Document ID: SEC-2010-1161-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-08-03T04:00Z

[Federal Register: August 3, 2010 (Volume 75, Number 148)]
[Notices]               
[Page 45683-45685]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03au10-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62580; File No. SR-NYSEArca-2010-69]

 
 Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending Rule 6.47

July 28, 2010.
    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 July 20, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 Rule 6.47 to describe new procedures 
for executing a cross transaction. The text of the proposed rule change 
is attached as Exhibit 5 to the 19b-4 form. A copy of this filing is 
available on the Exchange's Web site at http://www.nyse.com, at the 
Exchange's principal office, on the Commission's Web site at http://
www.sec.gov, 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 aspects of such 
statements.

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

1. Purpose
    NYSE Arca proposes to modify Rule 6.47(a) to describe new 
procedures for Floor Brokers wishing to execute a Non-Facilitation 
cross transaction.\4\ Currently, after requesting a market, Floor 
Brokers are required to disclose the terms of a cross, after which 
Market Makers are allowed to revise their bids and offers to block the 
cross.
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    \4\ Facilitation Crosses are governed by Rule 6.47(b), and are 
not affected by this proposal.
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    NYSE Arca proposes that Market Makers, after being informed of a 
potential cross, should provide their best bid and best offer, but not 
be allowed to step ahead of subsequently disclosed trading interest. 
The Exchange

[[Page 45684]]

intends for Market Makers to make markets and not prevent better priced 
trading interests from interacting with each other.
    The proposed rule change would allow a Floor Broker to request, 
without revealing the size of the orders, a final quote for a cross 
from the Trading Crowd, and then to cross above the highest bid, or 
below the lowest offer, and, if not on a price provided by the Crowd, 
to execute the cross in its entirety. If the cross were to take place 
on the price provided by the Crowd, the Floor Broker would be obligated 
to trade with that interest prior to crossing the orders. The cross 
would be required to be within the National Best Bid/Offer, and would 
also be obligated to satisfy any bids or offers in the Consolidated 
Book equal to or better than the crossing price.
    For example, if the prices of the orders to be crossed allowed for 
a range of possible crossing prices, and the Trading Crowd provided a 
final quote that was two or more Minimum Price Variations (``MPV'') 
wide, the Floor Broker could bid above the Trading Crowd's bid and 
consummate the cross without trading on a final quote price.
    If, alternatively, the final quote was only one MPV wide, (i.e., 
3.10 bid for 20 contracts at 3.20 offer for 50 contracts) the Floor 
Broker could not meet the obligation to the orders without trading on a 
final quote price. In this case, the Floor Broker would bid above the 
final quote bid (i.e., bid 3.20) or offer below the final quote offer 
(i.e., offer at 3.10), each instance of which is equal to a final quote 
price. The Floor Broker would then be obligated to trade with the final 
quote interest at that price (i.e., buy 50 at 3.20 or sell 20 at 3.10) 
before crossing the balance of the orders.
    Additionally, if, because of movement in the markets while the 
order was being brought to the crowd, the limit on one of the orders 
only allowed for a cross to be effected at a final quote price, 
regardless of the width of the final quote, the Floor Broker would be 
required to bid above the final quote bid or offer below the final 
quote offer yet still be at a final quote price. Again, the Floor 
Broker would be obligated to trade with the final quote interest at 
that price before crossing the balance of the orders. For instance, the 
electronic market in the series is 3.00 bid offered at 3.30, and the 
Floor Broker receives orders to cross at 3.10 or 3.20. When the Floor 
Broker requests a Final Quote, the crowd responds with a market of 3.20 
bid at 3.30. In order to meet the obligation to execute the order, the 
Floor Broker would have to offer at 3.20, fill the bids in the crowd at 
3.20, and then cross the balance of the orders.
    Additionally, the Exchange proposes to add two commentaries to Rule 
6.47. Commentary .01 would allow an OTP Holder to submit an order that 
has been solicited prior to transmittal to the Floor, but would not 
allow the new procedures to be used to circumvent limitations on 
principal transactions as described in Rule 6.47A, nor allow the OTP 
Holder to solicit a contra order from an NYSE Arca Market Maker 
assigned to the class of options to trade against an agency order.
    Commentary .02 would state it is a violation of a Floor Broker's 
duty for best execution to cancel an agency order to avoid execution at 
a better price.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
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, remove 
impediments to and perfect the mechanisms 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 will provide encouragement 
for Market Makers to provide their best prices earlier, upon the 
initial presentation of trading interest to the crowd, and the broker 
will be required to better the crowd's price in order to execute the 
cross transaction. The proposed new process should thus increase the 
possibility of price improvement for Customer orders.

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

    Within 35 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 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2010-69 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-2010-69. This 
file number should be included on the subject line if e-mail 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 such 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 
publicly available. All submissions should refer to File Number SR-

[[Page 45685]]

NYSEArca-2010-69 and should be submitted on or before August 24, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18998 Filed 8-2-10; 8:45 am]
BILLING CODE 8010-01-P