[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52784-52785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20998]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72942; File No. SR-NYSEArca-2014-75]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Amending NYSE Arca Equities Rules 7.6, 
7.11, 7.16, 7.31, 7.34, 7.35, 7.37 and 7.65 to Eliminate Certain Order 
Types, Modifiers and Related References

August 28, 2014.

I. Introduction

    On June 27, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
to eliminate certain order types, modifiers and related references from 
the Exchange's rules. The proposed rule change was published for 
comment in the Federal Register on July 16, 2014.\3\ The Commission 
received no comment letters regarding the proposed rule change. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72591 (July 10, 
2014), 79 FR 41613 (``Notice'').
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II. Description of the Proposal

    The Exchange has proposed to amend NYSE Arca Equities Rules 
(``Rule(s)'') 7.6, 7.11, 7.16, 7.31, 7.34, 7.35, 7.37 and 7.65 to 
eliminate certain order types, modifiers and related references. The 
Exchange states that it is proposing these rule changes in order to 
streamline its rules and reduce complexity among its order type 
offerings.\4\
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    \4\ See Notice, 79 FR at 41614.
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    Working Orders. The Exchange has proposed to eliminate five types 
of working orders \5\--Passive Discretionary Orders, Discretion Limit 
Orders, Sweep Reserve Orders, Random Reserve Orders, and PL Select 
Orders--and to delete the definitions of these order types currently 
set forth in Rule 7.31(h), as well as references to these order types 
currently in Rules 7.11 and 7.37.\6\ In addition, in connection with 
the proposed elimination of Passive Discretionary Orders and Sweep 
Reserve Orders, the Exchange has proposed not to accept certain 
combined orders that currently involve these order types, namely, the 
Passive Discretionary Reserve Order (a Passive Discretionary Order used 
in combination with a Reserve Order), Sweep Reserve with Discretion 
Order (a Sweep Reserve Order entered with a discretionary price), and 
Inside Limit Sweep Reserve Order (a Sweep Reserve Order entered with an 
inside limit price).\7\
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    \5\ According to the Exchange, workings orders are orders with a 
conditional or undisplayed price and/or size. Id.; see also Rule 
7.31(h).
    \6\ A more detailed description of these order types and the 
provisions of Rules 7.11, 7.31(h) and 7.37 that would be deleted is 
set forth in the Notice. See Notice, 79 FR at 41614; see also 
proposed Rules 7.11, 7.31(h) and 7.37.
    \7\ See Notice, 79 FR at 41614 n. 8 and 9.
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    Cross Orders. The Exchange has proposed to accept only one type of 
cross order--Cross Orders designated IOC--and to revise its rules 
accordingly. Currently, the Exchange defines a Cross Order in Rule 
7.31(s), separately defines an IOC Cross Order in Rule 7.31(aa), and 
separately defines additional types of cross orders in other provisions 
of Rule 7.31. To effect the proposed change, the Exchange has proposed 
to consolidate Rule 7.31(aa) into Rule 7.31(s), thereby creating one 
provision that describes Cross Orders designated IOC, and to eliminate 
the additional types of cross orders currently available on the 
Exchange.\8\ Rule 7.31(aa) would be Consolidated into Rule 7.31(s) by: 
(i) Adding the clause ``designated IOC'' to the definition of Cross 
Order in Rule 7.31(s), (ii) moving to Rule 7.31(s) from Rule 7.31(aa) 
text stating that Cross Orders that would lock or cross the PBBO or BBO 
will be cancelled,\9\ and (iii) deleting Rule 7.31(aa).\10\ The 
Exchange also has proposed to delete certain rule provisions that would 
be rendered moot or inapplicable by this proposed change.\11\
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    \8\ The additional types of cross orders currently available on 
the Exchange, and which would be eliminated under the proposal, are 
the Midpoint Cross Order (currently defined in Rule 7.31(y)), Post 
No Preference (``PNP'') Cross Order (currently defined in Rule 
7.31(bb)), Cross-and-Post Order (currently defined in Rule 
7.31(ff)), and Portfolio Crossing Service (``PCS'') Order (currently 
defined in Rule 7.31(ii)). The definitions of these cross order 
types currently set forth in Rule 7.31 would be deleted, as would 
references to certain of these cross order types currently set forth 
in Rules 7.34(g), 7.37(d) and 7.65. Id. at 41615.
    \9\ The terms ``PBBO'' and ``BBO'' are defined in Rules 1.1(h) 
and (dd), respectively.
    \10\ See Notice, 79 FR at 41614-15; see also proposed Rule 
7.31(s).
    \11\ See Notice, 79 FR at 41615. Subparagraphs (1)-(6) of 
current Rule 7.31(s) describe Cross Order functionality that is 
applicable only when Cross Orders are not designated IOC, and thus, 
according to the Exchange, the proposal would render those 
subparagraphs moot. Similarly, the Exchange proposes to delete Rule 
7.16(f)(v)(G) as that rule, which provides that short sale cross 
orders priced at or below the current national best bid will be 
rejected during a Short Sale Period (defined in Rule 7.16(f)(iv)), 
would be inapplicable because Cross Orders designated IOC cannot 
execute at or below the current national best bid. Further, by 
virtue of the proposed restriction of Cross Orders to those with an 
IOC designation, the Exchange has proposed to eliminate the Day 
Cross Order, and thus a Cross Order with a Day modifier would be 
rejected as a result of the proposal. Id.
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    Additional Order Types and Rule Reference Deletions. In addition to 
the foregoing proposed changes with respect to working orders and cross 
orders, the Exchange has proposed to eliminate or limit the operation 
of five other order types. First, the Exchange has proposed to 
eliminate the Market to Limit (``MTL'') Order, and thus to delete Rule 
7.31(rr), which currently sets forth the definition of this order type. 
Second, the Exchange has proposed to amend the definition of an 
Auction-Only Order in Rule 7.31(t) to provide that the Exchange will 
only accept the Auction-Only Orders specified therein, namely, Limit-
on-Open Orders (``LOO Order''), Market-on-Open Orders (``MOO Order''), 
Limit-on-Close Orders (``LOC''), and Market-on-Close Orders 
(``MOC'').\12\ Third, the Exchange proposes not to accept NOW Orders 
with a Reserve Modifier, and thus to amend the definition of a NOW 
Order in Rule 7.31(v) to provide that NOW Orders entered with a Reserve 
modifier will be rejected. Fourth, the Exchange proposes not to accept 
market orders with a NOW or IOC modifier, and thus to delete the 
reference to market orders in the definition of the IOC modifier in 
Rule 7.31(c)(3),\13\ and to amend the definition of a NOW Order in Rule 
7.31(v) to provide that NOW Orders entered with a Market modifier will 
be rejected. Lastly, the Exchange proposes to eliminate the use of a 
Fill or Kill (``FOK'') modifier with a Mid-Point Liquidity (``MPL'') 
Order, and thus to amend the definition of an MPL Order in Rule 
7.31(h)(5) to provide that an

