[Federal Register Volume 77, Number 169 (Thursday, August 30, 2012)]
[Notices]
[Pages 52774-52776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21390]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67728; File No. SR-NYSEArca-2012-96]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca
Rule 6.47, ``Crossing'' Orders--OX
August 24, 2012.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on August 20, 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, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 Rule 6.47, ``Crossing''
Orders--OX. The text of the proposed rule change is available on the
Exchange's Web site at www.nyse.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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend NYSE Arca Rule 6.47 to adopt a new
procedure that provides for the execution of Customer-to-Customer
Crosses on the Trading Floor. The proposal is based on a nearly
identical customer-to-customer cross functionality provided in NYSE
Amex Rule 934NY(a).\4\
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\4\ See Securities Exchange Act Release No. 59472 (February 27,
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEAlternext-2008-14).
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NYSE Arca Options Rule 6.47 currently provides procedures for
executing four different cross order types: (i) Non-Facilitation Cross
(Regular way Cross); (ii) Facilitation Cross; (iii) Solicited Order
Cross; and (iv) Mid-Point Cross.\5\ Each of the existing methods to
cross orders is designed to provide a useful order execution
functionality to market participants. The Exchange now proposes to add
a new cross order type, the Customer-to-Customer Cross, in order to
provide customers with a new method to get executions on the Trading
Floor while allowing them to benefit from price improvement from the
Trading Crowd quotes.
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\5\ See NYSE Arca Options Rule 6.47.
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Currently, if a Floor Broker intends to cross customer orders, to
buy and sell the same option contract, the orders are executed pursuant
to the Non-Facilitation Cross procedures.\6\ When utilizing these
procedures, a Floor Broker must request bids and offers for the option
series involved and make the trading crowd and the Trading Official
aware of the request for a market via open outcry. Then, after
providing an opportunity for such bids and offers to be made, the Floor
Broker must bid above the highest bid in the crowd, or offer below the
lowest offer in the crowd, by at least the MPV. If such higher bid or
lower offer is not taken by members of the trading crowd, the Floor
Broker may cross the orders at such higher bid or lower offer by
announcing by open outcry that he is crossing the orders and giving the
quantity and price. The crossing of the orders is contingent on the
requirements that: (i) the execution price must be equal to or better
than the NBBO; and (ii) the Floor Broker may not trade through any bids
or offers on the Consolidated Book that are priced equal to or better
than the proposed execution price. If there are bids or offers on the
Consolidated Book at or better than the proposed execution price, the
Floor Broker must trade against such bids or offers in the Consolidated
Book on behalf of the customer order(s). Once bids or offers in the
Consolidated Book are satisfied, the Floor Broker may cross the
remaining balance of the orders, if any. The orders will be cancelled
or posted in the Consolidated Book if an execution would take place at
a price that is inferior to the NBBO.\7\
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\6\ See NYSE Arca Options Rule 6.47(a).
\7\ The Floor Broker, at the direction of the Customer, will
cancel or post the order to the Consolidated Book.
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The Exchange proposes to make available a new crossing procedure
for Customer orders in situations when a Floor Broker who holds a
Customer order to buy and a Customer order to sell the same option
contract.\8\ Under the proposal, to conduct a Customer-to-Customer
Cross, a Floor Broker would be required to request bids and offers for
the option series involved and make the Trading Crowd and the Trading
Official aware of the request for a market via
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open outcry and provide opportunity for such bids and offers to be
made, in a manner similar to the current Non-Facilitation Cross
procedures. Once the best bids and offers are established in the
trading crowd, the Floor Broker would be required to bid above the
highest bid in the crowd, and offer below the lowest offer in the
crowd.\9\ Upon doing so, a Floor Broker could cross the orders at such
higher bid and lower offer by announcing he is crossing orders on
behalf of Customers, provided that: (i) the execution price is equal to
or better than the NBBO; and (ii) the execution price does not trade
through any equal or better priced bids or offers in the Consolidated
Book. Thus, the Customers that are party to the order would benefit
from price improvement over bids/offers in the Trading Crowd, yet still
respect the priority of orders resting in the Consolidated Book.
Finally, similar to the Non-Facilitation Cross procedures, Customer-to-
Customer cross orders will be cancelled or posted in the Consolidated
Book if an execution would take place at a price that is inferior to
the NBBO.
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\8\ ``Customer'' for purposes of the proposed Customer-to-
Customer Order type is defined in NYSE Arca Options Rule 6.1A(a)(4).
NYSE Arca Options Rule 6.1A(a)(4) provides that the term
``Customer'' shall not include a broker or dealer. See NYSE Arca
Options Rule 6.1A(a)(4). NYSE Amex uses a nearly identical
definition of customer for purposes of its customer-to-customer
cross order. NYSE Amex Options Rule 900.2NY(18) provides that
``[t]he term ``Customer'' means an individual or organization that
is not a Broker/Dealer; when not capitalized, ``customer'' refers to
any individual or organization whose order is being represented,
including a Broker/Dealer.'' See NYSE Amex Options Rule 900.2NY(18).
\9\ If the Floor Broker is unable to bid above the highest bid
or below the lowest offer in the crowd, then the cross will not be
able to be executed.
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The Exchange notes that the Customer-to-Customer Cross procedure is
almost identical to the existing Non-Facilitation Cross; except that in
contrast to the procedures for executing a Non-Facilitation Cross as
detailed above, when a Customer-to-Customer Cross is properly
announced, and after the execution price is established, the Customer
orders will have priority over equal priced bids/offers in the Trading
Crowd and would be executed against each other.\10\
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\10\ See NYSE Arca Options Rule 6.47(a) and Proposed NYSE Arca
Options Rule 6.47(e).
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The Exchange believes that Customers will benefit by have [sic]
another method to execute their transactions on the Trading Floor,
while allowing them to benefit from price improvement from the Trading
Crowds quotes. While the Exchange currently has four crossing
procedures to meet the execution needs of its market participants, the
Exchange does not have one that is narrowly tailored to Customer only
transactions that other competing options market have. The Exchange
believes that having the ability to offer similar functionality on the
Exchange will help the Exchange compete for Customer orders and
facilitate transitions on the Exchange in the competitive marketplace
for order flow. In addition, the Exchange believes that all market
participants will benefit from the enhanced liquidity from facilitating
the execution of these transactions on the Exchange. The Exchange notes
that this proposal raises no novel issues and that several other
options exchanges have similar crossing functionality.\11\
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\11\ See NYSE Amex Options Rule 934NY(a) and Phlx Rule 1064(a).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\12\ in general, and
furthers the objectives of Section 6(b)(5),\13\ 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.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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The new Customer-to-Customer Cross procedure will provide a new
method for Customers to get executions on the Trading Floor, while
allowing them to benefit from price improvement from the Trading
Crowd's quotes in a manner designed to promote just and equitable
principles of trade on the Exchange. The Customer-to-Customer Cross
will allow Customers an additional opportunity to trade their orders in
situations where they do not want the risk of their order being broken-
up and thus facilitate additional transactions on the Exchange and
boost liquidity for all market participants.
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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ 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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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 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 email to [email protected]. Please include
File Number SR-NYSEArca-2012-96 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-2012-96. 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
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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-NYSEArca-2012-96 and should be submitted
by September 20, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21390 Filed 8-29-12; 8:45 am]
BILLING CODE 8011-01-P