
[Federal Register Volume 80, Number 82 (Wednesday, April 29, 2015)]
[Notices]
[Pages 23838-23839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09918]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74796; File No. SR-NYSEArca-2015-08]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change To Eliminate Additional Order Type 
Combinations, Delete Related Rule Text, Restructure the Remaining Rule 
Text in NYSE Arca Equities Rule 7.31, and Make Other Clarifying Changes 
to Its Rules

April 23, 2015.

I. Introduction

    On February 19, 2015, 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 reorganize, revise and clarify the order type 
and order modifier definitions found in NYSE Arca Equities Rule 
(``Rule'') 7.31; make certain conforming and clarifying changes to 
Rules 7.35, 7.36, 7.37 and 7.38; and eliminate certain order type 
functionality from the restructured rule. The proposed rule change was 
published for comment in the Federal Register on March 9, 2015.\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. 74415 (March 3, 
2015), 80 FR 12537 (``Notice'').
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II. Description of the Proposal

    On June 5, 2014, in a speech entitled ``Enhancing Our Market Equity 
Structure,'' Mary Jo White, Chair of the Commission, requested that the 
equity exchanges conduct a comprehensive review of their order types 
and how they operate in practice, and as part of this review, consider 
appropriate rule changes to help clarify the nature of their order 
types.\4\ The Exchange has filed this proposed rule change to continue 
its efforts to review and clarify its rules governing order types.\5\
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    \4\ See Mary Jo White, Chair, Commission, Speech at the Sandler, 
O'Neill & Partners, L.P. Global Exchange and Brokerage Conference 
(June 5, 2014) (available at www.sec.gov/News/Speech/Detail/Speech/1370542004312#.U5HI-fmwJiw).
    \5\ See Notice, 80 FR at 12537.
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    The Exchange proposes to reorganize and revise its existing order 
type and modifier definitions in Rule 7.31. Specifically, proposed Rule 
7.31(a) would contain the revised Exchange definitions for Market 
Orders, Limit Orders, and Inside Limit Orders (collectively ``primary 
order types'').\6\ The revised Market Order definition would specify 
that it cannot be designated Immediate-or-Cancel (``IOC'') and that it 
would be rejected in the absence of a contra-side bid or offer.\7\ The 
revised Limit Order definition would specify that a ``marketable'' 
Limit Order is one to buy (sell) at or above (below) the contra- 
contra-side Protected Best Bid or Offer for the security.\8\ The 
revised Inside Limit Order definition would clarify how the order is 
routed, the handling of any returning remainder of such order after 
routing, and that such orders may not be designated IOC.\9\
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    \6\ See Notice, 80 FR at 12538.
    \7\ Id.
    \8\ Id. The Exchange also proposes to capitalize the term 
``Limit Orders'' where used in the rule. Id.
    \9\ Id. The Exchange also proposes to state in proposed Rule 
7.31(a)(3) that Inside Limit Orders may be designated with a NOW 
Modifier. Id.
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    Proposed Rule 7.31(b) would contain the definitions for the 
Exchange's Time-in-Force (``TIF'') Modifiers: Day, Good Till Cancelled, 
Good Till Date, IOC, and Fill-or-Kill.\10\ The definition for the NOW 
Order designation would also be relocated and re-designated as a TIF 
Modifier in proposed Rule 7.31(b)(5).\11\
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    \10\ See Notice, 80 FR at 12539.
    \11\ Id.
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    Proposed Rule 7.31(c) would contain the Exchange's revised 
definitions for Limit-on-Open Orders, Market-on-Open Orders, Limit-on-
Close Orders, and Market-on-Close Orders (collectively ``Auction-Only 
Orders'').\12\ The revised definitions would clarify that the Exchange 
would reject Auction-Only Orders in securities that are not eligible 
for an auction, or if an auction is suspended pursuant to Rule 
7.35(g).\13\
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    \12\ Id.
    \13\ Id.
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    Proposed Rule 7.31(d) would contain the Exchange's revised and 
reformatted definitions for Reserve Orders, Passive Liquidity Orders, 
and Mid-Point Passive Liquidity (``MPL'') Orders (collectively 
``Working Orders'').\14\ The revised Reserve Order definition would 
clarify that such an order could not be designated IOC.\15\ Currently, 
the All-or-None (``AON'') Order is offered as a Working Order, however 
the Exchange proposes to eliminate the functionality.\16\
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    \14\ Id.
    \15\ See Notice, 80 FR at 12538.
    \16\ See Notice, 80 FR at 12537-38. The Exchange also proposes 
conforming changes to other rules to reflect the elimination of AON 
Orders. See Notice, 80 FR at 12358; see also proposed Rules 7.36 and 
7.37.
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    Proposed Rule 7.31(e) would contain the Exchange's revised 
definitions for Adding Liquidity Only (``ALO'') Orders, Intermarket 
Sweep Orders, Post No Preference (``PNP'') Orders, PNP Blind Orders, 
Cross Orders, and Tracking Orders (collectively ``non-routable 
orders'').\17\ Proposed Rule 7.31(e)(4) would clarify that PNP Blind 
Orders combined with the ALO modifier may not also be designated as a 
Reserve Order.\18\
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    \17\ See Notice, 80 FR at 12539-40.
    \18\ See Notice, 80 FR at 12538.
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    Proposed Rule 7.31(f) would contain the Exchange's revised 
definitions for Primary Only Orders, Primary Until 9:45 Orders, and 
Primary After 3:55 Orders (collectively ``specified routing 
instructions'').\19\ The Primary Sweep Order is currently offered as a 
specified routing instruction, however the Exchange proposes to 
eliminate the functionality.\20\
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    \19\ See Notice, 80 FR at 12540.
    \20\ See Notice, 80 FR at 12538.
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    Proposed Rule 7.31(g) would contain the Exchange's definitions for 
other existing order types and modifiers, including the Pegged Order, 
Proactive if Locked Modifier, Do Not Reduce Modifier, Do Not Increase 
Modifier, and Self-Trade Prevention (``STP'') Modifier.\21\
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    \21\ See Notice, 80 FR at 12540.
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    Proposed Rule 7.31(h) would contain the Exchange's revised Q Order 
definition clarifying that such orders do not route.\22\
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    \22\ Id.
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    The Exchange also proposes to amend and conform Rules 7.35, 7.36, 
7.37 and 7.38 to proposed Rule 7.31 as it relates cross references, 
term usage and capitalization.\23\ In addition to certain technical 
changes, proposed Rule 7.35 would be updated to reflect that the 
Exchange no longer conducts a closing auction for certain NYSE-listed 
securities, does not run a Market Order Auction in Nasdaq-listed 
securities, and only runs a Trading Halt Auction in securities that are 
listed on the Exchange.\24\ In addition to certain technical changes, 
proposed Rule 7.36 would be amended to clarify how, for

