Document ID: SEC-2012-1358-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2012-08-17T04:00Z

[Federal Register Volume 77, Number 160 (Friday, August 17, 2012)]
[Notices]
[Pages 49848-49849]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20262]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67647; File No. SR-NSX-2012-12]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Text of NSX Rule 11.15 To Clarify the Manner in Which 
Certain Orders are Routed by the Exchange to Other Market Centers

August 14, 2012.
    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 August 9, 2012, National Stock Exchange, Inc. (``NSX'' or 
``Exchange'') 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 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

    National Stock Exchange, Inc. (``NSX''[supreg] or ``Exchange'') is 
proposing to modify the text of NSX Rule 11.15 to clarify the manner in 
which certain orders are routed by the Exchange to other market 
centers.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.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 Exchange 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 these 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange currently uses routing logic to direct certain 
incoming orders to other trading centers for execution in accordance 
with Rule 11.15(a)(ii) (``Routing to Away Trading Centers'' for 
``Orders Other Than Sweep Orders''). The Exchange is proposing to amend 
Rule 11.15(a)(ii) in order to provide that (i) the Exchange may route 
incoming orders to alternative trading systems, (ii) routed orders may 
not receive an execution and (iii) limit orders routed pursuant to Rule 
11.15(a)(ii) will be routed with a time in force of immediate or cancel 
(``IOC'').
    NSX Rule 11.15(a)(ii) currently provides in clause (B) that, unless 
the terms of an order direct otherwise, the Exchange will route 
incoming orders (other than Sweep Orders \3\) to ``the applicable 
trading center for execution against the applicable protected quotation 
at the Protected NBBO.'' A Protected NBBO is defined under NSX Rule 
1.5(P)(2) as ``the national best bid or offer that is a protected 
quotation.'' The Exchange proposes to amend the language in Rule 
11.15(a)(ii)(A) and (B) to explicitly provide that incoming orders may 
be routed to any ``Trading Center'' which is defined by the Exchange 
under NSX Rule 2.11(a) to include alternative trading systems.\4\
---------------------------------------------------------------------------

    \3\ A Sweep Order is defined in NSX Rule 11.11(c)(7).
    \4\ See NSX Rule 2.11(a) which defines a ``Trading Center'' as 
``other securities exchanges, facilities of securities exchanges, 
automated trading systems, electronic communications networks or 
other brokers or dealers.''
---------------------------------------------------------------------------

    The Exchange further proposes to clarify that the Exchange's 
Routing Logic determines the venue or venues to which an order may be 
routed. ``Routing Logic'' will be defined under Rule 1.5(R)(2) as ``the 
methodology used to determine the Trading Center to which an incoming 
order will be directed for potential execution.'' The Exchange is also 
proposing to add subsection (C) to NSX Rule 11.15(a)(ii) which will 
clarify that the Exchange may alter the Routing Logic without 
notice.\5\
---------------------------------------------------------------------------

    \5\ The Exchange currently offers a single routing option 
through its subsidiary broker-dealer, NSX Securities LLC (``NSXS''), 
which entity may engage one or more third-party routing broker-
dealers to route orders, at the direction of the Exchange, to away 
Trading Centers.
---------------------------------------------------------------------------

    The Exchange also proposes to amend 11.15(a)(ii)(A) and (B) by 
modifying the phrase ``for execution'' to ``for potential execution'' 
in order to clarify the fact that a routed order may not necessarily 
receive an execution at the away Trading Center.
    Finally, the references to converted and routed ``limit orders'' in 
Rule 11.15(a)(ii)(A) and (B) are proposed to be modified as ``limit IOC 
Orders'' in order to clarify that such orders are routed with a time in 
force of immediate-or-cancel.
    The proposed amendments benefit Equity Trading Permit (``ETP'') 
Holders by providing them with additional information regarding the 
Exchange's order routing process.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6 of the Act,\6\ and the rules and regulations thereunder and, 
in particular, the requirements of Section 6(b) of the Act.\7\ 
Specifically, the Exchange believes the modification of Rule 11.15 
furthers the objective of Section 6(b)(5) of the Act because it clearly 
explains the potential venues to which the Exchange may route orders. 
The proposed amendments clarify how the Exchange routes incoming orders 
other than Sweep Orders. Accordingly, the Exchange believes that the 
proposed rule change promotes just and equitable

[[Page 49849]]

principles of trade, will remove impediments to, and perfect the 
mechanism of a free and open market and a national market system and, 
in general, protects investors and the public interest.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The proposed rule change provides transparency and certainty with 
respect to how orders are routed by the Exchange. In so doing, the 
proposed rule change promotes the maintenance of a fair and orderly 
market, the protection of investors and the protection of the public 
interest, consistent with the Act and the rules promulgated thereunder.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
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) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\10\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and 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. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because such waiver will allow the Exchange to route certain 
orders to additional Trading Centers that may execute such orders 
faster and at the best price available. In addition, the proposed rule 
change will provide clarity regarding the manner in which the Exchange 
routes certain orders and should eliminate potential confusion in NSX 
Rules. Therefore, the Commission designates the proposal as operative 
upon filing with the Commission.\13\
---------------------------------------------------------------------------

    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within sixty (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.

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-NSX-2012-12 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-NSX-2012-12. 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-NSX-2012-12 and should be submitted on 
or before September 7, 2012.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2012-20262 Filed 8-16-12; 8:45 am]
BILLING CODE 8011-01-P