the
accounts for which agency orders may be crossed while also expanding
protection for interest on the Display Book by requiring that such
interest must be executed before a member could break up an agency
cross.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 prior to
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
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.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such 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-NYSE-2011-18 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2011-18. 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
[[Page 24080]]
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSE-2011-18 and should be submitted on or before May 20, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10409 Filed 4-28-11; 8:45 am]
BILLING CODE 8011-01-P