Document ID: SEC-2009-1158-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-08-17T04:00Z

[Federal Register: August 17, 2009 (Volume 74, Number 157)]
[Notices]               
[Page 41478-41479]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17au09-125]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60469; File No. SR-NYSEArca-2009-73]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rule 
6.76A--Order Execution-OX and Proposing New Rule 6.88--Directed Orders

August 10, 2009.
    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 August 5, 2009, 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 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing (i) new Rule 6.88 to describe Directed 
Orders, (ii) to amend Rule 6.76A to describe how Directed Orders are 
allocated upon execution, (iii) define Directed Order Market Makers, 
Order Flow Providers, and Directed Orders, and (iv) make other 
amendments to provide for Directed Orders. 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 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
    NYSE Arca proposes new Rule 6.88, Directed Orders, under which 
Market Makers may receive Directed Orders, and also proposes to amend 
Rule 6.76A to describe the allocation of Directed Orders upon 
execution. Additionally, the Exchange proposes to define Directed 
Orders, Order Flow Provider, and Directed Order Market Maker 
(``DOMM''), and make other rule modifications to provide for Directed 
Orders.
    Proposed Rule 6.88, Directed Orders, is based on NYSE Amex Rule 
964.1NY. It permits any Market Maker to receive Directed Orders, 
provided the Market Maker is quoting at the National Best Bid/Offer 
(``NBBO'') at the time of receipt. It also describes how Directed 
Orders are to be executed if the DOMM is not at the NBBO at time of 
receipt. Additionally, the proposed Rule requires a DOMM to meet a 90% 
quoting obligation in any class in which a Directed Order is received. 
The Exchange believes it is appropriate to oblige DOMMs to a higher 
quoting standard in return for the privilege of receiving directed 
order flow.
    The Exchange is also proposing to amend Rule 6.76A the 
circumstances by which a DOMM may receive an allocation entitlement up 
to 40% of an incoming order if quoting at the NBBO at the time the NYSE 
Arca System

[[Page 41479]]

receives a Directed Order. A DOMM will receive up to 40% of the 
remaining balance of an order, or the DOMM's share in the order of 
ranking, whichever is greater, provided that any Customer orders ranked 
ahead of the DOMM are satisfied first. However, if the DOMM is not at 
the NBBO, the order will be allocated as if it were not a Directed 
Order.
    The Exchange is proposing new Rule 6.62(z) to define Directed 
Orders, and also new Rule 6.1A(a)(20) to define Directed Order Market 
Maker and 6.1A(a)(21) to define Order Flow Provider.
    Lastly, the Exchange is proposing to modify Rule 6.82(d)(2)--
Guaranteed Participation, to clarify that LMMs are entitled to a trade 
allocation in accordance with Rule 6.76A, and that LMMs are not 
entitled to any guaranteed allocation on Directed Orders that trade 
with a Directed Order Market Maker. If the DOMM is not quoting at the 
NBBO, but the LMM's quote is at the NBBO, the LMM will be entitled to a 
trade allocation in accordance with Rule 6.76A. The LLM will be 
entitled to the same allocation as currently applicable under Rule 
6.76A.
    The trade allocation described in Rule 6.76A is structured so that 
no order will be subject to a guaranteed allocation greater than 40% of 
its size after satisfying any Customer orders ranked ahead of any 
guaranteed recipient. Additionally, it would be considered a violation 
of just and equitable principals of trade and a misuse of non-public 
information for a Directed Order Market Maker to become aware of an 
impending Directed Order so as to improve the quote to momentarily 
match the NBBO, and then worsen the price of the quote following 
execution of the Directed Order.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \4\ in general, 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, as it will 
provide greater incentive for Directed Order Market Makers to quote at 
the NBBO, and thereby provide a more competitive market structure for 
investors in general.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

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

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder.\6\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
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 complied with this requirement.
---------------------------------------------------------------------------

    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 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-2009-73 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-2009-73. 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 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 available publicly. All submissions should refer to 
File Number SR-NYSEArca-2009-73 and should be submitted on or before 
September 8, 2009.
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-19575 Filed 8-14-09; 8:45 am]

BILLING CODE 8010-01-P