[[Page 52785]]

MPL Order entered with a FOK modifier will be rejected.
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    \12\ See Notice, 79 FR at 41615. The Exchange also proposes to 
replace the references in Rule 7.35 to Auction-Only Limit with LOO 
and to Auction-Only Market with MOO, and to delete the references to 
Auction Only Limit Orders in Rule 7.35(f)(3)(E). Id.; see also 
proposed Rule 7.35.
    \13\ As a result, the use of the IOC modifier would be limited 
to limit orders, and a market order entered with an IOC modifier 
would be rejected. See proposed Rule 7.31(c)(3); see also Notice, 79 
FR at 41615.
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    Furthermore, the Exchange has proposed to delete commentary .04 to 
Rule 7.6, as the commentary provides an exception to Rule 7.6 (which 
governs trading differentials) for Midpoint Cross Orders, which would 
be eliminated as a result of the instant proposal, and for Midpoint 
Directed Fills, which were eliminated in a prior rule filing.\14\ The 
Exchange also proposes to delete references to Cleanup Orders from 
Rules 7.34 and 7.35, as Cleanup Orders were eliminated in the same 
prior rule filing that eliminated Midpoint Directed Fills.\15\
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    \14\ See Notice, 79 FR at 41615-16; see also Securities Exchange 
Act Release No. 71331 (January 16, 2014), 79 FR 3907 (January 23, 
2014) (SR-NYSEArca-2013-92).
    \15\ Id.
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    The Exchange has proposed, due to the technology changes associated 
with this proposal, to announce via Trader Update the implementation 
date of the elimination of the order types under this proposal.\16\
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    \16\ See Notice, 79 FR at 41616.
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III. Discussion and Commission Findings

    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 applicable to a national securities 
exchange.\17\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\18\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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; and are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the instant proposal does not add any new 
functionality but instead reduces the number of order types and order 
type/modifier combinations that will be accepted by the Exchange, which 
should simplify to a degree the order type functionality available on 
the Exchange. The Commission believes that the proposed rule change 
should promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NYSEArca-2014-75) be, and it 
hereby is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20998 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-P