Document ID: SEC-2014-0043-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-01-08T05:00Z

[Federal Register Volume 79, Number 5 (Wednesday, January 8, 2014)]
[Notices]
[Pages 1407-1408]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00065]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71221; File No. SR-NYSEArca-2013-115]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, To Adopt 
Commentary .03 to Rule 6.91 To Limit the Volume of Complex Orders by a 
Single OTP Holder or OTP Firm During the Trading Day

January 2, 2014.

I. Introduction

    On October 28, 2013, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ a 
proposed rule change to adopt Commentary .03 to NYSE Arca Rule 6.91 to 
limit the volume of complex orders that may be entered by a single OTP 
Holder or OTP Firm (collectively, ``OTPs'') during the trading day. On 
November 5, 2013, the Exchange submitted Amendment No. 1 to the 
proposed rule change. The proposed rule change, as modified by 
Amendment No. 1 thereto, was published for comment in the Federal 
Register on November 13, 2013.\4\ The Commission received no comments 
on the proposed rule change. On December 23, 2013, the Exchange granted 
an extension of time for the Commission to act on the filing until 
January 3, 2014.\5\ On December 24, 2013, the Exchange submitted 
Amendment No. 2 to the proposed rule change.\6\ The Commission is 
publishing this notice to solicit comments on Amendment No. 2 from 
interested persons, and is approving the proposed rule change, as 
modified by Amendment Nos. 1 and 2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 70817 (November 6, 
2013), 78 FR 68113 (``Notice'').
    \5\ In addition, on December 24, 2013, the Commission extended 
the time period for Commission action to January 3, 2014. See 
Securities Exchange Act Release No. 71184 (December 24, 2013).
    \6\ In Amendment No. 2, the Exchange amended the proposed rule 
change by removing the language in the proposal that gives the 
Exchange discretion to adjust the specified percentage (i.e., 
``n%'') to an amount less than 60% and ``n%-x'' to an amount less 
than 40%. Amendment No. 2 has been placed in the public comment file 
for NYSEArca-2013-115 at http://www.sec.gov/comments/sr-nysearca-2013-115/nysearca2013115.shtml (see letter from Janet McGinness, EVP 
& Corporate Secretary, General Counsel, NYSE Arca, to Elizabeth M. 
Murphy, Secretary, Commission, dated December 26, 2013).
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II. Description of the Proposed Rule Change

    The Exchange currently ranks and tracks Electronic Complex Orders 
in the Consolidated Book in a ``complex order table.'' Although the 
Exchange stated that the complex order table has sufficient capacity to 
accept all Complex Orders submitted by all OTPs under normal operating 
conditions, the Exchange also noted that that capacity is not 
unlimited.\7\ Given that this capacity is not unlimited, the Exchange 
proposes to adopt Commentary .03 to Rule 6.91 \8\ to provide that if an 
OTP submits orders that comprise more than ``n%'' of the capacity of 
the complex order table (the ``Cap''), the Exchange will reject that 
OTP's Electronic Complex Orders for the remainder of the trading day. 
Proposed Commentary .03 to Rule 6.91 also provides a ``warning 
threshold'' of ``n%--x'' of the complex order table. If an OTP breaches 
such warning threshold, it would result in the Exchange rejecting the 
OTP's

[[Page 1408]]

Electronic Complex Orders until such time that the OTP has notified the 
Exchange to re-enable the submission of Electronic Complex Orders. The 
Exchange will not reject any Electronic Complex Orders until after an 
OTP has breached either the warning threshold (i.e., ``n%-x'') or the 
Cap.\9\ The specified percentage (i.e., ``n%'') will be no less than 
60%, and ``n%-x'' will be no less than 40%.
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    \7\ According to the Exchange, the complex order table currently 
has the capacity to hold Electronic Complex Orders containing up to 
14 million legs throughout the trading day. See Notice, supra note 4 
at 68114, n. 8.
    \8\ Rule 6.91 governs trading of Complex Orders on the NYSE Arca 
System (``Electronic Complex Orders'').
    \9\ For example, if an OTP submits an Electronic Complex Order 
that, once accepted, breaches the Cap, the Exchange will accept that 
order in its entirety and then will reject all subsequent Electronic 
Complex Orders from that OTP for the remainder of the trading day.
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    The Exchange will announce the implementation date of the proposed 
rule change by Trader Update to be published no later than 60 days 
following approval by the Commission. The implementation date will be 
no later than 60 days following the issuance of the Trader Update.

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 rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule is consistent with Section 6(b)(5) of the Act,\11\ which requires, 
among other things, that the rules of an exchange be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and, in general, 
to protect investors and the public interest. The Commission believes 
that providing the Cap could provide the Exchange with a system 
protection tool to address the potential risk that a single OTP could--
either intentionally or inadvertently- utilize the entire complex order 
table, effectively shutting out all other OTPs' Electronic Complex 
Orders from the Exchange for the remainder of the trading day. By 
disabling the submission of Electronic Complex Orders of a single OTP 
that has exceeded the Cap, the Cap should allow the Exchange to 
accommodate Electronic Complex Orders from all other OTPs, thereby 
helping to ensure efficient functionality of the complex order table 
and the protection of investors and the public interest. In approving 
this proposed rule change, the Commission notes that the Exchange 
represented that under normal operating conditions, the combined 
Electronic Complex Orders of all OTPs do not exceed 40% of the complex 
order table.\12\ Therefore, the Exchange believes that setting the Cap 
for a single OTP at 60% would allow 40% of the complex order table--
which is typically sufficient to accommodate all OTP's Electronic 
Complex Orders--to remain accessible to the balance of OTPs and would 
not unfairly deny these OTPs access to the market.\13\
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    \10\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See Notice, supra note 4 at 68114. The Commission also 
notes that the Exchange represented that a single OTP would only 
exceed the Cap (or receive a warning of a near breach) in the event 
of a bona fide problem (e.g., a system error or malfeasance). See 
id.
    \13\ See Notice, supra note 4 at 68115.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 2 
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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-115 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-2013-115. 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 
10:00 a.m. and 3:00 p.m. Copies of such 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 publicly available. All 
submissions should refer to File Number SR-NYSEArca-2013-115 and should 
be submitted on or before January 29, 2014.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2

    As proposed, the proposed rule change provided that, unless 
determined otherwise by the Exchange and announced to OTPs via Trader 
Update, the specified percentage (i.e., ``n%'') will be no less than 
60%, and ``n%-x'' will be no less than 40%. Amendment No. 2 amended the 
proposed rule change by removing the language in the proposal that 
gives the Exchange discretion to adjust the specified percentage (i.e., 
``n%'') to an amount less than 60% and ``n%-x'' to an amount less than 
40%. By removing this discretion, Amendment No. 2 reduces potential 
uncertainty about the application of the proposed rule change. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\14\ for approving the proposed rule change, as 
modified by Amendment Nos. 1 and 2, prior to the 30th day after the 
date of publication of notice in the Federal Register.
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    \14\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\15\ that the proposed rule change (SR-NYSEArca-2013-115), as modified 
by Amendment Nos. 1 and 2, be, and hereby is, approved on an 
accelerated basis.
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    \15\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00065 Filed 1-7-14; 8:45 am]
BILLING CODE 8011-01-P