[Federal Register Volume 79, Number 5 (Wednesday, January 8, 2014)]
[Notices]
[Pages 1407-1408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71221; File No. SR-NYSEArca-2013-115]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Granting Accelerated Approval of Proposed
Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, To Adopt
Commentary .03 to Rule 6.91 To Limit the Volume of Complex Orders by a
Single OTP Holder or OTP Firm During the Trading Day
January 2, 2014.
I. Introduction
On October 28, 2013, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to adopt Commentary .03 to NYSE Arca Rule 6.91 to
limit the volume of complex orders that may be entered by a single OTP
Holder or OTP Firm (collectively, ``OTPs'') during the trading day. On
November 5, 2013, the Exchange submitted Amendment No. 1 to the
proposed rule change. The proposed rule change, as modified by
Amendment No. 1 thereto, was published for comment in the Federal
Register on November 13, 2013.\4\ The Commission received no comments
on the proposed rule change. On December 23, 2013, the Exchange granted
an extension of time for the Commission to act on the filing until
January 3, 2014.\5\ On December 24, 2013, the Exchange submitted
Amendment No. 2 to the proposed rule change.\6\ The Commission is
publishing this notice to solicit comments on Amendment No. 2 from
interested persons, and is approving the proposed rule change, as
modified by Amendment Nos. 1 and 2, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 70817 (November 6,
2013), 78 FR 68113 (``Notice'').
\5\ In addition, on December 24, 2013, the Commission extended
the time period for Commission action to January 3, 2014. See
Securities Exchange Act Release No. 71184 (December 24, 2013).
\6\ In Amendment No. 2, the Exchange amended the proposed rule
change by removing the language in the proposal that gives the
Exchange discretion to adjust the specified percentage (i.e.,
``n%'') to an amount less than 60% and ``n%-x'' to an amount less
than 40%. Amendment No. 2 has been placed in the public comment file
for NYSEArca-2013-115 at http://www.sec.gov/comments/sr-nysearca-2013-115/nysearca2013115.shtml (see letter from Janet McGinness, EVP
& Corporate Secretary, General Counsel, NYSE Arca, to Elizabeth M.
Murphy, Secretary, Commission, dated December 26, 2013).
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II. Description of the Proposed Rule Change
The Exchange currently ranks and tracks Electronic Complex Orders
in the Consolidated Book in a ``complex order table.'' Although the
Exchange stated that the complex order table has sufficient capacity to
accept all Complex Orders submitted by all OTPs under normal operating
conditions, the Exchange also noted that that capacity is not
unlimited.\7\ Given that this capacity is not unlimited, the Exchange
proposes to adopt Commentary .03 to Rule 6.91 \8\ to provide that if an
OTP submits orders that comprise more than ``n%'' of the capacity of
the complex order table (the ``Cap''), the Exchange will reject that
OTP's Electronic Complex Orders for the remainder of the trading day.
Proposed Commentary .03 to Rule 6.91 also provides a ``warning
threshold'' of ``n%--x'' of the complex order table. If an OTP breaches
such warning threshold, it would result in the Exchange rejecting the
OTP's
[[Page 1408]]
Electronic Complex Orders until such time that the OTP has notified the
Exchange to re-enable the submission of Electronic Complex Orders. The
Exchange will not reject any Electronic Complex Orders until after an
OTP has breached either the warning threshold (i.e., ``n%-x'') or the
Cap.\9\ The specified percentage (i.e., ``n%'') will be no less than
60%, and ``n%-x'' will be no less than 40%.
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\7\ According to the Exchange, the complex order table currently
has the capacity to hold Electronic Complex Orders containing up to
14 million legs throughout the trading day. See Notice, supra note 4
at 68114, n. 8.
\8\ Rule 6.91 governs trading of Complex Orders on the NYSE Arca
System (``Electronic Complex Orders'').
\9\ For example, if an OTP submits an Electronic Complex Order
that, once accepted, breaches the Cap, the Exchange will accept that
order in its entirety and then will reject all subsequent Electronic
Complex Orders from that OTP for the remainder of the trading day.
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The Exchange will announce the implementation date of the proposed
rule change by Trader Update to be published no later than 60 days
following approval by the Commission. The implementation date will be
no later than 60 days following the issuance of the 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 rules and
regulations thereunder applicable to a national securities
exchange.\10\ In particular, the Commission finds that the proposed
rule is consistent with Section 6(b)(5) of the Act,\11\ which requires,
among other things, that the rules of an exchange be designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and, in general,
to protect investors and the public interest. The Commission believes
that providing the Cap could provide the Exchange with a system
protection tool to address the potential risk that a single OTP could--
either intentionally or inadvertently- utilize the entire complex order
table, effectively shutting out all other OTPs' Electronic Complex
Orders from the Exchange for the remainder of the trading day. By
disabling the submission of Electronic Complex Orders of a single OTP
that has exceeded the Cap, the Cap should allow the Exchange to
accommodate Electronic Complex Orders from all other OTPs, thereby
helping to ensure efficient functionality of the complex order table
and the protection of investors and the public interest. In approving
this proposed rule change, the Commission notes that the Exchange
represented that under normal operating conditions, the combined
Electronic Complex Orders of all OTPs do not exceed 40% of the complex
order table.\12\ Therefore, the Exchange believes that setting the Cap
for a single OTP at 60% would allow 40% of the complex order table--
which is typically sufficient to accommodate all OTP's Electronic
Complex Orders--to remain accessible to the balance of OTPs and would
not unfairly deny these OTPs access to the market.\13\
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\10\ In approving the proposed rule changes, the Commission has
considered their impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\11\ 15 U.S.C. 78f(b)(5).
\12\ See Notice, supra note 4 at 68114. The Commission also
notes that the Exchange represented that a single OTP would only
exceed the Cap (or receive a warning of a near breach) in the event
of a bona fide problem (e.g., a system error or malfeasance). See
id.
\13\ See Notice, supra note 4 at 68115.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 2
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-2013-115 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-2013-115. 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 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 publicly available. All
submissions should refer to File Number SR-NYSEArca-2013-115 and should
be submitted on or before January 29, 2014.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2
As proposed, the proposed rule change provided that, unless
determined otherwise by the Exchange and announced to OTPs via Trader
Update, the specified percentage (i.e., ``n%'') will be no less than
60%, and ``n%-x'' will be no less than 40%. Amendment No. 2 amended the
proposed rule change by removing the language in the proposal that
gives the Exchange discretion to adjust the specified percentage (i.e.,
``n%'') to an amount less than 60% and ``n%-x'' to an amount less than
40%. By removing this discretion, Amendment No. 2 reduces potential
uncertainty about the application of the proposed rule change.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\14\ for approving the proposed rule change, as
modified by Amendment Nos. 1 and 2, prior to the 30th day after the
date of publication of notice in the Federal Register.
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\14\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\15\ that the proposed rule change (SR-NYSEArca-2013-115), as modified
by Amendment Nos. 1 and 2, be, and hereby is, approved on an
accelerated basis.
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\15\ 15 U.S.C. 78f(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00065 Filed 1-7-14; 8:45 am]
BILLING CODE 8011-01-P