[Federal Register Volume 77, Number 80 (Wednesday, April 25, 2012)]
[Notices]
[Pages 24750-24752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9969]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66833; File No. SR-NYSEArca-2012-32]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Equities Rule 7.31 To Specify How the Immediate-or-Cancel Time-in-Force
Instructions Are Applicable to an MPL Order
April 19, 2012.
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 April 10, 2012, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'')
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 Exchange has designated
the proposed rule change as constituting a rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal effective upon
filing with the Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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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 Rule 7.31 to
specify how the immediate-or-cancel (``IOC'') time-in-force
instructions are applicable to an MPL Order. The text of the proposed
rule change is available at the Exchange, www.nyse.com, and 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 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 Rule 7.31 to
specify how the IOC time-in-force instructions are applicable to an MPL
Order.
Background
An MPL Order is a type of Working Order that has conditional or
undisplayed price and/or size. As set forth in NYSE Arca Equities Rule
7.31(h)(5), an MPL Order is a Passive Liquidity Order that is priced at
the midpoint of the PBBO and does not trade through a Protected
Quotation. An MPL Order has a minimum order entry size of one share and
Users may specify a minimum executable size for an MPL Order, which
must be no less than one share. If an MPL Order has a specified minimum
executable size, it will execute against an incoming order that meets
the minimum executable size and is priced at or better than the
midpoint of the PBBO. If the leaves quantity becomes less than the
minimum size, the minimum executable size restriction will no longer be
enforced on executions.
If the market is locked or crossed, the MPL Order will wait for the
market to unlock or uncross before becoming eligible to trade again.
MPL Orders are ranked in time priority for the purposes of execution as
long as the midpoint is within the limit range of the order. MPL Orders
always execute at the midpoint and do not receive price improvement.
MPL Orders are valid for any session, but do not participate in
auctions. Unlike Passive Liquidity Orders, MPL Orders are not exclusive
to lead market makers (``LMM'') for securities for which the Exchange
is the primary market. Users that choose not to trade with MPL Orders
may mark incoming limit orders with a ``No Midpoint Execution''
designator and such limit orders will ignore MPL Orders. MPL Orders do
not route out of the Exchange to other market centers.
NYSE Arca Equities Rule 7.31 sets forth the time-in-force
conditions that are available for orders entered at the Exchange. One
such time-in-force condition is the IOC condition, which provides that
a market or limit order that is marked IOC 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.
Proposed Rule Change
The Exchange proposes to add NYSE Arca Equities Rule 7.31(h)(6) to
specify how the IOC time-in-force conditions are applicable to an MPL
Order (an ``MPL-IOC Order''). Because it is an MPL Order, the proposed
MPL-IOC Order follows the same execution and priority rules of an MPL
Order, including that it would be a Passive Liquidity Order that is
priced at the midpoint of the PBBO, does not trade through Protected
Quotations, always executes at the midpoint, does not receive price
improvement, does not route to other market centers, is not limited to
LMMs for securities listed on the Exchange, and will not trade with
incoming limit orders with a ``No Midpoint Execution'' designator.
[[Page 24751]]
Because of the IOC attributes, certain elements of the MPL Order,
by their terms, are not applicable to the proposed MPL-IOC Order.
First, because an IOC order cancels if it does not immediately execute,
Users will not be able to specify a minimum executable size for the
proposed MPL-IOC Order. Along those lines, because an IOC order cancels
if not immediately executed, the related aspect of the MPL Order
concerning the leaves quantity of an MPL Order are also inapplicable.
Second, if a proposed MPL-IOC order cannot immediately execute because
the market is either locked or crossed, unlike an MPL Order, an MPL-IOC
Order would cancel in such a situation. The Exchange proposes to
identify these differences in proposed NYSE Arca Equities Rule
7.31(h)(6). In addition, because by definition, an IOC order executes
upon arrival, a proposed MPL-IOC order would not execute against
incoming interest, but against resting interest.
The Exchange proposes one further distinction for the MPL-IOC
Order. As noted above, the minimum share size for an MPL Order is one
share. The Exchange proposes to require that an MPL-IOC Order have a
minimum entry size of one round lot. The Exchange believes that this
additional requirement will reduce the use of this order type by market
participants that are seeking to discover hidden interest at the
Exchange without any market risk.
Because of the technology changes necessary to implement the
proposed change, the Exchange will announce the implementation date of
the MPL-IOC Order by Trader Update.
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Securities Exchange Act of 1934 (the ``Act''),\4\ which requires
the rules of an exchange 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. The Exchange believes that the
proposed rule change promotes just and equitable principles of trade
because it would enable market participants to use the existing IOC
time-in-force conditions with MPL Orders. The proposed rule change will
also provide transparency in the Exchange rules of how the IOC time-in-
force conditions will apply with MPL Orders and which aspects of the
MPL Orders will be inapplicable. The Exchange further believes that the
proposed rule change will perfect the mechanism of a free and open
market because it adds additional flexibility in the use of the IOC
time-in-force instructions with existing order types at the Exchange,
thereby providing more flexibility to ETP Holders. Finally, the
Exchange believes that the proposed requirement that an MPL-IOC order
have a minimum entry size of one round lot will protect investors and
the public interest because it will reduce the potential for market
participants to use the MPL-IOC Order to probe the market for hidden
interest without any significant risk.
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\4\ 15 U.S.C. 78f(b).
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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 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, provided that the self-regulatory organization
has given the Commission written notice of its intent to file 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 proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6)
thereunder.\6\ 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.
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(f)(6).
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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 Number SR-NYSEArca-2012-32 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-2012-32. 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 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-2012-32 and
should be submitted on or before May 16, 2012.
[[Page 24752]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-9969 Filed 4-24-12; 8:45 am]
BILLING CODE 8011-01-P