Document ID: SEC-2014-1465-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-09-02T04:00Z

[Federal Register Volume 79, Number 169 (Tuesday, September 2, 2014)]
[Notices]
[Pages 52077-52079]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20697]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72915; File No. SR-NYSEArca-2014-87]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.31 To Delete Functionality Permitting Primary Only 
Orders and Primary Sweep Orders To Be Designated With Intermarket Sweep 
Order Modifiers

August 26, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 13, 2014, 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 to 
delete functionality permitting Primary Only Orders (``PO Order'') and 
Primary Sweep Orders (``PSO'') to be designated with Intermarket Sweep 
Order (``ISO'') modifiers. The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at 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, of the most 
significant parts of such statements.

[[Page 52078]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rules 7.31(x) and (kk) to 
eliminate the ability of Users to enter PO Orders and PSOs with ISO 
modifiers. A PO Order is a market or limit order that is routed to the 
primary market by the Exchange. Currently, Rule 7.31(x)(4) permits a PO 
Order to be entered with an ISO Modifier and places the responsibility 
of Regulation NMS compliance on the broker-dealer that designates the 
PO Order with an ISO Modifier. A PSO is a PO Order that first sweeps 
the Exchange book and then any unexecuted portion is routed to the 
primary market. Similar to Rule 7.31(x)(4), Rule 7.31(kk)(2) permits a 
PSO to be entered with an ISO Modifier and places the responsibility of 
Regulation NMS compliance on the broker-dealer that designates the PSO 
with an ISO Modifier.
    The Exchange proposes to delete Rules 7.31(x)(4) and 7.31(kk)(2) to 
no longer permit PO Orders and PSOs to be entered with ISO Modifiers. 
Instead, if a User were to enter an ISO instruction on a PO Order or 
PSO, the Exchange will reject such order. To reflect this change, the 
Exchange proposes to amend Rules 7.31(x) and 7.31(kk) to provide that 
PO Orders and PSOs may not be designated as an ISO. The Exchange is not 
proposing any other changes to the use of ISOs.
    The Exchange believes it is appropriate to no longer accept PO 
Orders and PSOs entered with ISO modifiers. While the Exchange has 
placed the responsibility of Regulation NMS compliance on the 
originating broker-dealer, the Exchange believes that the proposal 
would avoid the appearance of the Exchange's routing broker of 
violating Regulation NMS requirements should the originating broker-
dealer not be appropriately marking orders as ISO, even though 
responsibility rests with the originating broker-dealer. The proposed 
change would more clearly delineate such Regulation NMS requirements 
with a single party--the originating broker-dealer. Either the 
originating broker-dealer will directly enter ISOs at the necessary 
trading centers to comply with Regulation NMS or submit a routable 
order to the Exchange and the Exchange will route the order as 
necessary to ensure compliance with Regulation NMS.
    The Exchange will announce the implementation date of the systems 
functionality associated with the proposed rule change by Trader Update 
to be published no later than 30 days following the effective date. The 
implementation date will be no later than 30 days following the 
issuance of the Trader Update.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Section 
6(b)(5),\5\ in particular, in that it is 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that rejecting PO Orders and PSOs with ISO 
modifiers will protect investors and the public interest because the 
proposal will limit the number of ISO orders routed to other market 
centers for which, at the time of the route, the Exchange is unaware 
whether the originating broker-dealer has complied with its Regulation 
NMS obligations. The Exchange believes that the rule proposal might 
reduce the potential in which an ISO is routed by the Exchange to an 
away market without the originating broker-dealer complying with 
Regulation NMS. Additionally, the Exchange does not believe that 
eliminating the ability to enter PO Orders and PSOs with ISO modifiers 
will have a detrimental effect on the market because ETP Holders have 
the option either to enter ISOs directly to the necessary trading 
centers to comply with Regulation NMS or submit a routable order to the 
Exchange and the Exchange will route the order as necessary to ensure 
compliance with Regulation NMS.

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. The Exchange believes the 
[sic] eliminating the ability to add an ISO modifier to PO Orders and 
PSOs will not impose any burden on competition because ETP Holders have 
the option either to enter ISOs directly to the necessary trading 
centers to comply with Regulation NMS or submit a routable order to the 
Exchange and the Exchange will route the order as necessary to ensure 
compliance with Regulation NMS.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    At any time within 60 days of the filing of such 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \9\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \9\ 15 U.S.C. 78s(b)(2)(B).
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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

[[Page 52079]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2014-87. 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 the filing also will be available 
for inspection and copying at the NYSE's principal office and on its 
Internet Web site at www.nyse.com. 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-2014-87 and should be submitted on or before 
September 23, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20697 Filed 8-29-14; 8:45 am]
BILLING CODE 8011-01-P