[Federal Register Volume 79, Number 200 (Thursday, October 16, 2014)]
[Notices]
[Pages 62227-62229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24543]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73329; File No. SR-NYSEARCA-2014-115]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Retail Liquidity Program and NYSE Arca Equities Rule 7.44 To Provide 
That Retail Price Improvement Orders That Are Not Priced Better Than 
the Best Protected Bid or Best Protected Offer Will Not Be Rejected 
Upon Entry

October 9, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on October 1, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``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 7.44 to 
provide that Retail Price Improvement Orders that are not priced better 
than the best protected bid or best protected offer will not be 
rejected upon entry. 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 is proposing to amend NYSE Arca Equities Rule 7.44 
(``Rule 7.44'') to provide that Retail Price Improvement Orders 
(``RPI'') that are not priced better than the best protected bid 
(``PBB'') or best protected offer (``PBO'') will not be rejected upon 
entry.
    Rule 7.44 sets forth the Exchange's pilot Retail Liquidity Program 
(the ``Program'').\4\ Under the Program, ETP Holders are able to 
provide price improvement to Retail Orders, as defined in Rule 
7.44(a)(3) and (k), by submitting an RPI, which is non-displayed 
liquidity in NYSE Arca-listed securities and UTP Securities, excluding 
NYSE-listed (Tape A) securities, that is priced more aggressively than 
the PBBO by at least $0.001 per share and that is identified as an RPI 
in a manner prescribed by the Exchange. RPIs are entered at a single 
limit price, rather than being pegged to the PBBO; however, RPIs can be 
designated as a Mid-Point Passive Liquidity (``MPL'') Order, in which 
case the order will re-price as the PBBO changes.\5\ RPIs remain non-
displayed and only execute against Retail Orders.
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    \4\ See Securities Exchange Act Release No. 71176 (Dec. 23, 
2013), 78 FR 79524 (Dec. 30, 2013) (SR-NYSEArca-2013-107).
    \5\ RPIs not designated as MPL Orders would alternatively need 
to be designated as a Passive Liquidity (``PL'') Order.
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    Rule 7.44(a)(4) currently provides that an order that is identified 
as an RPI but is not priced better than the PBB or PBO will be rejected 
upon entry. The Exchange proposes to amend Rule 7.44(a)(4) to permit 
entry of RPI's that are not priced better than the PBB or PBO. The 
Exchange believes that by accepting all RPIs, regardless of price, the 
Exchange will expand the interest that would be available to provide 
price improvement for Retail Orders, particularly if the PBB or PBO 
moves such that an RPI that otherwise would have been rejected could 
become price-improving interest.
    To effect this change, the Exchange proposes to delete the third 
sentence of Rule 7.44(a)(4) that provides for such inferior-priced RPIs 
to be rejected upon entry. The Exchange further proposes to amend the 
fourth sentence of Rule 7.44(a)(4) to conform the rule text to this 
proposed change. Specifically, the current rule text provides that 
``[a] previously entered RPI that becomes priced at or inferior to the 
PBBO will not be eligible to interact with incoming

[[Page 62228]]

Retail Orders, and such an RPI will cancel if a Retail Order executes 
against all displayed liquidity at the PBBO and the [sic] attempt [sic] 
to execute against the RPI.'' Because the Exchange would no longer be 
rejecting RPIs that are not priced better than the PBB or PBO, the 
Exchange believes that use of the term ``previously entered'' would no 
longer reflect the universe of RPIs that may not be priced better than 
the PBB or PBO. The Exchange therefore proposes to amend this sentence 
to delete the term ``previously entered'' and instead state that an RPI 
that is or becomes priced at or inferior to the PBBO would be subject 
to the treatment currently described in the rule.
    The Exchange does not intend to make any other changes to the 
Program with this rule filing. The Exchange will announce the 
implementation date of the systems functionality associated with the 
proposed rule change by Trader Update to be published no later than 30 
days following the effective date. The implementation date will be no 
later than 30 days following the issuance of the Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\6\ in general, and furthers the objectives of Section 6(b)(5),\7\ 
in particular, in that it is designed 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to and perfects the mechanism of a free and open market and 
national market system because it would enable additional RPI interest 
to be entered regardless of price, thereby allowing that RPI interest 
to remain in Exchange systems and become eligible to provide price 
improvement if the PBB or PBO changes such that the RPI interest 
becomes priced better than the PBB or PBO. The Exchange further 
believes that the proposed rule change protects investors and the 
public interest because it potentially increases the amount of RPI 
interest available to provide price improvement to incoming Retail 
Orders if the PBB or PBO moves such that the RPI becomes eligible to 
provide price improvement. The Exchange further believes the proposal 
will protect investors and the public interest because the proposed 
rule change will increase the incentives of liquidity providers to 
enter RPIs because liquidity providers will no longer need to risk 
rejection of RPIs that may be priced inferior to the PBB or PBO upon 
entry.

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. The Exchange believes that 
the Program is designed to increase competition among execution venues, 
encourage additional liquidity, and offer the potential for price 
improvement to retail investors. The Exchange notes that a significant 
percentage of the orders of individual investors are executed over-the-
counter. The Exchanges believes that it is appropriate to create a 
financial incentive to bring more retail order flow to a public market. 
The Exchange believes that the proposed rule change supports this 
objective by eliminating the possibility that liquidity-providing 
interest would be rejected based on price.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder because 
the proposal does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) by its terms, become operative for 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.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 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) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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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.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(C).
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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-2014-115 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2014-115. 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 
10:00 a.m. and 3:00 p.m. Copies of such

[[Page 62229]]

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-2014-115 and should be submitted on or before 
November 6, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24543 Filed 10-15-14; 8:45 am]
BILLING CODE 8011-01-P