[Federal Register Volume 77, Number 176 (Tuesday, September 11, 2012)]
[Notices]
[Pages 55888-55889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22243]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67785; File No. SR-NYSEArca-2012-48]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change Amending NYSE Arca Equities Rule 7.31(h) To Add a
PL Select Order
September 5, 2012.
I. Introduction
On May 22, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend NYSE Arca Equities Rule 7.31(h) to add a PL Select Order. The
proposed rule change was published for comment in the Federal Register
on June 8, 2012.\3\ A designation of a longer period for Commission
action was published in the Federal Register on July 26, 2012.\4\ The
Commission received no comment letters regarding the proposed rule
change. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67101 (June 4,
2012), 77 FR 34115 (``Notice'').
\4\ See Securities Exchange Act Release No. 67475 (July 20,
2012), 77 FR 43879 (Notice of Designation of a Longer Period for
Commission Action on Proposed Rule Change Amending NYSE Arca
Equities Rule 7.31(h) To Add a PL Select Order Type).
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to amend NYSE Arca Equities Rule 7.31(h) to
add a PL Select Order. The PL Select Order would be a subset of a
Passive Liquidity (``PL'') Order.\5\ NYSE Arca Equities Rule 7.31(h)(7)
would define the PL Select Order as a PL Order that would not interact
with an incoming order that: (i) Has an immediate-or-cancel (``IOC'')
time in force condition,\6\ (ii) is an ISO,\7\ or (iii) is larger than
the size of the PL Select Order. The PL Select Order
[[Page 55889]]
would otherwise, except for the specified restrictions on trading with
certain incoming orders, operate as a PL Order and retain its standing
in execution priority among PL Orders. In the instances when an
incoming order meets one of the PL Select Order restrictions, the PL
Select Order would not interact with the incoming order and could be
traded through.
---------------------------------------------------------------------------
\5\ See NYSE Arca Equities Rule 7.31(h)(4).
\6\ See NYSE Arca Equities Rule 7.31(e).
\7\ See NYSE Arca Equities Rule 7.31(jj).
---------------------------------------------------------------------------
The Exchange believes that the restrictions on trading with
incoming IOC or ISO orders would enable Users \8\ to designate that
their PL Orders would not trade with interest that would never become
displayed or passive liquidity on the Exchange. The Exchange believes
that the final restriction would serve to attract larger-sized PL
Orders because the User would not have to risk having the PL Select
Order being swept up by larger-sized contra interest, thereby obviating
the primary purpose of the PL Order types: to provide price
improvement.
---------------------------------------------------------------------------
\8\ See Arca Equities Rule 1.1(yy) (defining the term ``User'').
---------------------------------------------------------------------------
The Exchange further proposes that upon notice to ETP Holders, the
Corporation \9\ may suspend the entry of PL Select Orders. If such
provision is invoked, Users may continue to submit PL Orders, but would
not be able to enter PL Select Orders and all open PL Select Orders on
the NYSE Arca trading book would be cancelled back to the User. The
Exchange believes that it is appropriate to be able to suspend the
entry of PL Select Orders in circumstances where the volume of orders
creates an issue with the ability of the Exchange to timely process
inbound orders to the Exchange.
---------------------------------------------------------------------------
\9\ See Arca Equities Rule 1.1(k) (defining the term
``Corporation'').
---------------------------------------------------------------------------
Because of the related technology changes that this proposed rule
change would require, the Exchange proposes to announce the initial
implementation date via Trader Update.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\10\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\11\ which
requires, among other things, that the rules of a national securities
exchange be 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; and are not designed to permit unfair discrimination
between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\10\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission finds the instant proposed rule change to be
consistent with the Act. The Commission notes that the Exchange
believes that the proposed rule change should allow PL Select Order
users to avoid interacting with market participants that are submitting
orders primarily for the purpose of probing for or ``pinging'' hidden
interest on the NYSE Arca book as opposed to adding liquidity to the
market. The Exchange also indicates that the probing or ``pinging''
interest that PL Select Orders would avoid is more likely to come from
professional traders than non-professional traders. In addition, the
Exchange believes that use of the PL Select Order could attract
displayed liquidity that would be eligible for execution against PL
Select Orders or posting on the NYSE Arca book if not executed by PL
Select Orders or other resting liquidity.
The Commission notes further that the Exchange believes that,
because PL Select Orders would not interact with larger-sized incoming
interest, market participants could be incentivized to use PL Select
Orders to provide price improvement opportunities, thereby promoting
more favorable executions for the benefit of public customers. In
addition, the Exchange believes that market participants also could be
incentivized to route more aggressively priced, displayable interest to
the Exchange because of an increased likelihood of receiving price
improvement.
Based on the Exchange's statements, the Commission believes that
the proposed rule change is consistent with Section 6(b)(5) of the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-NYSEArca-2012-48) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22243 Filed 9-10-12; 8:45 am]
BILLING CODE 8011-01-P