Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 9719 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Self-Trade Prevention would only be applicable 

to electronic trading on the Exchange. 

4The Exchange will specify from time to time via 

a Regulatory Information Bulletin the Market Maker 

trading interest (i.e., quotes and orders) to which 

Self-Trade Prevention will apply. Currently, the 

Exchange plans to initially apply Self-Trade 

Prevention to the following order types used by 

Market Makers: ‘‘PNP Orders’’ and ‘‘PNP–Blind 

Orders.’’ PNP Orders and PNP–Blind Orders are 

defined in NYSE Amex Options Rule 900.3NY, and 

each is a type of non-routable Limit Order that is 

only executed on the Exchange. The Exchange notes 

that Market Makers primarily use these order types, 

as opposed to other order types offered by the 

Exchange, because they are similar to quotes (i.e., 

they are non-routable Limit Orders). The Exchange 

currently plans to expand Self-Trade Prevention to 

other Market Maker trading interest (e.g., quotes) 

when certain technology changes have been 

completed, and would announce any such 

expansion through a Regulatory Information 

Bulletin under this proposed rule change pursuant 

to Commentary .02 of NYSE Amex Options Rule 

964NY. In the future, the Exchange may expand 

Self-Trade Prevention to other orders used by 

Market Makers (including routable orders), and it 

also would announce any such changes through a 

Regulatory Information Bulletin under this 

proposed rule change pursuant to Commentary .02 

of NYSE Amex Options Rule 964NY. The Exchange 

would submit a separate proposed rule change if it 

were to make Self-Trade Prevention available to 

non-Market Maker trading interest. 

5The Exchange would use a Market Maker’s 

trading permit identification (‘‘TPID’’) to monitor 

for self-trades in the proposed Self-Trade 

Prevention functionality. TPIDs are assigned to 

Market Makers, as well as other ATP Holders, to 

identify them in the Exchange’s systems. Market 

Makers on the Exchange are not able to submit 

orders on an agency basis. Thus, a Market Maker 

within a firm that conducts both an agency and 

market making business would have a unique TPID 

that could only be used for that Market Maker’s 

quotes and orders. 

6Example 1 illustrates that Self-Trade Prevention 

would result in the cancellation of the Market 

Maker’s resting order (or quote) to buy regardless 

of whether the incoming order (or quote) and the 

resting order (or quote) would actually execute 

against each other. 

7Example 2 illustrates that Self-Trade Prevention 

would not result in the cancellation of the Market 

Maker’s resting order (or quote) to buy with a price 

of $1.13 because the price of the resting order (or 

quote) to buy is lower than the price of the 

incoming order (or quote) to sell. 

8Market Markers on the Exchange would not 

have the ability to deactivate Self-Trade Prevention 

or change any settings related to it. 

9See, e.g., NYSE Amex Options Rule 952NY. 

10See NYSE Amex Options Rule 900.3NY(e), 

which defines Complex Order. See also NYSE 

Amex Options Rule 980NY, which describes 

electronic Complex Order trading. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3736 Filed 2–16–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66385; File No. SR– 

NYSEAmex–2012–03] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Provide for ‘‘SelfTrade Prevention’’ on the Exchange 

February 13, 2012. 

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 January 

30, 2012, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to add new 

Commentary .02 to NYSE Amex Options 

Rule 964NY (Display, Priority and Order 

Allocation—Trading Systems) to 

provide for ‘‘Self-Trade Prevention’’ on 

the Exchange. The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, and www.nyse.com. 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to add new 

Commentary .02 to NYSE Amex Options 

Rule 964NY (Display, Priority and Order 

Allocation—Trading Systems) to 

provide for ‘‘Self-Trade Prevention’’ on 

the Exchange.3 As proposed, the 

Exchange would cancel any resting 

Market Maker quote(s) and order(s) 4 to 

buy (sell) that are priced equal to or 

higher (lower) than an incoming Market 

Maker quote, order or both to sell (buy) 

entered under the same trading permit 

identification.5 The following examples 

illustrate how Self-Trade Prevention 

would function: 

Example 1 

D The National Best Bid and Offer 

(‘‘NBBO’’) for a particular option series 

is $1.15 (bid)—$1.20 (offer); 

D The Exchange Best Bid and Offer 

(‘‘BBO’’) is $1.15 (bid)—$1.25 (offer); 

D A Market Maker has a single resting 

PNP Order to buy on the Exchange’s 

Consolidated Book with a price of $1.15; 

D If the Market Maker submits a PNP 

Order to sell with a price of $1.15, the 

NYSE Amex System would cancel the 

Market Maker’s resting PNP Order to 

buy with a price of $1.15.6

Example 2 

D The NBBO and BBO are the same as 

in Example 1; 

D A Market Maker has two separate 

resting PNP Orders to buy on the 

Exchange’s Consolidated Book, with 

prices of $1.15 and $1.13, respectively; 

D If the Market Maker submits a PNP 

Order to sell with a price of $1.14, the 

NYSE Amex System would cancel the 

Market Maker’s resting PNP Order to 

buy with a price of $1.15, but would not 

cancel the Market Maker’s resting PNP 

Order to buy with a price of $1.13.7

As proposed, Self-Trade Prevention 

would be in effect throughout the 

trading day for all Market Markers on 

the Exchange,8 but not during Trading 

Auctions.9 In this regard, the Exchange 

believes that it is highly unlikely that a 

Market Maker would trade against its 

own resting interest during a Trading 

Auction. Moreover, the Exchange notes 

that it would be difficult to implement 

this functionality from a technological 

and operational perspective because it 

would require the Exchange to cancel 

resting, executable Market Maker 

trading interest as it is calculating the 

price at which to conduct the Trading 

Auction. For these reasons, the 

Exchange is not applying Self-Trade 

Prevention to Trading Auctions. 

