[Federal Register Volume 78, Number 89 (Wednesday, May 8, 2013)]
[Notices]
[Pages 26821-26823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10900]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69501; File No. SR-NYSEMKT-2013-36]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 13--
Equities To Expand the Availability of Self-Trade Prevention Modifiers
May 2, 2013.
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 April 22, 2013, NYSE MKT LLC (``NYSE MKT'' or the
``Exchange'') 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 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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[[Page 26822]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 13--Equities to expand the
availability of self-trade prevention (``STP'') modifiers. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 13--Equities to expand the
availability of STP modifiers functionality to additional order
types.\4\ STP modifiers are designed to prevent two orders from the
same market participant identifier (``MPID'') assigned to a member
organization from executing against each other. Use of the STP
modifiers is optional and is not automatically implemented by the
Exchange. Rather, a member organization can choose to add a STP
modifier on eligible orders. The STP modifier on the incoming order
determines the interaction between two orders marked with STP modifiers
and whether the incoming or the resting order would cancel. Both the
buy and the sell order must include an STP modifier in order to prevent
a trade from occurring and to effect a cancel instruction.
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\4\ The Exchange recently amended Rule 13--Equities to add STP
Modifiers. See Securities Exchange Act Release No. 69098 (Mar. 11,
2013), 78 FR 16544 (Mar. 15, 2013) (SR-NYSEMKT-2013-21).
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The Exchange proposes to make STP modifiers available to additional
order types. Specifically, the Exchange proposes to make STP modifiers
available for market orders and stop orders entered by off-Floor
participants in a manner that is similar to limit orders. As proposed,
the STP modifiers would be available for market orders and stop orders
sent to the matching engine by off-Floor participants. Because of
technology issues, the Exchange would continue to reject all GTC and
MTS-IOC orders with an STP modifier.
In addition, the Exchange proposes to make the STP modifier
available for certain Floor broker interest. In adopting STP modifiers,
the Exchange noted that the technology supporting the proposed STP
modifiers was not compatible with the Floor broker systems, but the
Exchange was actively working to develop the technology to extend STP
modifiers to be available for Floor brokers.\5\ The Exchange did not
believe it should delay the deployment of the STP modifiers for other
market participants while it performed the technical modifications
required for the use of STP modifiers for Floor brokers. Although the
technology supporting STP modifiers is still not compatible with
certain Floor broker systems, the Exchange is able to make the STP
modifiers available to algorithms used by Floor brokers to route
interest to the Exchange's matching engine. Accordingly, the Exchange
proposes to make STP modifiers available for e-Quotes, pegging e-
Quotes, and g-Quotes entered into the matching engine by an algorithm
on behalf of a Floor broker. STP modifiers would not be available for
d-Quotes at this time, regardless of the system used to enter d-Quotes.
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\5\ See id.
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Because of the technology changes associated with this rule
proposal, the Exchange will announce the implementation date of the STP
modifiers in a Trader Update to be published no later than 60 days
after the publication of the notice in the Federal Register. The
implementation date will be no later than 60 days following publication
of the Trader Update announcing publication of the notice in the
Federal Register.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \6\ of the Securities Exchange Act
of 1934 (the ``Act''), in general, and furthers the objectives of
Section 6(b)(5) \7\ 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. The Exchange believes that
expanding the availability STP functionality to additional order types
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because it would allow firms
to better manage order flow and prevent unintended executions with
themselves or the potential for ``wash sales'' that may occur as a
result of the velocity of trading in today's high-speed marketplace.
Commonly, member organizations have multiple connections into the
Exchange due to capacity and speed-related demands. Orders routed by
member organizations via different connections may, in certain
circumstances, inadvertently trade against each other. Enabling STP
modifiers for market orders and stop orders would provide member
organizations with the opportunity to prevent these unintended trades
from occurring.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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By providing STP modifier functionality to certain e-Quotes,
pegging e-Quotes, and g-Quotes entered algorithmically, the proposal
provides Floor brokers with the opportunity to prevent these unintended
trades from occurring as well. The Exchange believes that offering STP
modifiers to Floor broker interest entered via algorithms removes
impediments to and perfects the mechanism of a free and open market
because there is a greater potential for unintended consequences for
interest entered via algorithms, because of the above-noted velocity of
trading, as compared to orders entered manually. The Exchange will
continue to work to develop technology to extend STP modifiers for
other Floor broker systems as well. The Exchange notes that all Floor
brokers have access to algorithms, and therefore this functionality
will be available to all Floor brokers. The Exchange further notes that
the STP modifiers would not alleviate, or otherwise exempt, broker-
dealers from their best execution obligations.
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. The Exchange believes that
the proposal will would provide member organizations
[[Page 26823]]
and Floor brokers with the opportunity to prevent unintended self-
trades from occurring. The Exchange notes that it operates in a highly
competitive market in which market participants can readily direct
order flow to competing venues who offer similar functionality. Many
competing venues offer similar functionality to market participants. To
this end, the Exchange is proposing a market enhancement to provide
greater protections from inadvertent executions, and encourage market
participants to trade on the Exchange. The Exchange believes the
proposed rule change is pro-competitive because it would enable the
Exchange to provide Floor brokers with functionality that is similar to
that of other exchanges and available for interest entered
electronically from off of the Floor.
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 foregoing 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\
thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give 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 Exchange has satisfied this requirement.
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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-NYSEMKT-2013-36 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-NYSEMKT-2013-36. 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
10:00 a.m. and 3:00 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-NYSEMKT-2013-36 and should
be submitted on or before May 29, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10900 Filed 5-7-13; 8:45 am]
BILLING CODE 8011-01-P