Document ID: SEC-2007-1593-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-11-26T05:00Z

[Federal Register: November 26, 2007 (Volume 72, Number 226)]
[Notices]               
[Page 66013-66015]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no07-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56810; File No. SR-NYSEArca-2007-117]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Adding a New Order 
Type Known as PNP Blind

November 19, 2007.
    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 November 13, 2007, NYSE Arca, Inc. (``NYSE Arca'' 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

[[Page 66014]]

substantially prepared by the Exchange. NYSE Arca has designated the 
proposed rule change as ``non-controversial'' under Section 
19(b)(3)(A)(iii) \3\ of the Act and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly owned subsidiary, NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), proposes to amend NYSE Arca 
Equities Rule 7.31 in order to add a new order type known as PNP Blind. 
The changes described in this rule proposal would add new Exchange Rule 
7.31(mm). The text of the proposed rule change is available on the 
Exchange's Web site at http://www.nyse.com, at the Exchange's Office of 

the Secretary, 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, NYSE Arca 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. NYSE Arca 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
    In order to provide additional flexibility and increased 
functionality to its system and its Users,\5\ the Exchange proposes to 
add a new variation upon an existing order type. The existing order 
type, the PNP Order (Post No Preference),\6\ is a limit order to buy or 
sell that is executed in whole or in part on the Exchange, with any 
unexecuted portion displayed and ranked in the NYSE Arca book. The 
proposed corollary to this order type, PNP Blind, is a PNP order that 
is priced at or through the Best Protected Bid or Best Protected Offer 
(``PBBO'') \7\ and is displayed on the NYSE Arca book at the price of 
the contra quote. The limit price of the PNP Blind order shall be 
undisplayed (e.g., blind).
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    \5\ See NYSE Arca Equities Rule 1.1(yy) for the definition of 
``User.''
    \6\ See NYSE Arca Equities Rule 7.31(w).
    \7\ Pursuant to NYSE Arca Equities Rule 1.1(dd), the term 
``NBBO'' refers to the National best bid or offer and the term 
``PBBO'' refers to the Best Protected Bid and the Best Protected 
Offer on NYSE Arca. PNP Blind orders will be priced in relation to 
the PBBO and orders placed on NYSE Arca cannot trade-through 
Protected Quotations on away markets except as allowed under NYSE 
Arca Equities Rule 7.37(g).
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PNP Blind
    The limit price of the PNP Blind order shall remain undisplayed 
while its tradable price may be adjusted in certain circumstances. 
Where the PBBO adjusts away from the price of the PNP Blind and the 
prices continue to overlap, the limit price of the PNP Blind will 
remain undisplayed but its tradable price shall be adjusted to the 
contra side of the PBBO. Similarly, in instances where the PBBO moves 
into the price of the PNP Blind, the limit price remains undisplayed 
and the tradable price is adjusted to the contra side of the PBBO.
    In certain circumstances, the PNP Blind order will convert to a 
displayed PNP limit order. Where the PBBO moves away from the price of 
the PNP Blind order and the prices no longer overlap, the PNP Blind 
will convert to a displayed PNP order and once displayed it may become 
the new PBBO. Once converted, the order never reverts to an undisplayed 
PNP Blind order.
    This order type is similar in nature to an existing order type, the 
Passive Liquidity Order (``PLO'').\8\ The PLO allows Users to post 
undisplayed limit orders on the NYSE Arca book, which do not route to 
away market centers. However, the PLO is exclusive to Lead Market 
Makers in issues where the Exchange is the primary listings market and 
there is a Lead Market Maker. PNP Blind orders are available to all 
Users for all securities and never route to away market centers. Unlike 
the PLO which remains undisplayed, the PNP Blind will convert to a 
displayed limit order under the circumstances described above.
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    \8\ See NYSE Arca Equities Rule 7.3(h)(4).
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    PNP Blind orders, therefore, will offer all Users the ability to 
post an undisplayed limit order priced at or through the PBBO, with a 
tradable price set at the contra side of the PBBO. The tradable price 
will adjust until such time as the PBBO either moves away from the 
limit price of the PNP Blind order and the prices no longer overlap, or 
moves into the price of the PNP Blind order, whereupon it will then 
convert to a displayed PNP order. The entry time of a PNP Blind order 
is not refreshed or updated with each adjustment to its price.\9\
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    \9\ If a PNP Blind order reaches its limit price and becomes 
displayed, such PNP Blind order would become the only displayed 
order in the NYSE Arca book at that price.
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PNP Blind Examples
    The following examples demonstrate how a PNP Blind order operates.

