[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52784-52785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20998]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72942; File No. SR-NYSEArca-2014-75]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change Amending NYSE Arca Equities Rules 7.6,
7.11, 7.16, 7.31, 7.34, 7.35, 7.37 and 7.65 to Eliminate Certain Order
Types, Modifiers and Related References
August 28, 2014.
I. Introduction
On June 27, 2014, 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
to eliminate certain order types, modifiers and related references from
the Exchange's rules. The proposed rule change was published for
comment in the Federal Register on July 16, 2014.\3\ The Commission
received no comment letters regarding the proposed rule change. This
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 72591 (July 10,
2014), 79 FR 41613 (``Notice'').
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II. Description of the Proposal
The Exchange has proposed to amend NYSE Arca Equities Rules
(``Rule(s)'') 7.6, 7.11, 7.16, 7.31, 7.34, 7.35, 7.37 and 7.65 to
eliminate certain order types, modifiers and related references. The
Exchange states that it is proposing these rule changes in order to
streamline its rules and reduce complexity among its order type
offerings.\4\
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\4\ See Notice, 79 FR at 41614.
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Working Orders. The Exchange has proposed to eliminate five types
of working orders \5\--Passive Discretionary Orders, Discretion Limit
Orders, Sweep Reserve Orders, Random Reserve Orders, and PL Select
Orders--and to delete the definitions of these order types currently
set forth in Rule 7.31(h), as well as references to these order types
currently in Rules 7.11 and 7.37.\6\ In addition, in connection with
the proposed elimination of Passive Discretionary Orders and Sweep
Reserve Orders, the Exchange has proposed not to accept certain
combined orders that currently involve these order types, namely, the
Passive Discretionary Reserve Order (a Passive Discretionary Order used
in combination with a Reserve Order), Sweep Reserve with Discretion
Order (a Sweep Reserve Order entered with a discretionary price), and
Inside Limit Sweep Reserve Order (a Sweep Reserve Order entered with an
inside limit price).\7\
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\5\ According to the Exchange, workings orders are orders with a
conditional or undisplayed price and/or size. Id.; see also Rule
7.31(h).
\6\ A more detailed description of these order types and the
provisions of Rules 7.11, 7.31(h) and 7.37 that would be deleted is
set forth in the Notice. See Notice, 79 FR at 41614; see also
proposed Rules 7.11, 7.31(h) and 7.37.
\7\ See Notice, 79 FR at 41614 n. 8 and 9.
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Cross Orders. The Exchange has proposed to accept only one type of
cross order--Cross Orders designated IOC--and to revise its rules
accordingly. Currently, the Exchange defines a Cross Order in Rule
7.31(s), separately defines an IOC Cross Order in Rule 7.31(aa), and
separately defines additional types of cross orders in other provisions
of Rule 7.31. To effect the proposed change, the Exchange has proposed
to consolidate Rule 7.31(aa) into Rule 7.31(s), thereby creating one
provision that describes Cross Orders designated IOC, and to eliminate
the additional types of cross orders currently available on the
Exchange.\8\ Rule 7.31(aa) would be Consolidated into Rule 7.31(s) by:
(i) Adding the clause ``designated IOC'' to the definition of Cross
Order in Rule 7.31(s), (ii) moving to Rule 7.31(s) from Rule 7.31(aa)
text stating that Cross Orders that would lock or cross the PBBO or BBO
will be cancelled,\9\ and (iii) deleting Rule 7.31(aa).\10\ The
Exchange also has proposed to delete certain rule provisions that would
be rendered moot or inapplicable by this proposed change.\11\
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\8\ The additional types of cross orders currently available on
the Exchange, and which would be eliminated under the proposal, are
the Midpoint Cross Order (currently defined in Rule 7.31(y)), Post
No Preference (``PNP'') Cross Order (currently defined in Rule
7.31(bb)), Cross-and-Post Order (currently defined in Rule
7.31(ff)), and Portfolio Crossing Service (``PCS'') Order (currently
defined in Rule 7.31(ii)). The definitions of these cross order
types currently set forth in Rule 7.31 would be deleted, as would
references to certain of these cross order types currently set forth
in Rules 7.34(g), 7.37(d) and 7.65. Id. at 41615.
\9\ The terms ``PBBO'' and ``BBO'' are defined in Rules 1.1(h)
and (dd), respectively.
\10\ See Notice, 79 FR at 41614-15; see also proposed Rule
7.31(s).