[[Page 23839]]

purposes of determining the best ranked displayed order(s) on the 
Exchange for dissemination on the public data feeds, the Exchange 
handles non-marketable odd-lot orders that are priced better than the 
best-priced round lot interest at the Exchange.\25\ Specifically, 
proposed Rule 7.36(c) would be amended to explain the current Exchange 
functionality where non-marketable odd-lot sized orders that can be 
aggregated to equal at least a round lot are displayed as the best 
ranked displayed orders to sell (buy) at the least aggressive price at 
which such odd-lot sized orders can be aggregated to equal at least a 
round lot.\26\ Proposed Rule 7.37 would be amended to make conforming 
and other non-substantive, technical changes.\27\ Proposed Rule 
7.38(a)(1) would be amended to specify the order types that cannot be 
entered as odd-lots, namely Reserve Orders, MPL-IOC Orders, Tracking 
Orders, and Q Orders.\28\
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    \23\ See Notice, 80 FR at 12540-41.
    \24\ See Notice, 80 FR at 12540.
    \25\ See Notice, 80 FR at 12540-41.
    \26\ Id.
    \27\ See Notice, 80 FR at 12540.
    \28\ See Notice, 80 FR at 12541.
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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.\29\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\30\ 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 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.
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    \29\ 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).
    \30\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposed rule change reflects the 
Exchange's continued efforts to review and clarify its rules governing 
order types.\31\ In addition, the Commission notes that the Exchange 
believes that the proposal is consistent with Section 6(b)(5) of the 
Act because it provides greater specificity, clarity and transparency 
with regard to the Exchange's order handling processes and 
functionalities, including how otherwise non-marketable odd-lot sized 
orders are aggregated for purposes of determining the best bid or offer 
for display on the public data feeds.\32\ According to the Exchange, 
these amendments, both clarifying and technical, should remove 
impediments to and perfect the mechanism of a free and open market, and 
are consistent with the protection of investors and the public 
interest.\33\ The Exchange believes that this proposal should help 
reduce the potential for investor confusion and facilitate a better 
understanding of the Exchange's order handling operations and 
navigation of its rulebook.\34\
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    \31\ See Notice, 80 FR at 12537.
    \32\ See Notice, 80 FR at 12541.
    \33\ Id.
    \34\ Id.
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    The Commission notes that the proposal reduces the number of order 
types that will be accepted by the Exchange. The Commission also notes 
that the proposal provides additional detail regarding certain order 
type and modifier functionality that remain available on the Exchange. 
The Commission further notes that the Exchange has restructured and 
reorganized proposed Rule 7.31 such that order types with similar 
functionality are grouped together by subsection. The Commission 
believes that these proposed changes should provide greater 
specificity, clarity and transparency with respect to the order type 
and modifier functionality available on the Exchange, as well as the 
Exchange's methodology for handling certain order types. Accordingly, 
the Commission believes that the proposal should help to prevent 
fraudulent and manipulative acts and practices, 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,\35\ that the proposed rule change (SR-NYSEArca-2015-08) be, and it 
hereby is, approved.
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    \35\ 15 U.S.C. 78s(b)(2).
    \36\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
Brent J. Fields,
Secretary.
[FR Doc. 2015-09918 Filed 4-28-15; 8:45 am]
 BILLING CODE 8011-01-P


