[Federal Register Volume 72, Number 139 (Friday, July 20, 2007)]
[Notices]
[Pages 39867-39869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14036]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56072; File No. SR-NYSEArca-2007-61]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Adding a New Order 
Type Known As the Mid-Point Passive Liquidity Order

July 13, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 29, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly-owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities'' or ``Corporation'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been substantially 
prepared by the Exchange. The Exchange filed the proposed rule change 
pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder, which renders it effective upon filing with the 
Commission.\4\ The Commission is publishing this notice to

[[Page 39868]]

solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly-owned subsidiary, NYSE Arca 
Equities proposes to amend its rules in order to add a new order type 
known as the Mid-Point Passive Liquidity Order (``MPL Order''). The 
changes described in this rule proposal would add new NYSE Arca 
Equities Rule 7.31(h)(5) and would amend existing Rule 7.37(d)(2). The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.nyse.com.

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 Exchange 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 
Exchange has prepared summaries set forth in Sections A, B, and C below 
of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    As part of its continuing efforts to provide additional flexibility 
and increased functionality to its system and its Users,\5\ the 
Exchange proposes to add a new order type known as the MPL Order. The 
MPL Order is a version of the NYSE Arca Passive Liquidity Order,\6\ 
except that it will be executable only at the midpoint of the Protected 
Best Bid and Offer (``PBBO'').\7\
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    \5\ See NYSE Arca Equities Rule 1.1(yy) for the definition of 
``User.''
    \6\ See NYSE Arca Equities Rule 7.31(h)(4).
    \7\ See NYSE Arca Equities Rule 1.1(eee) for the definitions of 
``Protected Bid'' and Protected Offer.''
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MPL Order Execution in NYSE Arca
    The MPL Order will follow the same execution priority rules as the 
Passive Liquidity Order.\8\ MPL Orders always execute at the midpoint 
of the PBBO and do not receive price improvement.
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    \8\ See NYSE Arca Equities Rule 7.31(h)(4) and 
7.37(b)(2)(A)(iv).
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    MPL Orders will be ranked in time priority for the purposes of 
execution as long as the midpoint is within the limit range of the 
order. The Exchange may set a minimum entry size for MPL Orders from 
time to time, with the initial minimum entry size set at 1,000 shares. 
Users may specify a minimum executable size for an MPL Order, but no 
less than 1,000 shares. An MPL Order with a specified minimum 
executable size will execute against an incoming order that meets the 
minimum executable size and is priced at or better than the midpoint of 
the PBBO.\9\
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    \9\ For example, an order may be entered to buy 10,000 MPL with 
a minimum size of 2,000. This would allow for execution of the MPL 
order only if the contra size order were at least 2,000 shares. If 
the leaves quantity becomes less than the minimum size, the minimum 
size restriction will no longer be enforced on executions.
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    An MPL Order may be executed in subpennies if necessary to attain a 
midpoint price. Users may mark incoming limit orders with a ``No 
Midpoint Execution'' designator; so marked, those limit orders will 
ignore MPL Orders and trade against the rest of the book in the 
ordinary course.
    MPL Orders will not be exclusive to Lead Market Makers \10\ 
(``LMMs'') where NYSE Arca is the primary listings market. MPL Orders 
will be valid for any session but will not participate in any auctions. 
If the market is locked, the eligible MPL Order will trade at the 
locked price. If the market is crossed, the MPL Order will wait for the 
market to uncross before becoming eligible to trade again. MPL Orders 
will interact with all order types including contra MPL Orders, with 
the exception of cross orders.
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    \10\ See NYSE Arca Equities Rule 1.1(ccc) for definition of 
``Lead Market Makers.''
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    MPL Orders will not route out of NYSE Arca to other market centers. 
For purposes of the NYSE Arca rules related to Regulation NMS, MPL 
Orders will never be routed to Protected or Manual Quotations. An MPL 
Order will not trade-through a Protected Quotation.
    The Exchange believes that the implementation of the aforementioned 
rule changes adding a new order type and the related NYSE Arca order 
processing modifications will enhance order execution opportunities on 
NYSE Arca.\11\ The Exchange believes that the proposed order type will 
allow for additional opportunities for liquidity providers, especially 
institutions, to passively interact with interest in the NYSE Arca 
book.
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    \11\ This proposed order type is similar to the MidPoint Match 
mechanism of the International Securities Exchange, Inc. (``ISE''), 
previously approved by the Commission. See Securities Exchange Act 
Release No. 54528 (September 28, 2006), 71 FR 58650 (October 4, 
2006) (SR-ISE-2006-48).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \12\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \13\ in particular, because 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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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

    The Exchange has neither solicited nor received written comments on 
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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) \14\ of the Act and Rule 19b-
4(f)(6) thereunder.\15\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    NYSE Arca has asked the Commission to waive the 30-day operative 
delay. The Commission believes such a waiver is consistent with the 
protection of investors and the public interest because it would permit 
the Exchange to codify the proposed order type, the MPL without 
delay.\16\ For this reason, the Commission designates the proposal to

[[Page 39869]]

be operative upon filing with the Commission.
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    \16\ For purposes only of waiving the 30-day pre-operative 
period, the Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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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 e-mail to: [email protected]. Please include 
File Number SR-NYSEArca-2007-61 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-61. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying 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 NYSE Arca. 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-2007-61 and should 
be submitted on or before August 10, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14036 Filed 7-19-07; 8:45 am]
BILLING CODE 8010-01-P