Document ID: SEC-2014-1159-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-07-11T04:00Z

[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Notices]
[Pages 40169-40174]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16190]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72547; File No. SR-NYSEMKT-2014-56]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Rule 13--Equities To Make the Add 
Liquidity Only Modifier Available for Additional Limit Orders and Make 
the Day Time-In-Force Condition Available for Intermarket Sweep Orders

July 7, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on June 27, 2014, NYSE MKT LLC (``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``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 Rule 13--Equities to make the Add 
Liquidity Only (``ALO'') modifier available for additional limit orders 
and make the day time-in-force condition available for Intermarket 
Sweep Orders (``ISO''). 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

[[Page 40170]]

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 is proposing to amend Rule 13--Equities (``Rule 13'') 
to make the ALO modifier available for additional limit orders and make 
the day time-in-force condition available for ISOs.
ALO Modifier
    The Exchange currently offers an ALO modifier for MPL Orders, which 
are undisplayed limit orders that execute at the mid-point of the 
protected best bid or offer (``PBBO'').\4\ Pursuant to paragraph (e) 
governing MPL Orders in Rule 13, an MPL-ALO Order will not execute upon 
arrival, even if marketable. The Exchange proposes to amend Rule 13 to 
make the ALO modifier available for day limit orders. The Exchange 
notes that all other equity exchanges already make available add-
liquidity-only functionality for limit orders.\5\
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    \4\ See Rule 13 (Mid-Point Passive Liquidity (MPL) Order).
    \5\ See BATS Exchange, Inc. (``BATS'') Rule 11.9(c)(6) (``BATS 
Post Only Order''); BATS Y-Exchange, Inc. (``BATS-Y'') Rule 
11.9(c)(6) (``BATS Post Only Order''); Chicago Stock Exchange, Inc. 
(``CHX'') Article 20, Rule 4(b)(18) (``Post Only''); EDGA Exchange, 
Inc. (``EDGA'') Rule 11.5(c)(5) (``Post Only Order''); EDGX 
Exchange, Inc. (``EDGX'') Rule 11.5(c)(5) (``Post Only Order''); 
NASDAQ Stock Market LLC (``Nasdaq'') Rule 4751(f)(10) (``Post-Only 
Orders''); NASDAQ OMX BX LLC (``Nasdaq OMX BX'') Rule 4751(f)(10) 
(``Post-Only Orders''); NASDAQ OMX PHLX LLC (``Nasdaq OMX PSX'') 
Rule 3301(f)(11) (``Post-Only Orders''); and NYSE Arca Equities, 
Inc. (``NYSE Arca Equities'') Rule 7.31(nn).
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    To effect this change, the Exchange proposes to adopt a definition 
of ALO Modifier in Rule 13. Proposed paragraph (a) of this new 
definition would describe how an ALO Modifier impacts an order to which 
it is appended, which is the same functionality as the ALO modifier 
currently available for MPL Orders. Specifically, an order designated 
ALO does not route and will not remove liquidity from the Exchange's 
book. Proposed paragraph (a) of the new definition would also state 
that ALO modifiers are available for MPL Orders, as they are today, and 
for day limit orders.\6\ Because the behavior of MPL-ALO Orders is 
currently described in paragraph (e) for MPL Orders in Rule 13, the 
Exchange further proposes to cross-reference that rule text in the new 
definition for ALO Modifiers. Accordingly, the remainder of the 
proposed definition for ALO Modifier would describe the behavior of 
limit orders designated ALO.
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    \6\ Pursuant to Rule 13, a ``Limit, Limited Order, or Limited 
Price Order'' means an order to buy or sell a stated amount of a 
security at a specified price, or at a better price, if obtainable 
and a ``Day Order'' means an order to buy or sell which, if not 
executed, expires at the end of the 9:30 a.m. to 4:00 p.m. trading 
session on the day on which it was entered.
