Document ID: SEC-2012-0010-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-01-04T05:00Z

[Federal Register Volume 77, Number 2 (Wednesday, January 4, 2012)]
[Notices]
[Pages 313-315]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33715]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66062; File No. SR-NYSEArca-2011-98]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Deleting NYSE Arca 
Equities Rule 7.31(w)(1) to Remove the PNP Plus Order Type

December 28, 2011.
    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 December 21, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with

[[Page 314]]

the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete NYSE Arca Equities Rule 7.31(w)(1) 
to remove the PNP Plus Order type. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to delete NYSE Arca Equities Rule 7.31(w)(1) 
to remove the PNP (Post No Preference) Plus order type.
    By its terms, a PNP Order is a limit order to buy or sell that is 
to be executed in whole or in part on the Exchange, and the portion 
that is not executed is ranked on the Exchange's order book without 
routing any portion of the order to another market center.\3\ Pursuant 
to NYSE Arca Equities Rule 7.31(w)(1), for any portion of a PNP Order 
designated as a PNP Plus Order that remains unexecuted and would 
otherwise lock or cross the best protected bid or offer (``PBBO''), 
Exchange systems would automatically re-price the PNP Plus Order to a 
penny better than the Best Protected Bid (for sell orders) or a penny 
lower than the Best Protected Offer (for buy orders). Exchange systems 
would continue to re-price a PNP Plus Order with each change of the 
PBBO until such time that the PBBO has moved to a price where the 
original price of the PNP Plus Order would no longer result in a locked 
or crossed market, at which time the PNP Plus Order would revert to the 
original price of the order.
---------------------------------------------------------------------------

    \3\ See NYSE Arca Equities Rule 7.31(w).
---------------------------------------------------------------------------

    The Exchange proposes to delete Rule 7.31(w)(1) and all references 
to the PNP Plus Order type. The rule was adopted, in part, to provide 
ETP Holders with an additional processing capability for PNP Orders.\4\ 
However, since it was adopted, the PNP Plus Order type has not been 
used by ETP Holders. In addition, the functionality associated with PNP 
Plus Orders causes system instability, and as a result, the system 
functionality has not been operable.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No.49942 (June 29, 
2004), 69 FR 41005 (July 7, 2004) (SR-PCX-2004-12).
---------------------------------------------------------------------------

    In reviewing this system functionality, the Exchange has also 
identified that the operation of the PNP Plus Order may conflict with 
the proposed Plan pursuant to Rule 608 of Regulation NMS to Address 
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or 
``Plan''), which the equities exchanges and the Financial Industry 
Regulatory Authority, Inc., filed with the Securities and Exchange 
Commission in April 2011.\5\ The Limit Up-Limit Down Plan is designed 
to prevent trades from occurring outside of specified price bands. The 
Exchange believes that if the best protected bid (offer) is below 
(above) the Lower (Upper) Price Band, as defined in the Plan, the 
automatic re-pricing of PNP Plus Orders may result in an offer (bid) 
being repriced either at the Lower (Upper) Price Band, potentially 
causing the market to enter a Limit State, as defined in the Plan, or 
below (above) the Lower (Upper) Price Band, in violation of the Plan. 
Accordingly, as part of the Exchange's system development efforts for 
the Limit Up-Limit Down Plan, the Exchange has determined to remove the 
PNP Plus Order functionality.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 64547 (May 25, 
2011), 76 FR 31647 (June 1, 2011) (File No. 4-631).
---------------------------------------------------------------------------

2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Securities Exchange Act of 1934 (the ``Act''),\6\ which requires 
the rules of an exchange to promote just and equitable principles of 
trade, 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 proposed rule change also is 
designed to support the principles of Section 11A(a)(1) \7\ of the Act 
in that it seeks to assure fair competition among brokers and dealers 
and among exchange markets. The Exchange believes that the proposed 
rule change will perfect the mechanism of a free and open market 
because it removes an order type that is not used by ETP Holders and 
that causes system function instability. In addition, the Exchange 
believes it is appropriate and desireable to remove the PNP Plus Order 
type because it would further the Exchange's system development effort 
in support of the proposed Limit Up-Limit Down Plan. By eliminating 
this order type and the system functionality that supports it, the 
Exchange will be better positioned to meet the target implementation 
date for the Plan, and assure that the Exchange's systems will operate 
in a manner that effectively and efficiently implements the Limit Up-
Limit-Down Rule. As such, this proposed rule change furthers the goal 
of a free and open market and national market system.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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)

[[Page 315]]

of the Act \10\ and Rule 19b-4(f)(6) \11\ thereunder.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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 to 
determine whether the proposed rule should be approved or disapproved.

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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-98 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-2011-98. 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-2011-98 and should 
be submitted on or before January 25, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-33715 Filed 1-3-12; 8:45 am]
BILLING CODE 8011-01-P