The Exchange also proposes that SelfTrade Prevention would not be 

applicable to individual legs of Complex 

Orders.10 In this regard, senders of 

Complex Orders, including Market 

Makers, view them as discrete orders, 

serving a particular investment purpose, 

that are contingent on all of the legs of 

the Complex Order being executed. 

Thus, they are only interested in having 

all of the legs of a Complex Order 

executed. Because the non-execution of 

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9720 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 

11See Chapter VI, Section 10(6) of the NOM 

Rules. 

12See CBOE Rule 6.53(c)(v). 

13See NYSE Arca Equities Rule 7.31(qq). Similar 

to the Self-Trade Prevention functionality proposed 

in this filing, the NYSE Arca Equities Self Trade 

Prevention modifier is not in effect during auctions. 

14See supra note 4. As mentioned above, the 

Exchange notes that any such announcements 

regarding Self-Trade Prevention would not be for 

the purpose of, or permit the Exchange to, expand 

the applicability of Self-Trade Prevention beyond 

Market Maker trading interest. Any such expansion 

would be the subject of a separate proposed rule 

change submitted by the Exchange to the 

Commission. The Exchange further notes that the 

Commission has previously permitted other option 

exchanges to communicate settings or eligibility for 

various exchange mechanisms to their members 

through exchange notices, bulletins or circulars. 

See, e.g., Interpretation and Policy .05 to CBOE Rule 

6.74A, which provides that any determinations 

made by CBOE regarding CBOE’s Automated 

Improvement Mechanism, such as eligible classes, 

order size parameters and the minimum price 

increment for certain responses, shall be 

communicated in a Regulatory Circular. See also 

CBOE Rules 6.45A and 6.45B, which provide that 

CBOE will issue a Regulatory Circular to specify 

certain priority-related information, including 

specifying which priority rules will govern which 

classes of options any time the exchange changes 

the priority. 

15See supra notes 11, 12 and 13. 

16Under Commentary .02 to NYSE Amex Options 

Rule 965NY, a ‘‘trade may be nullified if all parties 

to the trade agree to the nullification,’’ and when 

‘‘all parties to a trade have agreed to a trade 

nullification, one party must promptly notify the 

Exchange for dissemination of cancellation 

information to the Options Price Reporting 

Authority.’’ 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78s(b)(3)(A). 

20 17 CFR 240.19b–4(f)(6). 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 the five-day prefiling requirement. 

one leg of a Complex Order is contrary 

to the investment purpose of the 

Complex Order, the Exchange has 

determined to not apply Self-Trade 

Prevention in a manner that would 

prevent a Complex Order sent by a 

Market Maker from executing against 

that Market Maker’s resting interest in 

the leg markets. 

The Exchange notes that Self-Trade 

Prevention would not relieve or modify 

a Market Maker’s obligations under the 

Exchange’s Rules, such as the Market 

Maker’s quoting obligations, or any 

other rules and regulations to which the 

Market Maker is subject. 

The Exchange believes that the 

proposed Self-Trade Prevention is very 

similar to functionality currently offered 

by the Nasdaq Options Market 

(‘‘NOM’’). In particular, NOM provides 

market makers on its market with an 

‘‘anti-internalization’’ functionality, 

whereby quotes and orders entered by 

NOM market makers using the same 

market participant identifier will not be 

executed against quotes and orders 

entered on the opposite side of the 

market by the same market maker using 

the same identifier, but instead the 

NOM system will cancel the oldest of 

the quotes or orders back to the entering 

party prior to execution.11 Similarly, the 

Chicago Board Options Exchange 

(‘‘CBOE’’) provides for a market-maker 

trade prevention order, which is a 

market maker immediate-or-cancel 

order that, if it would trade against a 

resting quote or order for the same 

market-maker, is cancelled along with 

the resting quote or order.12

Additionally, NYSE Arca Equities 

provides for a self trade prevention 

order modifier that prevents orders so 

designated from executing against 

resting opposite side orders entered 

under the same equity trading permit 

identification that are also designated 

with the modifier.13 The change 

proposed herein would therefore 

provide Market Makers with a method 

of managing their trading interest that is 

similar to functionalities that are 

currently available on other markets. 

Because of the technology changes 

associated with this proposed rule 

change, the Exchange proposes to 

announce the implementation date of 

Self-Trade Prevention on the Exchange 

via a Regulatory Information Bulletin. 