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    The Exchange further proposes in new paragraph (a) of the new 
definition that limit orders designated ALO would be eligible to 
participate in the open or close, which would include Limit on Open or 
Limit on Close Orders, but that the ALO designation would be ignored. 
The Exchange's opening and closing transactions are single-priced 
auction transactions and the Exchange does not consider either side of 
the transaction to be either a ``provider'' or a ``taker.'' 
Accordingly, an ALO modifier is moot for the open or close. In order to 
enable as much interest as possible to participate in the open or 
close, the Exchange proposes to include any limit orders designated ALO 
in these auctions, but to ignore the ALO designation.
    To promote the display of liquidity, the Exchange further proposes 
that a limit order designated ALO must be entered with a minimum of one 
displayable round lot. Accordingly, the ALO Modifier would be available 
for Minimum Display Reserve Orders (Rule 13) and Minimum Display 
Reserve e-Quotes (Rule 70(f)(1)--Equities). The Exchange would reject 
incoming limit orders designated ALO that do not meet the minimum 
display requirement, including odd-lot sized orders designated ALO.
    The Exchange proposes to specify in paragraph (c) to the new rule 
text that the following interest may not be designated ALO: (1) DMM 
interest entered via the Capital Commitment Schedule pursuant to Rule 
1000--Equities; (2) d-Quotes, as defined in Rule 70.25--Equities; (3) 
Sell ``Plus''--Buy ``Minus'' Orders as defined in Rule 13; (4) Non-
Display Reserve Orders, as defined in Rule 13, or Non-Display Reserve 
e-Quotes, as defined in Rule 70(f)(ii)--Equities; or (5) Retail Orders 
or Retail Price Improvement Orders, as defined in Rule 107C--Equities.
    To assure that a limit order designated ALO meets its goal to be 
available on the Exchange's book to add liquidity to arriving orders, 
the Exchange proposes to re-price a limit order designated ALO that 
upon arrival would be marketable against Exchange interest or would 
lock or cross a protected quotation in violation of Rule 610(d) of 
Regulation NMS.\7\ Accordingly, the Exchange proposes to specify in 
paragraph (b) to the rule text for ALO Modifiers that if, at the time 
of entry, a limit order designated ALO is marketable against Exchange 
interest or would lock or cross a protected quotation in violation of 
Rule 610(d) of Regulation NMS, the order would be re-priced and 
displayed one minimum price variation, as defined in supplementary 
material to Rule 62--Equities, below the best-priced sell interest (for 
bids) or above the best-priced buy interest (for offers). The Exchange 
notes that re-pricing a limit order designated ALO so that it would not 
execute against resting Exchange interest or lock or cross a protected 
quotation is consistent with how other equities markets currently 
operate.\8\
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    \7\ 17 CFR 242.610(d).
    \8\ See BATS Rules 11.9(c)(6) and 11.9(g)(2)(D); BATS-Y Rules 
11.9(c)(6) and 11.9(g)(2)(D); CHX Article 20, Rule 4(b)(25 (``CHX 
Only''); EDGA Rule 11.5(c)(5); EDGX Rule 11.5(c)(5); Nasdaq Rule 
4751(f)(10); and NYSE Arca Equities Rule 7.31(mm) (PNP Blind order 
combined with an ALO order).
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    The Exchange proposes to use the term ``Exchange interest'' in the 
proposed rule text in order to include both displayed interest and non-
displayed interest (i.e., Non-Displayed Reserve Orders or odd-lot sized 
orders), which may be priced better than the displayed quote. In 
addition, the Exchange proposes to add new Supplementary Material .10 
to Rule 13 to define new terms to capture the best price among Exchange 
displayed and non-displayed interest and the best away protected quote. 
