[Federal Register Volume 77, Number 161 (Monday, August 20, 2012)]
[Notices]
[Pages 50189-50191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20316]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67652; File No. SR-NYSEArca-2012-83]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.31 To Specify How MPL Orders With ALO Order 
Instructions May Interact

August 14, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 50190]]

notice is hereby given that, on August 6, 2012, 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 to 
specify how MPL Orders with ALO Order instructions may interact. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 7.31 to 
specify how MPL Orders with ALO Order instructions may interact.
Background
    An MPL Order is a type of Working Order that has conditional or 
undisplayed price and/or size. As set forth in NYSE Arca Equities Rule 
7.31(h)(5), an MPL Order is a Passive Liquidity Order that is priced at 
the midpoint of the PBBO and does not trade through a Protected 
Quotation. An MPL Order has a minimum order entry size of one share and 
Users may specify a minimum executable size for an MPL Order, which 
must be no less than one share. If an MPL Order has a specified minimum 
executable size, it will execute against an incoming order that meets 
the minimum executable size and is priced at or better than the 
midpoint of the PBBO. If the leaves quantity becomes less than the 
minimum size, the minimum executable size restriction will no longer be 
enforced on executions.
    If the market is locked or crossed, the MPL Order will wait for the 
market to unlock or uncross before becoming eligible to trade again. 
MPL Orders are ranked in time priority for the purposes of execution as 
long as the midpoint is within the limit range of the order. MPL Orders 
always execute at the midpoint and do not receive price improvement. 
MPL Orders are valid for any session, but do not participate in 
auctions. Users that choose not to trade with MPL Orders may mark 
incoming limit orders with a ``No Midpoint Execution'' designator and 
such limit orders will ignore MPL Orders. MPL Orders do not route out 
of the Exchange to other market centers.
    An ALO Order is a limit order that Exchange systems will accept and 
place in the NYSE Arca book only when the order adds liquidity. As set 
forth in NYSE Arca Equities Rule 7.31(nn), ALO Orders will not route to 
an away market, shall be day only, and may not be designated as GTC. In 
addition, the rule specifies when Exchange systems will reject incoming 
ALO orders at the time of entry, including when the ALO Order is 
marketable or if the ALO Order will lock or cross the market. The rule 
also specifies that an ALO Order will be rejected if it would interact 
with undisplayed orders on NYSE Arca. However, the rule further 
specifies that the system will not reject an incoming ALO Order if it 
would interact with an MPL Order. Rather, the incoming ALO order will 
ignore the MPL Order and proceed to post to the NYSE Arca book.
    Currently, Users may designate an MPL Order to also be an ALO Order 
(``MPL-ALO Order''). If an MPL Order (or MPL-ALO Order) is resting on 
the NYSE Arca book and an incoming contra-side MPL-ALO Order is 
marketable against the resting MPL Order, pursuant to current rules, 
the incoming MPL-ALO Order will ignore the resting MPL Order and be 
placed in the NYSE Arca Book. As a result, there may be a buy and sell 
MPL Order resting on the NYSE Arca Book at the same price that cannot 
interact.
Proposed Rule Change
    The Exchange proposes to amend both NYSE Arca Equities Rules 
7.31(h)(5) and (nn) to specify how MPL Orders with ALO Order 
instructions may interact. First, the Exchange proposes to amend Rule 
7.31(h)(5) to specify that User may designate an MPL Order as an ALO 
Order and to name such orders as an ``MPL-ALO Order''.
    The Exchange also proposes to amend Rule 7.31(nn) to provide that a 
User may specify that a resting MPL Order or MPL-ALO Order may execute 
against an arriving marketable MPL-ALO Order. By providing Users with 
the choice for an MPL Order to interact with an incoming MPL-ALO Order, 
the Exchange believes that it will reduce the potential for two orders 
that are marketable against one another to be placed in the NYSE Arca 
book.
    The Exchange recognizes that if a User designates an MPL or MPL-ALO 
Order to execute against an incoming marketable MPL-ALO Order, the 
incoming order would technically not be a liquidity providing order, 
since it would be executing against a resting order, and proposes to 
amend Rule 7.31(nn) accordingly. However, for purposes of determining 
which order is a ``liquidity taker'' and which order is a ``liquidity 
provider'', the Exchange will designate the User who chooses for a 
marketable MPL-ALO Order to execute to be the liquidity taker. 
Accordingly, if the resting interest chooses to interact, but the 
arriving MPL-ALO Order does not, the two orders will execute, but the 
arriving MPL-ALO Order will be considered the liquidity provider. If 
both the resting interest and the arriving MPL-ALO Order are designated 
to interact, the Exchange will consider the arriving interest as the 
liquidity taker interest.
    The Exchange further proposes to make technical, non-substantive 
changes to Rule 7.31(nn). The Exchange proposes to use consistent 
terminology for orders that are placed in the NYSE Arca book and 
replace the term ``post to'' with ``placed in.'' The Exchange notes 
that orders ``placed in'' the NYSE Arca book are not necessary [sic] 
displayed orders. The Exchange also proposes to amend Rule 7.31(nn)(1) 
to clarify that ALO Orders that are marketable will be rejected, except 
as provided for in Rule 7.31(nn)(3), which, as noted above, concerns 
the proposed new rule text enabling User-directed MPL or MPL-ALO Orders 
to interact with incoming marketable MPL-ALO Orders.
    The Exchange will announce the implementation date of the proposed 
rule change in a Trader Update to be published no later than 90 days 
following Commission approval. The implementation date will be no later 
than 90 days following publication of the Trader Update announcing 
Commission approval.

[[Page 50191]]

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 Exchange believes that the 
proposed rule change removes impediments to and perfects the mechanism 
of a free and open market by reducing the potential for two orders that 
are marketable against one another from resting on the NYSE Arca book 
and not executing. The proposed rule change will also provide 
transparency in the Exchange rules of how MPL Orders with ALO Order 
instructions would interact.
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    \4\ 15 U.S.C. 78f(b).
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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.

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 \5\ and Rule 19b-4(f)(6) thereunder.\6\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.\7\
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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(f)(6).
    \7\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to provide the 
Commission with written notice of its 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 fulfilled this requirement.
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    At any time within 60 days of the filing of such 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 email to [email protected]. Please include 
File Number SR-NYSEArca-2012-83 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-2012-83. 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 
a.m. and 3 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-2012-83 and should 
be submitted on or before September 10, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20316 Filed 8-17-12; 8:45 am]
BILLING CODE 8011-01-P