
[Federal Register: August 4, 2010 (Volume 75, Number 149)]
[Notices]               
[Page 47052-47053]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au10-104]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62598; File No. SR-NYSEArca-2010-48]

 
 Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
a Proposed Rule Change Relating to the Guaranteed Allocation for Lead 
Market Makers and Directed Order Market Makers

July 29, 2010.
    On June 8, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 relating to the guaranteed allocation for Lead 
Market Makers (``LMM''s) and Directed Order Market Makers (``DOMM''s). 
Notice of the proposed rule change was published for comment in the 
Federal Register on June 29, 2010.\3\ The Commission received no 
comments on the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62328 (June 21, 
2010), 75 FR 37516.
---------------------------------------------------------------------------

    Generally, incoming marketable orders are allocated among contra 
side orders resting on the NYSE Arca Consolidated Book at the same 
price on the basis of time priority. Exchange Rule 6.76A nonetheless 
provides an exception to this principle: When an LMM or DOMM is quoting 
on the book at the National Best Bid or Offer (``NBBO''), the LMM or 
DOMM receives a guaranteed allocation of 40% of the incoming order 
ahead of any other non-Customer interest ranked earlier in time. Rule 
6.76A further provides that if a Customer order is ranked earlier than 
the LMM or DOMM, the Customer order is filled first. The LMM or DOMM 
then receives its 40% guarantee out of the remainder, if any, of the 
incoming order, and any other non-Customer is filled from the balance 
on the basis of time priority.
    According to the Exchange, in the latter situation, non-Customers 
have submitted orders that set a new price, only to find themselves 
left with just a small portion of an incoming order, because Customer 
orders at the same price must be satisfied first, and 40% of the 
balance is allocated to the LMM or DOMM before the price-setter can 
receive any allocation. Thus, the Exchange proposes to amend Rule 6.76A 
to provide that the guaranteed allocation will not apply if there are 
Customer orders on the Consolidated Book ranked ahead of the LMM or 
DOMM. In such a case, the incoming order will be allocated strictly on 
the basis of time priority. The guarantee will apply only if there are 
no resting Customer orders ranked ahead of the LMM or DOMM.
    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.\4\ 
In particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act,\5\ 
which requires, among other things, that the rules of a national 
securities exchange remove impediments to and perfect the mechanism of 
a free and open market and a national market system. The Commission 
believes that eliminating the 40% guarantee for LMMs and DOMMs when 
Customer orders are ranked ahead in the Consolidated Book is reasonable 
to encourage non-Customer market participants to competitively price 
their orders.
---------------------------------------------------------------------------

    \4\ 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).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2010-48), be and hereby is 
approved.


[[Page 47053]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19223 Filed 8-3-10; 8:45 am]
BILLING CODE 8010-01-P