As proposed, the term ``best-priced sell interest'' would refer to the 
lowest-priced sell interest against which incoming buy interest would 
be required to execute with and/or route to, including Exchange 
displayed offers, Non-Display Reserve Orders, Non-Display Reserve e-
Quotes, odd-lot sized sell interest, and protected offers on away 
markets, but would not include non-displayed interest that is priced 
based on the PBBO, such as MPL Orders or Retail Price Improvement 
Orders (``RPI''). The term ``best-priced buy interest'' would refer to 
the highest-priced buy interest against which incoming sell interest 
would be required to execute with and/or route to, including Exchange 
displayed bids, Non-Display Reserve Orders, Non-

[[Page 40171]]

Display Reserve e-Quotes, odd-lot sized buy interest, and protected 
bids on away markets, but would not include non-displayed interest that 
is priced based on the PBBO, such as MPL Orders or RPIs. The Exchange 
believes it is appropriate to exclude MPL Orders from the definition of 
best-priced sell/buy interest because the price at which an MPL Order 
is eligible to execute changes as the PBBO moves.
    As further proposed, if the best-priced sell interest is re-priced 
higher, an order to buy designated ALO would be re-priced and re-
displayed higher, up to its limit price. If the best-priced buy 
interest is re-priced lower, an order to sell designated ALO would be 
re-priced and re-displayed lower, down to its limit price. The Exchange 
believes that re-pricing and re-displaying limit orders designated ALO 
each time the best-priced sell interest is priced higher (for bids) or 
the best-priced buy interest is priced lower (for offers) would ensure 
that the order is displayed at its most aggressive price without 
requiring the order to either take liquidity or lock or cross a 
protected quotation.
    In addition, as proposed, a limit order designated ALO would not be 
re-priced if it is displayed at its limit price or if the best-priced 
sell interest moves down in price (for limit orders to buy designated 
ALO) or if the best-priced buy interest moves up in price (for limit 
orders to sell designated ALO). Once an order reaches its limit price, 
the Exchange would no longer need to re-price it. The Exchange also 
would not need to re-price a limit order designated ALO if the best-
priced sell interest moves down (for bids) or the best-priced buy 
interest moves up (for offers) because in such scenario, the limit 
order designated ALO would have been displayed first at that price and 
the opposite-side bid or offer would be required to execute with or 
route to the resting limit order designated ALO.
    For example, assume the Exchange best bid and offer (``BBO'') in 
XYZ is 10.05 x 10.11, the PBBO is 10.05 x 10.09, and the Exchange has a 
non-displayed odd-lot sell order priced at 10.07. In this scenario, the 
best-priced sell interest, as defined in new supplementary material .10 
to Rule 13, would be 10.07. Accordingly, if the Exchange were to 
receive a limit order to buy designated ALO at 10.12 (``Order A''), the 
Exchange would re-price and display Order A at $10.06, which is one MPV 
below the 10.07 best-priced sell interest.
    Assume now that the resting odd-lot order to sell on the Exchange 
is either executed or cancelled, but the Exchange best offer and PBO 
does not change. Because the new best-priced sell interest is the away-
market PBO of 10.09, Order A would re-price and re-display to 10.08, 
which is one MPV below the updated best-priced sell interest.
    Assume further that the market updates so that both the Exchange's 
BBO and the PBBO update to 10.08-10.14 and there is no undisplayed 
interest to sell at the Exchange. Order A would be re-priced and re-
displayed at its limit price of 10.12. At this point, because it has 
been displayed at its limit price, Order A would not be subject to any 
further re-pricing. If the Exchange were to receive incoming sell 
interest marketable against Order A, Order A would be available 
liquidity to execute against that incoming sell interest.
    As further proposed, a limit order designated ALO would receive a 
new time stamp each time it is re-priced and re-displayed. The Exchange 
believes that providing a new time stamp each time a limit order 
designated ALO is re-priced and re-displayed is consistent with current 
Exchange rules that provide that an order that is modified to change 
the price of the order shall receive a new time stamp.\9\
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    \9\ See Rule 72(xii)--Equities.
