[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Notices]
[Pages 41844-41845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17871]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64857; File No. SR-NYSEArca-2011-45]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating To Amend 
NYSE Arca Equities Rule 7.31(b) To Add Text Describing How Limit Orders 
Priced a Specified Percentage Away From the National Best Bid or Offer 
Will Be Rejected by Exchange Systems

 July 12, 2011.
    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 July 6, 2011, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.31(b) to 
add text describing how limit orders priced a specified percentage away 
from the national best bid or offer will be rejected by Exchange 
systems. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, http://www.nyse.com, 
and http://www.sec.gov.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 7.31(b) to 
add text describing how limit orders priced a specified percentage away 
from the national best bid or national best offer will be rejected by 
Exchange systems. The Exchange believes that the proposed treatment of 
limit orders serves as an additional safeguard that could help limit 
potential harm from extreme price volatility by preventing executions 
that could occur at a price significantly away from the contra side 
national best bid or national best offer.
    As proposed, the Exchange will reject limit orders that are priced 
a specified percentage away from the contra side national best bid or 
national best offer, as defined in Rule 600(b)(42) of Regulation NMS. 
As the Exchange receives limit orders, Exchange systems will check the 
price of the limit order against the contra-side national best bid 
(``NBB'') or national best offer (``NBO'') at the time of the order 
entry to determine whether the limit order is within the specified 
percentage.
    As proposed, the specified percentage will be equal to the 
corresponding ``numerical guideline'' percentages set forth in 
paragraph (c)(1) of Rule 7.10 (Clearly Erroneous Executions) that are 
used for the Core Trading Sessions. Accordingly, the specified 
percentage will be 10% if the NBB or NBO is $25.00 and below, 5% if the 
NBB or NBO is between $25.01 and $50.00, and 3% if the NBB or NBO is 
greater than $50.00. If the limit order is priced outside of the 
specified percentage, the limit order will be rejected. For example, if 
the NBB is $26.00, a sell order priced at or below $24.70, which is 5% 
below the NBB, would be rejected. Likewise, if the NBO is $55.00, a buy 
order priced at or above $56.65, which is 3% above the NBO, would be 
rejected.
    The Exchange believes that this mechanism will prevent the entry of 
super-marketable limit orders, i.e., limit orders that in essence act 
like market orders because they are priced so far away from the 
prevailing market price that could cause significant price dislocation 
in the market. The Exchange also believes that this mechanism will 
further serve to mitigate the potential for clearly erroneous 
executions to occur.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Securities Exchange Act of 1934 (the ``Act''),\4\ which requires 
the rules of an exchange 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. The proposed rule change also is 
designed to support the principles of Section 11A(a)(1) \5\ of the Act 
in that it seeks to assure fair competition among brokers and dealers 
and among exchange markets. The Exchange believes that the proposed 
rule meets these requirements in that it ensures that limit orders will 
not cause the price of a security to move beyond prices that could 
otherwise be determined to be a clearly erroneous execution, thereby 
protecting investors from receiving executions away from the prevailing 
prices at any given time.
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    \4\ 15 U.S.C. 78f(b)(5).
    \5\ 15 U.S.C. 78k-1(a)(1).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

[[Page 41845]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and text of 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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    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \11\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay to permit the Exchange to 
implement this proposal without delay is consistent with the protection 
of investors and the public interest.\12\ The Exchange noted that it is 
prepared to deploy this technology change immediately and this change 
would not require ETP Holders to make system changes. The Commission 
notes that the proposed rule change may reduce the potential for price 
dislocation and clearly erroneous executions. Waiving the 30-day 
delayed operative date will enable the Exchange to implement 
immediately the proposed functionality to achieve these goals and to 
enhance investor protection. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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.

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 No. SR-NYSEArca-2011-45 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 No. SR-NYSEArca-2011-45. 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 website 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 
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 No. SR-NYSEArca-2011-45 and should be 
submitted on or before August 5, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17871 Filed 7-14-11; 8:45 am]
BILLING CODE 8011-01-P