This Bulletin also would include the 

Market Maker trading interest to which 

Self-Trade Prevention initially would 

apply.14

2. Statutory Basis 

As discussed above, the Exchange 

believes that the proposed rule change 

is designed to promote just and 

equitable principles of trade because it 

would provide Market Makers with a 

functionality to manage their trading 

interest that is similar to functionalities 

currently available on other markets.15

Additionally, the Exchange believes that 

the proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices, to remove 

impediments to, and perfect the 

mechanisms of, a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, because it would allow 

Market Makers to better manage their 

trading interest and provide a means to 

prevent executions against their own 

trading interest. The Exchange notes 

that Market Makers have asked for this 

functionality to prevent them from 

inadvertently trading with their own 

interest. In such a situation, the firms 

ask the Exchange to nullify the trades, 

which they are permitted to do under 

the Exchange’s rules because they are on 

both sides of the trades.16 While the 

proposed Self-Trade Prevention 

functionality would prevent inadvertent 

self-trading, the Exchange notes that the 

functionality would also prevent 

intentional self-trading. In this regard, 

the proposed rule change provides a 

means to prevent manipulative conduct 

such as ‘‘wash trading.’’ 

Presently, the Exchange is proposing 

that Self-Trade Prevention be applicable 

only for Market Makers. The Exchange 

has made this decision because Market 

Makers are the most likely market 

participants to execute against their own 

trading interest. The Exchange may 

propose to expand the Self-Trade 

Prevention functionality to other ATP 

Holders in the future, subject to being in 

a position to implement the 

functionality in a manner consistent 

with a firm’s agency responsibilities to 

its customer orders. Accordingly, the 

Exchange believes that the proposed 

rule change is not designed to permit 

unfair discrimination. 

For the reasons set forth above, the 

Exchange believes that the proposed 

rule change is consistent with Section 

6(b) of the Securities Exchange Act of 

1934 (the ‘‘Act’’),17 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act,18 in particular. 

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. 

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 

Because the foregoing proposed rule 

change does not significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not become operative for 30 

days from the date on which it was 

filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 19 and Rule 19b– 

4(f)(6) thereunder.20

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 9721 

21For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

22 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Self-Trade Prevention would only be applicable 

to electronic trading on the Exchange. 

4The Exchange will specify from time to time via 

a Regulatory Information Bulletin the Market Maker 

trading interest (i.e., quotes and orders) to which 

Self-Trade Prevention will apply. Currently, the 

Exchange plans to initially apply Self-Trade 

Prevention to the following order types used by 

Market Makers: ‘‘PNP Orders,’’ PNP–Blind Orders,’’ 

and ‘‘PNP–Light Orders.’’ PNP Orders, PNP–Blind 

Orders, and PNP–Light Orders are defined in NYSE 

Arca Options Rule 6.62, and each is a type of nonroutable Limit Order that is only executed on the 

Exchange. The Exchange notes that Market Makers 

primarily use these order types, as opposed to other 

order types offered by the Exchange, because they 

are similar to quotes (i.e., they are non-routable 

Limit Orders). The Exchange currently plans to 

expand Self-Trade Prevention to other Market 

Maker trading interest (e.g., quotes) when certain 

technology changes have been completed, and 

would announce any such expansion through a 

Regulatory Information Bulletin under this 

proposed rule change pursuant to Commentary .01 

of NYSE Arca Options Rule 6.76A. In the future, the 

Exchange may expand Self-Trade Prevention to 

other orders used by Market Makers (including 

routable orders), and it also would announce any 

such changes through a Regulatory Information 

Bulletin under this proposed rule change pursuant 

to Commentary .01 of NYSE Arca Options Rule 

6.76A. The Exchange would submit a separate 

proposed rule change if it were to make Self-Trade 

Prevention available to non-Market Maker trading 

interest. 

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal will provide a tool 

for Exchange market makers to better 

manage their trading interest and 

provide a means to prevent 

manipulative conduct such as ‘‘wash 

trading.’’ Therefore, the Commission 

designates the proposal operative upon 

filing.21

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. 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2012–03 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEAmex–2012–03. 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 

a.m. and 3 p.m. Copies of the 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– 

NYSEAmex–2012–03 and should be 

submitted on or before March 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3738 Filed 2–16–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66386; File No. SR– 

NYSEArca–2012–08] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Provide for ‘‘SelfTrade Prevention’’ on the Exchange 

February 13, 2012. 

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 January 

30, 2012, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to add new 

Commentary .01 to NYSE Arca Options 

Rule 6.76A (Order Execution—OX) to 

provide for ‘‘Self-Trade Prevention’’ on 

the Exchange. The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, and www.nyse.com. 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to add new 

Commentary .01 to NYSE Arca Options 

Rule 6.76A (Order Execution—OX) to 

provide for ‘‘Self-Trade Prevention’’ on 

the Exchange.3 As proposed, the 

Exchange would cancel any resting 

Market Maker quote(s) and order(s) 4 to 

buy (sell) that are priced equal to or 

higher (lower) than an incoming Market 

Maker quote, order or both to sell (buy) 

entered under the same trading permit 

mstockstill on DSK4VPTVN1PROD with NOTICES