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[Federal Register Volume 77, Number 76 (Thursday, April 19, 2012)]
[Notices]
[Pages 23534-23536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9409]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66810; File No. SR-NYSEArca-2012-30]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.31(h)(4) To Make Passive Liquidity Orders in Exchange-
Listed Securities Available to All Users, Regardless of Whether a Lead 
Market Maker Is Assigned to the Security

April 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 April 3, 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 Exchange has designated 
the proposed rule change as constituting a rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal effective upon 
filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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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 7.31(h)(4) 
to make Passive Liquidity Orders (``PL Orders'') in Exchange-listed 
securities available to all Users, regardless of whether a Lead Market 
Maker (``LMM'') is assigned to the security. The text of the proposed 
rule change is available at the Exchange, www.nyse.com, and 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,

[[Page 23535]]

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 amend NYSE Arca Equities Rule 7.31(h)(4) 
to make PL Orders in Exchange-listed securities available to all Users, 
regardless of whether an LMM is assigned to the security.
    A PL Order is an order to buy or sell a stated amount of a security 
at a specified, undisplayed price.\4\ In securities where the NYSE Arca 
Marketplace is the primary listings market and there is an LMM assigned 
to the security that complies with certain display requirements, a PL 
Order is currently available only to the LMM for such security. In all 
other securities traded on the Exchange, whether dually-listed 
securities or securities traded pursuant to unlisted trading 
privileges, a PL Order is available to all Users. The Exchange proposes 
to amend NYSE Arca Equities Rule 7.31(h)(4) to remove the text therein 
that limits the use of PL Orders in Exchange-listed securities to the 
assigned LMM, thereby making PL Orders available to all Users, 
regardless of whether an LMM is assigned to the security.\5\
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    \4\ See NYSE Arca Equities Rule 7.31(h)(4).
    \5\ The Exchange also proposes to remove certain text from NYSE 
Arca Equities Rule 7.37(a)(1) and (b)(1)(A) that would be rendered 
obsolete by the proposed amendment to NYSE Arca Equities Rule 
7.31(h)(4).
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    The PL Order was initially designed to attract liquidity to the 
Exchange by permitting market participants to express their trading 
interest more accurately than was possible with other order types 
available at the time.\6\ PL Orders were also designed to offer 
potential price improvement to incoming marketable orders submitted by 
any User.\7\ The Exchange originally believed that restricting the use 
of the PL Order in Exchange-listed securities to LMMs was appropriate 
because LMMs would be subject to certain minimum display requirements 
in proximity to the Exchange's Best Bid and Offer (``BBO'').\8\ The 
Exchange believed that these requirements could enhance depth and 
liquidity at or near the Exchange's BBO.\9\
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    \6\ See Securities Exchange Act Release No. 54511 (September 26, 
2006), 71 FR 58460, 58461 (October 3, 2006) (SR-PCX-2005-53).
    \7\ Id.
    \8\ Id.
    \9\ Id. at 58462.
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    After significant experience with the use of PL Orders on the 
Exchange, both by LMMs and other Users, the Exchange believes that PL 
Orders in Exchange-listed securities should be available to all Users, 
regardless of whether an LMM is assigned to the security. In this 
regard, experience has shown that LMMs in Exchange-listed securities 
generally do not utilize PL Orders in their assigned securities. In 
contrast, the Exchange has recently received requests from ETP Holders 
to permit PL Orders in Exchange-listed securities to be entered by 
Users other than the LMM assigned to the security.
    The proposed rule change would enhance the tools available to Users 
when entering their trading interest by making PL Orders in Exchange-
listed securities available to all Users, including LMMs. The Exchange 
believes that the proposed rule change would not disadvantage LMMs, 
which generally do not utilize the PL Order type, but would remain able 
to do so going forward, albeit without the exclusivity that is 
currently available. Furthermore, the Exchange believes that the 
elimination of this exclusivity, and the display requirements related 
thereto, would not have a detrimental impact on the quality of the 
Exchange's market, because, as discussed above, LMMs generally do not 
utilize the PL Order. Instead, the proposed rule change could improve 
the quality of the Exchange's market by increasing the potential for 
price improvement on the Exchange in Exchange-listed securities.
    Because of the related technology changes that this proposed rule 
change would require, the Exchange proposes to announce the initial 
implementation date via Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\10\ in general, and 
furthers the objectives of Section 6(b)(5),\11\ in particular, because 
it is 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. The Exchange 
believes that the proposed rule change meets these requirements because 
it would promote just and equitable principles of trade and remove 
impediments to the mechanism of a free and open market by expanding the 
universe of Users that could submit PL Orders in Exchange-listed 
securities. The Exchange further believes that by expanding access to 
PL Orders in Exchange-listed securities to all Users, the Exchange will 
further promote just and equitable principles of trade. Conversely, the 
Exchange believes that the proposed rule change would not disadvantage 
LMMs, which generally do not utilize the PL Order type, because they 
would remain able to use PL Orders in Exchange-listed securities. 
Furthermore, the Exchange believes that the elimination of this 
exclusivity would further the goals of a free and open market and 
national market system by increasing the potential for price 
improvement in Exchange-listed securities.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change does not (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) 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, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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 proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\ At any time within 60 days of the filing of such 
proposed rule change, the Commission

[[Page 23536]]

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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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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-2012-30 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-NYSEArca-2012-30. 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-NYSEArca-2012-30 and 
should be submitted on or before May 10, 2012.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9409 Filed 4-18-12; 8:45 am]
BILLING CODE 8011-01-P
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