[Federal Register Volume 75, Number 218 (Friday, November 12, 2010)]
[Notices]
[Page 69491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28542]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63266; File No. SR-NYSE-2010-67]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by New York Stock Exchange LLC Changing the NYBX Order Execution 
Sequence

November 5, 2010.

I. Introduction

    On September 9, 2010, the New York Stock Exchange LLC (``Exchange'' 
or ``NYSE'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change, pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to change the execution of algorithm of the New York 
Block Exchange (``NYBX'' or the ``Facility''), an electronic trading 
facility of the NYSE. The proposed rule change was published for 
comment in the Federal Register on September 24, 2010.\3\ The 
Commission received no comments on the proposal. 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. 62955 (September 20, 
2010), 75 FR 58456 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    The NYBX is an electronic facility of the Exchange for the trading 
of undisplayed orders in NYSE-listed securities.\4\ NYSE Rule 1600 
governs the operation of the NYBX.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 59282 (January 22, 
2009), 74 FR 5009 (January 28, 2009) (NYSE-2008-119).
---------------------------------------------------------------------------

    When an order enters the Facility, the Facility scans its own book, 
the NYSE's Display Book (``DBK'') (both displayed and undisplayed 
orders), and the protected quotations of automated trading centers to 
identify marketable contraside interest.\5\ Following this review, if 
marketable contraside interest exists and the applicable minimum 
triggering volume threshold of the incoming order is met, the Facility 
will commence a sequential process for executing the incoming order. As 
part of this process, the full remaining size of the incoming order 
will be routed back and forth between the Facility and the DBK at each 
price point, even though only a small portion of the order might be 
filled at a particular price point. This ``oversizing'' allows any CCS 
interest in the DBK, which the Facility is not aware of, to be 
triggered at each price point. During the sequential routing process, 
portions of the incoming order will be routed away to hit protected 
quotations of automated trading centers as necessary to avoid trade 
throughs.
---------------------------------------------------------------------------

    \5\ See NYSE Rule 1600(d)(1)(B).
---------------------------------------------------------------------------

    The NYSE proposes to change the order execution method from the 
current sequential, ``oversizing'' process to a simultaneous process. 
When a market evaluation indicates that sufficient marketable liquidity 
exists to meet the incoming order's minimum trading volume threshold, 
the Facility will divide the incoming order into separate orders that 
will be routed simultaneously to execute against marketable contraside 
liquidity in the DBK and/or other automated trading centers up to the 
price of the incoming order. The orders routed to the DBK will no 
longer be oversized. The remainder of the original order will execute, 
to the extent possible, against contraside interest in the Facility at 
the same or better prices. Using this approach, any orders sent by the 
Facility to the DBK would not trigger any CCS interest. In addition, 
the Exchange is proposing to amend the Facility's order-routing 
algorithm to route away to hit the protected quotations of automated 
trading centers even in some cases where it would not be necessary to 
do so to avoid a trade through.\6\
---------------------------------------------------------------------------

    \6\ See proposed NYSE Rule 1600(d)(1)(C)(iii).
---------------------------------------------------------------------------

    The Exchange states that the proposal is designed to allow a NYBX 
order to better capture the available contra side liquidity revealed 
during the Facility's initial market evaluation. According to the NYSE, 
some NYBX orders currently are not able to execute against available 
contra side liquidity, because of ``the disappearance or the adjustment 
of a substantial portion of the available contra side liquidity that 
shows up on the initial market evaluation, before the NYBX order is 
able to execute against that liquidity.'' \7\
---------------------------------------------------------------------------

    \7\ See Notice, supra note 3.
---------------------------------------------------------------------------

III. Discussion

    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 are applicable to a national securities 
exchange.\8\ In particular, the Commission believes that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\9\ which 
requires, among other things, that an exchange have rules designed to 
promote just and equitable principles of trade; to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities; 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.
---------------------------------------------------------------------------

    \8\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the proposal is reasonably designed to 
increase the fill rates of NYBX orders in a manner consistent with 
Regulation NMS, by capturing a higher percentage of the marketable 
contra side liquidity that may be available for execution, as revealed 
by the Facility's initial market evaluation. The proposal should also 
benefit market participants whose orders are displayed at automated 
trading centers, by increasing their fill rates against NYBX orders. 
Accordingly, the Commission finds that the proposal is reasonably 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and is also consistent 
with the protection of investors and the public interest.

IV. Conclusion

    It is therefore ordered, that pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSE-2010-67) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28542 Filed 11-10-10; 8:45 am]
BILLING CODE 8011-01-P