[Federal Register Volume 76, Number 209 (Friday, October 28, 2011)]
[Notices]
[Pages 67012-67013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27888]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65610; File No. SR-Phlx-2011-141]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change To Introduce the Minimum Life Order as a
New Order Type
October 24, 2011.
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 October 12, 2011, NASDAQ OMX PHLX LLC (``PHLX'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by PHLX. 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
PHLX is filing this proposed rule change to introduce a new order
type--the Minimum Life Order--for use in the NASDAQ OMX PSX (``PSX'')
system. PHLX proposes to implement the rule change as soon as
practicable following Commission approval. The text of the proposed
rule change is available at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/phlx, at PHLX'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 forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
PHLX proposes to introduce a new order type--the Minimum Life
Order--for use on PSX. Today's cash equities markets are characterized
by high levels of automation and speed, both in the systems employed by
exchanges and by their market participants. In such an environment, the
degree to which displayed orders reflect committed trading sentiment
has become less predictable, because many entered orders are rapidly
cancelled. Market participants that seek to interact with orders that
are cancelled before they can execute may ultimately achieve less
favorable executions than would have been the case if the order had not
cancelled or if they had directed their own order elsewhere. The more
often a market participant pursues displayed liquidity at a particular
venue that is no longer available by the time its order arrives, the
more likely it is that the market participant will pursue liquidity at
another venue. Conversely, if an exchange's fill rates are good, market
participants will direct liquidity-seeking orders to it with greater
confidence.
PSX was developed to provide an alternative to traditional price-
time markets that reward market participants whose systems are quickest
to post at a given price. Through its unique price-size-pro rata
algorithm, PSX instead allocates execution opportunities based on the
size of posted orders. The Exchange has devised the Minimum Life Order
as a further enhancement to this market model, designed to provide
market participants with a means to signal that their order will not be
cancelled within a given time frame, and thereby encourage removers of
liquidity to route orders to PSX in the expectation of receiving higher
fill rates. The Exchange believes that the order type may also enhance
price discovery by allowing a market participant to signal its
commitment to trade at a particular price.
Once entered, a Minimum Life Order may not be cancelled for a
period of time established in advance by the Exchange. If a market
participant entering a Minimum Life Order submits a cancel message with
respect to a Minimum Life Order at the same time as the order, or at
any point during the ``no cancel'' window, the cancel message will not
be rejected, but will be effected only following the expiration of the
window (assuming the order has not already been executed). Thus, a
market participant that wished to use the order type but that was
concerned about the potential for keeping its order on the book too
long would have a readily available mechanism for cancelling the order
at the end of the window. The initial ``no cancel'' window will be 100
milliseconds. The Exchange reserves the right to change the duration of
the no cancel window by submitting a proposed rule change to do so. All
Minimum Life Orders must be designated as Displayed Orders.
Through a separate filing, the Exchange will establish pricing for
the order. Because the Exchange believes that the order type may
enhance PSX's market quality through improved fill rates, the Exchange
expects to propose to offer an enhanced liquidity provider rebate of
$0.0026 per share executed for Minimum Life Orders that provide
liquidity after posting to the book. This rebate is the same as the
rebate offered with respect to displayed orders with an initial size of
2,000 shares or more, and compares favorably to the rates of $0.0024
per share executed for displayed orders with a smaller size and $0.0010
per share executed for non-displayed orders.
[[Page 67013]]
2. Statutory Basis
PHLX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\3\ in general, and with Section
6(b)(5) of the Act,\4\ in particular, in that the proposal 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 regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Exchange believes that
the order will enhance PSX's market quality by providing a means for
market participants to signal commitment to trade at the stated price
of the order for a defined period of time. The Exchange believes that
the use of such orders will benefit other market participants by
increasing the certainty of execution, and benefit the Exchange and all
of its participants by attracting additional order flow and increasing
order interaction.
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\3\ 15 U.S.C. 78f.
\4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
PHLX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Rather, the change
will promote greater competition by enhancing the functionality offered
by PSX. Use of the order type is entirely voluntary.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the 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.
The Exchange stated that it will submit an amendment to the
proposed rule change upon its approval by the Board of Directors of
PHLX.\5\ The Exchange consented to an extension of the period of time
specified in Section 19(b)(2) of the Act \6\ until forty-five days
after the Exchange files an amendment to this filing reflecting
approval of the provisions of the proposed rule change by the Board of
Directors of PHLX.\7\
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\5\ See Item 2 of the Form 19b-4 filed by the Exchange on
October 12, 2011.
\6\ 15 U.S.C. 78s(b)(2).
\7\ See Item 6 of the Form 19b-4 filed by the Exchange on
October 12, 2011.
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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 email to [email protected]. Please include
File No. SR-Phlx-2011-141 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2011-141. 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 (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 such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2011-141 and should be
submitted on or before November 18, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-27888 Filed 10-27-11; 8:45 am]
BILLING CODE 8011-01-P