\11\ See Notice, 79 FR at 41615. Subparagraphs (1)-(6) of
current Rule 7.31(s) describe Cross Order functionality that is
applicable only when Cross Orders are not designated IOC, and thus,
according to the Exchange, the proposal would render those
subparagraphs moot. Similarly, the Exchange proposes to delete Rule
7.16(f)(v)(G) as that rule, which provides that short sale cross
orders priced at or below the current national best bid will be
rejected during a Short Sale Period (defined in Rule 7.16(f)(iv)),
would be inapplicable because Cross Orders designated IOC cannot
execute at or below the current national best bid. Further, by
virtue of the proposed restriction of Cross Orders to those with an
IOC designation, the Exchange has proposed to eliminate the Day
Cross Order, and thus a Cross Order with a Day modifier would be
rejected as a result of the proposal. Id.
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Additional Order Types and Rule Reference Deletions. In addition to
the foregoing proposed changes with respect to working orders and cross
orders, the Exchange has proposed to eliminate or limit the operation
of five other order types. First, the Exchange has proposed to
eliminate the Market to Limit (``MTL'') Order, and thus to delete Rule
7.31(rr), which currently sets forth the definition of this order type.
Second, the Exchange has proposed to amend the definition of an
Auction-Only Order in Rule 7.31(t) to provide that the Exchange will
only accept the Auction-Only Orders specified therein, namely, Limit-
on-Open Orders (``LOO Order''), Market-on-Open Orders (``MOO Order''),
Limit-on-Close Orders (``LOC''), and Market-on-Close Orders
(``MOC'').\12\ Third, the Exchange proposes not to accept NOW Orders
with a Reserve Modifier, and thus to amend the definition of a NOW
Order in Rule 7.31(v) to provide that NOW Orders entered with a Reserve
modifier will be rejected. Fourth, the Exchange proposes not to accept
market orders with a NOW or IOC modifier, and thus to delete the
reference to market orders in the definition of the IOC modifier in
Rule 7.31(c)(3),\13\ and to amend the definition of a NOW Order in Rule
7.31(v) to provide that NOW Orders entered with a Market modifier will
be rejected. Lastly, the Exchange proposes to eliminate the use of a
Fill or Kill (``FOK'') modifier with a Mid-Point Liquidity (``MPL'')
Order, and thus to amend the definition of an MPL Order in Rule
7.31(h)(5) to provide that an
[[Page 52785]]
MPL Order entered with a FOK modifier will be rejected.
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\12\ See Notice, 79 FR at 41615. The Exchange also proposes to
replace the references in Rule 7.35 to Auction-Only Limit with LOO
and to Auction-Only Market with MOO, and to delete the references to
Auction Only Limit Orders in Rule 7.35(f)(3)(E). Id.; see also
proposed Rule 7.35.
\13\ As a result, the use of the IOC modifier would be limited
to limit orders, and a market order entered with an IOC modifier
would be rejected. See proposed Rule 7.31(c)(3); see also Notice, 79
FR at 41615.
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Furthermore, the Exchange has proposed to delete commentary .04 to
Rule 7.6, as the commentary provides an exception to Rule 7.6 (which
governs trading differentials) for Midpoint Cross Orders, which would
be eliminated as a result of the instant proposal, and for Midpoint
Directed Fills, which were eliminated in a prior rule filing.\14\ The
Exchange also proposes to delete references to Cleanup Orders from
Rules 7.34 and 7.35, as Cleanup Orders were eliminated in the same
prior rule filing that eliminated Midpoint Directed Fills.\15\
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\14\ See Notice, 79 FR at 41615-16; see also Securities Exchange
Act Release No. 71331 (January 16, 2014), 79 FR 3907 (January 23,
2014) (SR-NYSEArca-2013-92).
\15\ Id.
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The Exchange has proposed, due to the technology changes associated
with this proposal, to announce via Trader Update the implementation
date of the elimination of the order types under this proposal.\16\
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\16\ See Notice, 79 FR at 41616.
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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.\17\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\18\ 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.
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\17\ 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).
\18\ 15 U.S.C. 78f(b)(5).
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The Commission notes that the instant proposal does not add any new
functionality but instead reduces the number of order types and order
type/modifier combinations that will be accepted by the Exchange, which
should simplify to a degree the order type functionality available on
the Exchange. The Commission believes that the proposed rule change
should promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, protect investors and the
public interest.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NYSEArca-2014-75) be, and it
hereby is, approved.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20998 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-P