
[Federal Register: March 27, 2008 (Volume 73, Number 60)]
[Notices]               
[Page 16402-16403]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr08-90]                         


[[Page 16402]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

Release No. 34-57538; File No. SR-NSX-2008-07]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Post Only Orders

March 20, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 17, 2008, the National Stock Exchange, Inc. (``NSX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change, as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. The Exchange has designated this proposal as one effecting a 
change in an existing order-entry system of a self-regulatory 
organization under Section 19(b)(3)(A)(iii) of the Act,\3\ and Rule 
19b-4(f)(5) thereunder,\4\ which renders the proposal immediately 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comment on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(5).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to clarify that a Post Only Order will be 
rejected without execution if it is immediately marketable against 
round-lot orders when entered. The Exchange will permit a Post Only 
Order to post if odd-lot orders are the only marketable orders in the 
book.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 Exchange 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 these 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.

1. Purpose

    A Post Only Order is an order designed to encourage displayed 
liquidity on the Exchange. By its terms, a Post Only Order is posted on 
the Exchange and does not route away to another trading center. 
Currently, a Post Only Order is rejected by the Exchange if the order 
is immediately marketable against any order on the Exchange, even if 
the order is an odd-lot order.\5\ The Exchange intends to change the 
operation of Post Only Orders so that such orders are rejected only if 
there are marketable round-lot orders in the book, resulting in Post 
Only Orders being posted when an odd lot order is the only marketable 
order in the book. In this way, the Exchange will enhance liquidity on 
the Exchange by permitting greater ability for the Post Only Order to 
be posted in the book.
---------------------------------------------------------------------------

    \5\ In SR-NSX-2008-03, the Exchange adopted a new Zero Display 
Reserve Order type and changed the rule text to state that Post Only 
Orders that are not Zero Display Reserve Orders will be rejected 
without execution if immediately marketable. See Securities Exchange 
Act Release No. 57311 (February 12, 2008), 73 FR 9148 (February 19, 
2008). The Zero Display Reserve Order type will commence trading in 
April 2008.
---------------------------------------------------------------------------

    NSX Rule 11.11(c)(5)(A) states that the ``Post Only Order that is 
not a Zero Display Reserve Order will be rejected without execution if 
it is immediately marketable when entered.'' To clarify this Rule, the 
Exchange is now amending the language to make clear that Post Only 
Orders will be rejected only if there are marketable round-lot orders 
in the book.\6\ Orders marked Post Only will always be considered 
``liquidity providing'' by the Exchange for purposes of application of 
the Exchange's fees and rebate programs. By making a Post Only 
designation, ETP Holders are able to avoid the risk that their orders 
will be considered ``liquidity taking'' for purposes of application of 
the Exchange's fees and rebate programs.
    The Exchange's clarification of Rule 11.11(c)(5) is consistent with 
Regulation NMS. Only round-lot orders are subject to the requirements 
of Regulation NMS in that only round-lot orders must be included in the 
Exchange's automated quote.\7\ In contrast, odd-lot orders are not 
displayed, and the prohibitions against both locked and crossed markets 
and trade-throughs do not apply to odd-lots. Exchanges are permitted to 
establish their own rules for handling odd-lot orders and the odd-lot 
portions of mixed-lot orders.\8\
---------------------------------------------------------------------------

    \6\ The Exchange notes that odd lot orders are aggregated where 
possible to form round lots.
    \7\ Under Regulation NMS, Rule 600(b)(8) defines ``bid'' or 
``offer'' as the bid price or offer price for one or more round lots 
of an NMS security. This definition is embedded in the definition of 
``quotation'' in Rule 600(b)(62), as well as the definition of 
``protected bid'' or ``protected offer'' in Rule 600(b)(57). 17 CFR 
242.600(b).
    \8\ See Response No. 7.03 in ``Responses to Frequently Asked 
Questions Concerning Rule 611 and Rule 610 of Regulation NMS,'' 
Division of Trading and Markets, dated June 8, 2007.
---------------------------------------------------------------------------

    The Exchange believes that this clarification to the Post Only 
Order will enhance the use of Post Only Orders. Further, allowing Post 
Only Orders greater opportunities to post in the book will increase the 
displayed liquidity in the Exchange.

2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act \9\ in general, and 
Section 6(b)(5) of the Act,\10\ in particular, which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition
    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others
    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The foregoing proposed rule change is filed pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and subparagraph (f)(5) of Rule 19b-4 
thereunder \12\ because it effects a change in an existing order-entry 
system of a self-regulatory

[[Page 16403]]

organization that: (i) Does not significantly affect the protection of 
investors or the public interest; (ii) does not impose any significant 
burden on competition; and (iii) does not have the effect of limiting 
the access to or availability of the system. The rule change is simply 
a language clarification of an existing NSX rule. Furthermore, the rule 
change raises no novel issues for the Commission and is consistent with 
odd-lot order handling as contemplated by Regulation NMS. Accordingly, 
the proposal is effective upon Commission receipt of the filing.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(5).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 rule-comments@sec.gov. Please include 
File Number SR-NSX-2008-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSX-2008-07. 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 inspection and 
copying in the Commission's Public Reference Room, 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 NSX. 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-NSX-
2008-07 and should be submitted on or before April 17, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-6248 Filed 3-26-08; 8:45 am]

BILLING CODE 8011-01-P