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    As noted above, limit orders designated ALO would not be priced 
based on resting opposite-side MPL Orders, which are triggered to trade 
at the midpoint of the PBBO by arriving interest. To assure that limit 
orders designated ALO would not trigger an opposite-side MPL Order to 
trade, the Exchange proposes to add new paragraph (d) governing ALO 
Modifiers in Rule 13 to specify that a limit order designated ALO would 
not trigger a contra-side MPL Order to trade. The Exchange proposes to 
make a conforming change to paragraph (a) governing MPL Orders in Rule 
13 to specify that an incoming limit order designated ALO would not 
interact with an MPL Order.
    For example, assume the Exchange BBO and PBBO in XYZ is 10.05-10.09 
and there is a sell MPL Order eligible to execute at the midpoint of 
the PBBO, which would be 10.07. Assume further that the Exchange also 
has a Non-Display Reserve Order to sell priced at 10.08. In this 
scenario, an incoming buy order designated ALO priced at 10.11 (``Order 
B'') would re-price and display one MPV below the best-priced sell 
interest, which is 10.08. Accordingly, Order B would display at 10.07. 
Although the new 10.07 bid is at the same price that the resting MPL 
Order could have executed when the PBBO was 10.05 x 10.09, because the 
new bid updates the PBBO to 10.07 x 10.09, the MPL Order is now 
eligible to execute at 10.08 and no longer at 10.07.
    Because pegging interest may be designated ALO, the Exchange 
proposes to amend the rules governing pegging interest in Rule 13 to 
take into consideration how an ALO Modifier would function with pegging 
interest. As proposed in paragraph (c) governing pegging interest in 
Rule 13, pegging interest to buy (sell) that is designated ALO would 
not peg to a price that would result in its executing before displaying 
and shall instead peg one minimum price variation below (above) the 
undisplayed Exchange sell (buy) interest against which it would have 
otherwise executed. For example, assume the Exchange BBO is 10.05 x 
10.10 and the PBBO is 10.08 x 10.10 and the Exchange has sell odd-lot 
interest priced at 10.08. Assume further incoming pegging interest to 
buy designated ALO with a limit of 10.10 arrives (``Order C''). If 
Order C were not designated ALO, it would peg to the PBB of 10.08 and 
execute against the resting odd-lot interest, and any remainder would 
be displayed at 10.08. As proposed, with the ALO designation, to assure 
that Order C would not execute on arrival, it would peg to a price one 
MPV below the 10.08 odd-lot sell interest and display at 10.07.
Day Time-in-Force Designation for ISOs
    An ISO is currently defined in Rule 13 as a limit order designated 
for automatic execution that meets the following requirements: (i) it 
is identified as an ISO in the manner prescribed by the Exchange; and 
(ii) simultaneously with the routing of an ISO to the Exchange, one or 
more additional limit orders, as necessary, are routed to execute 
against the full displayed size of any protected bid, in the case of a 
limit order to sell, or the full displayed size of any protected offer, 
in the case of a limit order to buy and these additional orders are 
identified as ISOs. This definition is based on the definition of an 
ISO set forth in Regulation NMS Rule 600(b)(30),\10\ and is consistent 
with similar provisions on other exchanges.\11\
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    \10\ 17 CFR 242.600(b)(30).
    \11\ See BATS Rule 11.9(d); BATS-Y Rule 11.9(d); CHX Article 20, 
Rule 4(b)(1) and (15); EDGA Rule 11.5(d); EDGX Rule 11.5(d); Nasdaq 
Rule 4751(f)(6); Nasdaq OMX BX Rule 4751(f)(6); Nasdaq OMX PSX Rule 
3301(f)(6); and NYSE Arca Equities Rule 7.31(jj).
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    Currently, the Exchange immediately and automatically executes an 
ISO upon arrival and the portion not so executed will be immediately 
and automatically

[[Page 40172]]

cancelled.\12\ Accordingly, the Exchange treats all ISOs with an 
immediate-or-cancel time-in-force condition.
