Document ID: SEC-2013-0814-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-04-30T04:00Z

[Federal Register Volume 78, Number 83 (Tuesday, April 30, 2013)]
[Notices]
[Pages 25332-25334]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10167]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69443; File No. SR-NYSEArca-2013-39]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending NYSE Arca Equities Rule 7.31 To Add a 
Moving Average Check for Incoming Market Orders and Marketable Limit 
Orders

Dated: April 24, 2013.
    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 April 11, 2013, 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, II 
and III 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 add 
a Moving Average Check for incoming Market Orders and marketable limit 
orders. 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.

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 amend NYSE Arca Equities Rule 7.31(a) to 
add a Moving Average Check that would prevent incoming Market Orders 
and marketable Limit Orders, as defined in NYSE Arca Equities Rule 
7.31(b), from trading if the order size exceeded certain thresholds. 
The Exchange believes that the proposed Moving Average Check would 
serve as an additional safeguard that could help limit potential harm 
from extreme price volatility by preventing executions of potentially 
erroneously sized orders.
    Specifically, the proposed Moving Average Check would reduce the 
potential for a single order to disrupt trading in that security by 
comparing the size of the incoming order to a measure of historical 
trading activity in that security. The Exchange believes that if an 
incoming order represents a significant volume as compared to the 
historical trading activity in that security, that order is likely to 
be erroneous and should be rejected before it has an opportunity to 
impact the market. As proposed, the Exchange would perform the 
following Moving Average Check for all incoming Market Orders and 
marketable Limit Orders:
     If the size of an incoming Market Order or marketable 
Limit Order is less than or equal to 50% of the projected 30-day moving 
average volume for that security, the order would be processed 
normally.
     If the size of an incoming Market Order or marketable 
Limit Order is greater than 50% but less than or equal to 75% of the 
projected 30-day moving average volume for the security, the Exchange 
would process the order normally and also notify the ETP Holder that 
the order size was greater than 50% of the projected 30-day moving 
average volume for the security.
     If the size of an incoming Market Order or marketable 
limit order is greater than 75% of the projected 30-day moving average 
volume for the security, the Exchange would reject the order and notify 
ETP Holder of the reason why the order was rejected.
    As proposed, the projected 30-day moving average volume for each 
security would be calculated by: (i) Taking the prior day's 30-day 
moving average volume and multiplying that number by 29; (ii) adding to 
that number the total consolidated last sale volume in that security 
for the prior trading day; and (iii) dividing the combined number by 
30.\4\ If a security does not yet have a projected 30-day moving 
average volume, the default projected 30-day moving average volume 
shall be 10,000 shares. For example:
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    \4\ The Exchange notes that the projected 30-day moving average 
volume is not the same as the 30-day average daily volume for the 
security.
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 Day 0
    1. Seed the projected 30-day moving average volume for Day 0 with 
the default projected 30-day moving average volume (10,000 shares).
    2. Total consolidated last sales volume in XYZ on Day 0 of 20,000 
shares.
 Day 1
    1. Projected 30-day moving average volume for Day 1 Moving Average 
Check = 10,333 shares ((10,000 x 29) + 20,000)/30.
    2. Total consolidated last sales volume for XYZ on Day 1 of 10,000 
shares.
 Day 2
    1. Projected 30-day moving average volume for Day 2 Moving Average 
Check = 10,322 shares ((10,333 x 29) + 10,000)/30.

[[Page 25333]]

    2. Total consolidated last sales volume for XYZ on Day 2 of 20,000 
shares.
 Day 3
    1. Projected 30-day moving average volume for Day 3 Moving Average 
Check = 10,645 [sic] shares ((10,332 x 29) + 20,000)/30.
    As proposed, the Moving Average Check would not apply to orders 
designated for Auctions pursuant to NYSE Arca Equities Rule 7.35 \5\ 
and orders that were not marketable upon entry into the Exchange.\6\ 
When determining the size of marketable Reserve Orders, the Exchange 
proposes to include the full volume of the order, including the reserve 
size.
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    \5\ The Exchanges notes that one of the purposes of an auction 
is to maximize liquidity for efficient price discovery for a single-
priced transaction and that the auction may not function effectively 
if order size were limited.
    \6\ The Exchange notes that a large-sized limit order could be 
unmarketable at the time of entry, but that after the price of that 
security moves, the order could become marketable. The Exchange 
believes that if such a large-sized order were displayed, the market 
would respond with adequate liquidity to dampen the potential market 
impact of such large-sized order before it becomes marketable.
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    The Exchange believes that the proposed Moving Average Check would 
provide appropriate thresholds for determining whether an incoming 
Market Order or marketable Limit Order should either be accepted by the 
Exchange and processed normally or be rejected. Specifically, the 
Exchange believes that if the size of the incoming Market Orders or 
marketable limit orders is greater than 75% of the projected moving 
average volume for that security, it is likely erroneous and should be 
rejected. The Exchange proposes to include a notification to the ETP 
Holder of the reason for the rejection so that the ETP Holder is on 
notice of why the order was rejected. While the Exchange will permit 
incoming orders that are greater than 50% but less than or equal to 75% 
of the projected moving average volume, the Exchange believes that a 
notification should be provided to the ETP Holder warning that the 
order is approaching a threshold size for rejection, thereby putting 
the ETP Holder on notice of the potential impact of that order on the 
market for that security. Such a notification would also put an ETP 
Holder on notice of whether an order of such size was intended to be 
entered or should be modified.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \7\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act, 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 a national market system and, 
in general, to protect investors and the public interest. Specifically, 
the Exchange believes that the proposed Moving Average Check will 
remove impediments to and perfect the mechanism of a free and open 
market and protect investors and the public interest by ensuring that 
exceedingly large-sized Market Orders and marketable limit orders 
cannot be entered into the Exchange and potentially cause significant 
price dislocation for the security. The Exchange believes that the 
percentage thresholds for the Moving Average Check provide appropriate 
parameters for determining whether an incoming Market Order or 
marketable limit order should either trade normally, receive a warning 
notification, or be rejected by the Exchange, thereby facilitating 
transactions on the Exchange in a just and equitable manner while 
protecting investors from exceedingly large or potentially erroneously 
sized orders that may dislocate pricing and liquidity in the market and 
result in extreme price volatility.
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    \7\ 15 U.S.C. 78f(b).
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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. The Exchange believes that 
the proposal will serve as an additional safeguard to help limit 
potential harm from extreme price volatility by preventing executions 
from exceedingly large or potentially erroneously sized orders in a 
manner that promotes a fair and orderly market while protecting 
investors on the Exchange. In addition, the proposal should act to 
promote competition amongst market participants on the Exchange by 
facilitating transactions on the Exchange in a just and equitable 
faction while protecting investors.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order, approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2013-39 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-2013-39. 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

[[Page 25334]]

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 
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-2013-39 and should be submitted on or before 
May 21, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10167 Filed 4-29-13; 8:45 am]
BILLING CODE 8011-01-P