Document ID: SEC-2013-0860-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2013-05-08T04:00Z

[Federal Register Volume 78, Number 89 (Wednesday, May 8, 2013)]
[Notices]
[Pages 26818-26819]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10901]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69502; File No. SR-NYSE-2013-30]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 13 to Expand the Availability of Self-Trade Prevention 
Modifiers

May 2, 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 22, 2013, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``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 to expand the availability 
of self-trade prevention (``STP'') modifiers. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 13 to expand the availability 
of STP modifiers functionality to additional order types.\4\ STP 
modifiers are designed to prevent two orders from the same market 
participant identifier (``MPID'') assigned to a member organization 
from executing against each other. Use of the STP modifiers is optional 
and is not automatically implemented by the Exchange. Rather, a member 
organization can choose to add a STP modifier on eligible orders. The 
STP modifier on the incoming order determines the interaction between 
two orders marked with STP modifiers and whether the incoming or the 
resting order would cancel. Both the buy and the sell order must 
include an STP modifier in order to prevent a trade from occurring and 
to effect a cancel instruction.
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    \4\ The Exchange recently amended Rule 13 to add STP Modifiers. 
See Securities Exchange Act Release No. 69102 (Mar. 11, 2013), 78 FR 
16561 (Mar. 15, 2013) (SR-NYSE-2013-17).
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    The Exchange proposes to make STP modifiers available to additional 
order types. Specifically, the Exchange proposes to make STP modifiers 
available for market orders and stop orders entered by off-Floor 
participants in a manner that is similar to limit orders. As proposed, 
the STP modifiers would be available for market orders and stop orders 
sent to the matching engine by off-Floor participants. Because of 
technology issues, the Exchange would continue to reject all GTC and 
MTS-IOC orders with an STP modifier.
    In addition, the Exchange proposes to make the STP modifier 
available for certain Floor broker interest. In adopting STP modifiers, 
the Exchange noted that the technology supporting the proposed STP 
modifiers was not compatible with the Floor broker systems, but the 
Exchange was actively working to develop the technology to extend STP 
modifiers to be available for Floor brokers.\5\ The Exchange did not 
believe it should delay the deployment of the STP modifiers for other 
market participants while it performed the technical modifications 
required for the use of STP modifiers for Floor brokers. Although the 
technology supporting STP modifiers is still not compatible with 
certain Floor broker systems, the Exchange is able to make the STP 
modifiers available to algorithms used by Floor brokers to route 
interest to the Exchange's matching engine. Accordingly, the Exchange 
proposes to make STP modifiers available for e-Quotes, pegging e-
Quotes, and g-Quotes entered into the matching engine by an algorithm 
on behalf of a Floor broker. STP modifiers would not be available for 
d-Quotes at this time, regardless of the system used to enter d-Quotes.
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    \5\ See id.
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    Because of the technology changes associated with this rule 
proposal, the Exchange will announce the implementation date of the STP 
modifiers in a Trader Update to be published no later than 60 days 
after the publication of the notice in the Federal Register. The 
implementation date will be no later than 60 days following publication 
of the Trader Update announcing publication of the notice in the 
Federal Register.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \6\ of the Securities Exchange Act 
of 1934 (the ``Act''), in general, and furthers the objectives of 
Section 6(b)(5) \7\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that 
expanding the availability STP functionality to additional order types 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because it would allow firms 
to better manage order flow and prevent unintended executions with 
themselves or the

[[Page 26819]]

potential for ``wash sales'' that may occur as a result of the velocity 
of trading in today's high-speed marketplace. Commonly, member 
organizations have multiple connections into the Exchange due to 
capacity and speed-related demands. Orders routed by member 
organizations via different connections may, in certain circumstances, 
inadvertently trade against each other. Enabling STP modifiers for 
market orders and stop orders would provide member organizations with 
the opportunity to prevent these unintended trades from occurring.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    By providing STP modifier functionality to certain e-Quotes, 
pegging e-Quotes, and g-Quotes entered algorithmically, the proposal 
provides Floor brokers with the opportunity to prevent these unintended 
trades from occurring as well. The Exchange believes that offering STP 
modifiers to Floor broker interest entered via algorithms removes 
impediments to and perfects the mechanism of a free and open market 
because there is a greater potential for unintended consequences for 
interest entered via algorithms, because of the above-noted velocity of 
trading, as compared to orders entered manually. The Exchange will 
continue to work to develop technology to extend STP modifiers for 
other Floor broker systems as well. The Exchange notes that all Floor 
brokers have access to algorithms, and therefore this functionality 
will be available to all Floor brokers. The Exchange further notes that 
the STP modifiers would not alleviate, or otherwise exempt, broker-
dealers from their best execution obligations.

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 provide member organizations and Floor brokers with 
the opportunity to prevent unintended self-trades from occurring. The 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
who offer similar functionality. Many competing venues offer similar 
functionality to market participants. To this end, the Exchange is 
proposing a market enhancement to provide greater protections from 
inadvertent executions, and encourage market participants to trade on 
the Exchange. The Exchange believes the proposed rule change is pro-
competitive because it would enable the Exchange to provide Floor 
brokers with functionality that is similar to that of other exchanges 
and available for interest entered electronically from off of the 
Floor.

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

    Because the foregoing 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 for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ 
thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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.
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    At any time within 60 days of the filing of the 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 under 
Section 19(b)(2)(B) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2013-30 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-NYSE-2013-30. 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 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-NYSE-2013-30 and should be 
submitted on or before May 29, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10901 Filed 5-7-13; 8:45 am]
BILLING CODE 8011-01-P