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    \12\ See paragraph (b) governing ISOs in Rule 13.
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    Other equities exchanges do not limit their ISOs to an immediate-
or-cancel time-in-force condition.\13\ Accordingly, the Exchange 
proposes to amend Rule 13 governing ISOs to make available an ISO Order 
with a day time-in-force condition. As proposed, an ISO designated day 
(``Day ISO''), if marketable upon arrival, would be immediately and 
automatically executed against the displayed bid (offer) up to its full 
size in accordance with and to the extent provided by Rules 1000--
Equities- 1004--Equities and would then sweep the Display Book,[supreg] 
as provided in Rule 1000--Equities(d)(iii). This proposed rule text is 
consistent with current paragraph (b) governing ISOs in Rule 13.
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    \13\ The rules of Nasdaq, BATS, BATS-Y, EDGA, and EDGX do not 
expressly provide that their versions of ISOs can be day, however, 
nor do their rules prohibit this functionality. In practice, Nasdaq, 
BATS, BATS-Y EDGA, and EDGX all accept ISOs with a day time-in-force 
condition. In addition, NYSE Arca Equities expressly permits an ISO 
with a day time-in-force condition, which is entered as a Post No 
Preference (``PNP'') Order. See, e.g., NYSE Arca Equities Rule 
7.31(w) (PNP Order designated ISO does not route and may lock and 
cross and trade through protected quotations). See also Securities 
Exchange Act Release No. 34-54549 (Sept. 29, 2006), 71 FR 59179 
(Oct. 6, 2006) (SR-NYSEArca-2006-59) (Order approving NYSE Arca 
Equities' proposal to adopt ISO PNP Orders, which post to NYSE's 
Arca book and may lock or cross protected quotations). See also CHX 
Article 20, Rules 4(b)(1) and (23).
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    The Exchange further proposes to provide that the remaining 
unexecuted portion of a Day ISO would be posted to the Exchange's book 
at its limit price and may lock or cross a protected quotation that was 
displayed at the time of arrival of the Day ISO. The Exchange believes 
this proposed rule text is consistent with Regulation NMS and the rules 
of other exchanges because the member organization that sent the Day 
ISO to the Exchange has an existing obligation (pursuant to paragraph 
(a)(ii) governing ISOs in Rule 13) to simultaneously route ISOs to 
trade with the full size of protected quotations on other markets.\14\ 
Accordingly, the Exchange would consider any protected quotes that 
existed at the time of arrival of the Day ISO as cleared when it posts 
any remainder of a Day ISO to the Exchange's book.\15\
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    \14\ See supra n. 11.
    \15\ See supra n. 13.
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    The Exchange further proposes that a Day ISO must be entered with a 
minimum of one displayable round lot. Accordingly, similar to the 
proposed ALO Modifier for limit orders, Day ISOs would be available for 
Minimum Display Reserve Orders and Minimum Display Reserve e-Quotes. 
The Exchange also proposes that a Day ISO may also be designated ALO.
    Because Day ISOs would not route, which is similar to the proposed 
ALO Modifier functionality, the Exchange proposes to re-price and re-
display resting Day ISOs in a manner consistent with the proposed re-
pricing and re-displaying functionality described above for limit 
orders designated ALO. As proposed, if, after posting, a Day ISO would 
lock or cross a protected quotation, the Exchange would re-price and 
re-display the order consistent with proposed paragraph (b) for ALO 
Modifiers in Rule 13. Accordingly, any such re-pricing would be based 
on the best-priced sell interest (for bids) or best-priced buy interest 
(for offers), as proposed in new Supplementary Material .10 to Rule 13.