Example 1:

    If the price of the PNP Blind order is at or through a protected 
quote, the order will go blind (undisplayed) and will be placed on 
the book at the price of the contra quote of the PBBO.

PBBO: 15.00 to 15.05.
Result: PNP Blind goes blind (undisplayed) and is placed on the bid 
side of the book at 15.05.

Example 2:

    If the PBBO moves away from the price of the PNP Blind, but the 
prices continue to overlap, the PNP Blind remains undisplayed and 
adjusts its tradable price on the book to the new price of the 
contra quote of the PBBO.

PBBO: 15.00 to 15.05.
Result: PNP B goes blind (undisplayed) and is placed on the bid side 
of the book at 15.05.
PBO: Updates from 15.05 to 15.07.
Result: PNP Blind remains blind (undisplayed) but adjusts in price 
to 15.07.

Example 3:

    If the PBBO moves away from the price of the PNP Blind and the 
prices no longer overlap, the PNP Blind converts to a displayed PNP 
limit order.

PBBO: 15.05 to 15.07.
Result: PNP B goes blind (undisplayed) and is placed on the bid side 
of the book at 15.07.
PBO: Updates from 15.07 to 15.15.
Result: PNP Blind converts to PNP limit order and displays a bid of 
15.10, setting an updated PBBO of 15.10 to 15.15.

Example 4:

    If the PBBO moves into the price of the PNP Blind, the PNP Blind 
will adjust its tradable price on the book to the new price of the 
contra quote of the PBBO or remains displayed if it never went blind 
or had previously converted to a PNP limit order.

PBBO: 15.00 to 15.05.
Result: PNP Blind goes blind (undisplayed) and is placed on the bid 
side of the book at 15.05.
PBBO: Updates to 15.00 to 15.03.
Result: PNP Blind remains blind (undisplayed) and its tradeable 
price adjusts to 15.03.
PBBO: 15.00 to 15.05.
Result: PNP Blind is displayed at 15.03.

[[Page 66015]]

Update: PBBO resets to 15.03 to 15.05.
Result: PNP Blind remains displayed at 15.03.

Display Order Process

    PNP Blind orders fall within the Exchange's Display Order 
Process set forth in NYSE Arca Equities Rule 7.36. Accordingly, as 
described above, PNP Blind orders follow a strict price/time 
priority.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, because 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 for a free and open market and a national market system.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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.

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

    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 for 30 
days after the date of filing, 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 \12\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\13\ As required under Rule 19b-4(f)(6)(iii),\14\ NYSE 
Arca provided the Commission with written notice of its 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 the filing of the proposed rule change.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\15\ 
However, Rule 19b-4(f)(6)(iii)\16\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. NYSE Arca requests that the 
Commission waive the 30-day operative delay period for ``non-
controversial'' proposals under Rule 19b-4(f)(6) \17\ and make the 
proposed rule change effective and operative upon filing. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it would permit the Exchange to offer the PNP Blind order type 
without delay. Accordingly, the Commission designates the proposed rule 
change operative upon filing with the Commission.\18\
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    \15\ Id.
    \16\ Id.
    \17\ Id.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the impact of the proposed rule on 
efficiency, competition, and capital formation. See 15 U.S.C. 78c(f)
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 the 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSEArca-2007-117 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-117. 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 inspection 
and copying 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 NYSE Arca. 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-2007-117 and should 
be submitted on or before December 17, 2007.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22898 Filed 11-23-07; 8:45 am]

BILLING CODE 8011-01-P