[Federal Register Volume 77, Number 181 (Tuesday, September 18, 2012)]
[Notices]
[Pages 57635-57637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22914]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67841; File No. SR-NYSEArca-2012-99]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.31(d) To Provide That an Inside Limit Order Designated 
as a Primary Until 9:45 Order or a Primary After 3:55 Order Will Follow 
the Order Processing of an Inside Limit Order Only When the Order Is On 
the NYSE Arca Book

September 12, 2012.
    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 August 31, 2012, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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(d) to 
provide that an Inside Limit Order designated as a Primary Until 9:45 
Order or a Primary After 3:55 Order will follow the order processing of 
an Inside Limit Order only when the order is on the NYSE Arca Book.
    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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 7.31(d) to 
provide that an Inside Limit Order designated as either a Primary Until 
9:45 Order or a Primary After 3:55 Order will follow the order 
processing of an Inside Limit Order only when the order is on the NYSE 
Arca Book and to clarify that the order processing of the inside limit 
order is repeated at each next best displayed price.
    As defined in NYSE Arca Equities Rule 7.31(d), an Inside Limit 
Order is a Limit Order, which, if routed away pursuant to NYSE Arca 
Equities Rule 7.37(d), will be routed to the market participant with 
the best displayed price. Any unfilled portion of the order will not be 
routed to the next best price level until all quotes at the current 
best bid or offer are exhausted. Once each current best bid or offer is 
exhausted, Exchange systems will repeat the process at each new best 
displayed price level until the order is filled or no longer 
marketable.
    The Exchange proposes to amend Rule 7.31(d) to clarify that this 
process is repeated at each next best displayed price. Once the Inside 
Limit Order is no longer marketable it will be ranked in the NYSE Arca 
Book pursuant to NYSE Arca Equities Rule 7.36. An Inside Limit Order is 
``marketable'' when it is priced to buy (sell) at or above (below) the 
national best bid or offer for the security.
    The purpose of the Inside Limit Order is to assess away market 
displayed interest on a price-by-price basis, thereby slowing down the 
routing of such order, rather than simultaneously routing an order to 
away markets at

[[Page 57636]]

potentially multiple prices. For example, if the national best bid and 
offer is 10.10 by 10.12, and the Exchange receives an order to buy with 
a limit of 10.15, in addition to executing with the interest on the 
Exchange's book, the Exchange will route the balance of the order to 
all protected quotes, including quotes with an inferior price than the 
NBO (e.g., any protected offers priced at 10.13 or higher), up to the 
limit order price of 10.15.\4\ By contrast, an Inside Limit Order with 
a price of 10.15 would be matched with interest on the Arca Book and 
routed only to away market interest priced at the NBO of 10.12. After 
routing to the 10.12 offer(s), Exchange systems will reevaluate the 
next best displayed offer price, and route to that single price point 
and continue such assessment at each price point until either the limit 
order has been filled, or there is no further interest available to 
satisfy the limit order price either at the Exchange or at away 
markets.
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    \4\ See NYSE Arca Equities Rule 7.37(d)(2)(B).
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    As defined in NYSE Arca Equities Rule 7.31(oo), a Primary Until 
9:45 Order is an Order entered for participation on the primary market 
until 9:45 a.m. Eastern Time, after which time the order is cancelled 
on the primary market and entered on the NYSE Arca Book. Orders that 
return to the NYSE Arca Book after routing to the primary market will 
retain their original order attributes.
    As defined in NYSE Arca Equities Rule 7.31(pp), a Primary After 
3:55 Order is an Order entered for participation on the Exchange until 
3:55 p.m. Eastern Time (12:55 p.m. Pacific Time) after which time the 
order is cancelled on the Exchange and an order is entered for 
participation on the primary market. Orders that route to the primary 
market at 3:55 p.m. Eastern Time will retain their original order 
attributes.
    As currently defined, the Primary Until 9:45 Order and Primary 
After 3:55 Order are available to orders entered for participation on 
the Exchange, except for orders that, by definition, do not route, and 
currently, Inside Limit Orders. The Exchange proposes to amend NYSE 
Arca Equities Rule 7.31(d) to clarify that when an Inside Limit Order 
is designated as a Primary Until 9:45 Order or as a Primary After 3:55 
Order, it will follow the order processing set forth in Rule 7.31(d), 
i.e., that if routed, it would be routed to the market participant with 
the best displayed price, only when the Inside Limit Order is on the 
NYSE Arca Book. Accordingly, when an Inside Limit Order is routed to 
the primary market pursuant to the terms of a Primary Until 9:45 Order 
or a Primary After 3:55 Order, such order will be routed as a straight 
limit order to the primary market, and the order processing of an 
Inside Limit Order will be applicable only if it returns to the NYSE 
Arca Book (in the case of a Primary Until 9:45 Order) or before it is 
routed to the primary market (in the case of a Primary After 3:55 
Order). The Exchange is proposing this rule change to make clear that 
the routing process of the Inside Limit Order, i.e., routing to the 
best displayed price, will not be in effect when the Primary Until 9:45 
Order or Primary After 3:55 Order is applicable, because during those 
periods, the entirety of the order would be routed to the primary 
market, regardless of whether the primary market is displaying the best 
price.
    The Exchange believes that the proposed rule change provides 
transparency in the rules regarding the order processing applicable to 
Inside Limit Orders when such an order is routed to a primary market 
pursuant to the terms of a Primary Until 9:45 Order or a Primary After 
3:55 Order.
    The Exchange will announce the implementation date of the proposed 
rule change in a Trader Update to be published no later than 30 days 
following the date of filing. The implementation date will be no later 
than 30 days following publication of the Trader Update announcing the 
rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\5\ in general, and 
furthers the objectives of Section 6(b)(5),\6\ 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, 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 change to the Inside Limit Order meets these 
requirements because it provides that the order processing of an Inside 
Limit Order will only be applicable when such an order is on the NYSE 
Arca Book, and will not be applicable if the order is routed to a 
primary market pursuant to the terms of a Primary Until 9:45 Order or 
Primary After 3:55 Order. Accordingly, the proposed rule change will 
remove impediments to and perfect the mechanism of a free and open 
market and national market system by providing transparency in the 
rules regarding the order processing applicable to Inside Limit Orders 
when such an order is routed to a primary market pursuant to the terms 
of a Primary Until 9:45 Order or a Primary After 3:55 Order.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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 \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
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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,

[[Page 57637]]

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-2012-99 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-2012-99. 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 the 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 available publicly. All 
submissions should refer to File Number SR-NYSEArca-2012-99 and should 
be submitted on or before October 9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22914 Filed 9-17-12; 8:45 am]
BILLING CODE 8011-01-P