    The Exchange further proposes that a Day ISO designated ALO that is 
marketable upon arrival would follow a combination of both the Day ISO 
and ALO rules. Specifically, the Day ISO element of this order would be 
permitted to trade through away market protected quotations on arrival 
and lock or cross a protected quotation. In addition, the ALO element 
would require that this order not result in taking liquidity. 
Accordingly, the Exchange proposes that if a Day ISO designated ALO is 
marketable against Exchange interest on arrival, it would be re-priced 
and displayed one minimum price variation, as defined in supplementary 
material to Rule 62--Equities, below the Exchange's best-priced 
displayed or non-displayed non-MPL Order sell interest (for bids) or 
above the best-priced Exchange displayed or non-displayed non-MPL Order 
buy interest (for offers). Any re-pricing and display on arrival would 
ignore away-market protected quotations. As further proposed, once a 
Day ISO designated ALO has been posted to the Exchange's book, to 
assure that any subsequent re-pricing and re-displaying of a Day ISO 
designated ALO does not lock or cross a protected quotation, the 
Exchange proposes to follow the re-pricing rule set forth in proposed 
paragraph (b) for ALO Modifiers in this Rule. Therefore, any subsequent 
re-pricing would be based on the best-priced sell interest (for bids) 
or best-priced buy interest (for offers), as proposed in new 
Supplementary Material .10 to Rule 13.
    For example, assume the BBO in XYZ is 10.05 x 10.11, the PBBO is 
10.05 x 10.09, and the Exchange has a resting odd-lot order to sell 
priced at 10.07. In this scenario, the best-priced sell interest, as 
defined in new supplementary material .10 to Rule 13, would be 10.07. 
If the Exchange were to receive a Day ISO to buy at 10.12 (``Order 
D''), the Exchange would execute Order D against the resting odd-lot 
order to sell at 10.07, ignore the best protected offer of 10.09, and 
execute against the Exchange's best offer of 10.11. If there were any 
remaining quantity of Order D, it would post at 10.12. Although this 
10.12 bid would cross the 10.09 PBO, the Exchange would consider that 
10.09 PBO cleared pursuant to the existing obligation for the entering 
firm to have sent an ISO to trade with the full size of that PBO 
simultaneous with entering Order D at the Exchange.
    Assume instead that the Day ISO to buy at 10.12 is also designated 
ALO (``Order E''). In this scenario, upon arrival, Order E would be re-
priced and displayed at 10.06, which is one MPV below the Exchange's 
best priced non-displayed interest. Assume instead that the Exchange 
receives a Day ISO designated ALO to buy at 10.12 (``Order F''), but 
that when Order F arrives, the BBO is 10.05 x 10.11, the PBBO is 10.05 
x 10.09, and the Exchange has no non-displayed sell interest. In this 
scenario, the Exchange would ignore the 10.09 PBO and Order F would be 
re-priced and displayed at 10.10, which is one MPV below the Exchange's 
best-priced displayed offer of 10.11. Assume the market updates and the 
BBO becomes 10.10 x 10.14 and the PBBO is 10.10 x 10.12. Order F would 
re-price and re-display one MPV below the best-priced sell interest, 
which here would be the 10.12 PBO. Accordingly, Order F would re-price 
and re-display at 10.11.
    The Exchange also proposes to add new paragraph (e) governing ISOs 
in Rule 13 to specify that IOC ISOs and Day ISOs are not available for 
Sell ``Plus''--Buy ``Minus'' Orders or Non-Display Reserve Orders or 
Non-Display Reserve e-Quotes.
    Finally, the Exchange proposes non-substantive changes to paragraph 
(a) defining ISOs to provide more detail regarding the current 
operation of ISOs, consistent with existing NYSE Arca Rule 7.31(jj). As 
proposed, the Exchange would define an ISO as a limit order designated 
for automatic execution in a particular security that is never routed 
to an away market, may trade through a protected bid or offer, and will 
not be rejected or cancelled if it would lock, cross, or be marketable 
against an away market provided that it meets the requirements 
described in the rule. The Exchange also proposes to make non-
substantive, technical amendments to define the term ``Intermarket 
Sweep

[[Page 40173]]

Order'' as ``ISO'' and change references from ``Intermarket Sweep 
Order'' to ``ISO.'' The Exchange further proposes a non-substantive, 
technical change to define the existing form of an ISO as an ``ISO 
designated IOC (`IOC ISO').''
    Because of the technology changes associated with this proposed 
rule change, the Exchange proposes to announce the implementation date 
of ALO Modifiers for day limit orders and Day ISOs by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \16\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\17\ in particular, in that it is designed to promote just and 
equitable principles of trade, 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.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal is designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the expansion of the availability of 
ALO Modifiers for day limit orders will increase competition, not only 
among market participants, but also among exchanges offering similar 
functionality. Specifically, all other equity exchanges currently 
enable member firms to enter limit orders that would only post on the 
designated exchange and not route.\18\ The Exchange proposes to expand 
its existing ALO functionality, consistent with other markets, to also 
make it available for limit orders. The Exchange believes that 
requiring limit orders designated ALO to be entered with a minimum 
display quantity will help perfect the mechanism of a free and open 
market by encouraging additional displayed liquidity on a public 
registered exchange, and therefore promote price discovery. The 
Exchange further believes that the proposed re-pricing and re-
displaying of a limit order designated ALO removes impediments to and 
perfects the mechanism of a free and open market because it assures 
that such an order would meet its intended goal to be available on the 
Exchange's book as displayed liquidity without locking or crossing a 
protected quotation in violation of Rule 610(d) of Regulation NMS.\19\ 
The Exchange further notes that the proposed re-pricing and re-
displaying of limit orders designated ALO is consistent with how other 
exchanges currently operate.\20\
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    \18\ See supra n. 5.
    \19\ 17 CFR 242.610(d).
    \20\ See supra n. 8.
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    The Exchange also believes that adding a day time-in-force 
condition for ISOs, an existing order type on the Exchange, is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and national market system because the proposed expansion is 
consistent with the definition of an ISO under Regulation NMS\21\ and 
with the operation of how ISOs may be entered on other exchanges, 
including that it may trade through protected quotations on arrival and 
display on the Exchange at a price that may lock or cross a protected 
quotation.\22\ The Exchange further believes that any subsequent re-
pricing and re-displaying of a Day ISO after it has posted on the Book 
will meet the entering firm's expectations that a Day ISO order not 
route, while at the same time ensure that it would not lock or cross a 
protected quotation in violation of Rule 610(d) of Regulation NMS.\23\
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    \21\ 17 CFR 242. 600 (b)(3) and supra n. 11.
    \22\ See supra n. 13, 71 FR at 59181 (``If an ISO is not marked 
as `immediate or cancel,' any remaining balance in the order would 
be displayed by the Exchange without regard to whether that display 
would lock or cross another market center, only if the participant 
routing the order has already sent an order to satisfy the 
quotations of other markets so that the display of the order would 
not lock or cross those markets.'') and at 59182 (approving, among 
other things, NYSE Arca's proposed ISO order type and finding that 
it is consistent with the Act).
    \23\ 17 CFR 242.610(d).
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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. Rather, the Exchange 
believes that the proposed rule change is pro-competitive because it 
expands the functionality associated with existing Exchange order types 
to conform to how these order types already operate on other exchanges, 
thereby harmonizing the forms of order types available for market 
participants that trade on equity exchanges.\24\
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    \24\ See supra, nn. 5, 11, and 13.
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(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 up to 90 days (i) as the 
Commission may designate 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 such 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-NYSEMKT-2014-56 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-NYSEMKT-2014-56. 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

[[Page 40174]]

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-NYSEMKT-2014-56 and should be submitted 
on or before August 1, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16190 Filed 7-10-14; 8:45 am]
BILLING CODE 8011-01-P