Document ID: SEC-2014-0037-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2014-01-08T05:00Z

[Federal Register Volume 79, Number 5 (Wednesday, January 8, 2014)]
[Notices]
[Pages 1396-1398]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00066]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71222; File No. SR-NYSEMKT-2013-86]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Amendment No. 2 and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, To Adopt 
Commentary .03 to Rule 980NY To Limit the Volume of Complex Orders by a 
Single ATP Holder During the Trading Day

January 2, 2014.

I. Introduction

    On October 28, 2013, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant

[[Page 1397]]

to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Act''),\2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to 
adopt Commentary .03 to NYSE MKT Rule 980NY to limit the volume of 
complex orders that may be entered by a single ATP Holder during the 
trading day. On November 5, 2013, the Exchange submitted Amendment No. 
1 to the proposed rule change. The proposed rule change, as modified by 
Amendment No. 1 thereto, was published for comment in the Federal 
Register on November 13, 2013.\4\ The Commission received no comments 
on the proposed rule change. On December 23, 2013, the Exchange granted 
an extension of time for the Commission to act on the filing until 
January 3, 2014.\5\ On December 24, 2013, the Exchange submitted 
Amendment No. 2 to the proposed rule change.\6\ The Commission is 
publishing this notice to solicit comments on Amendment No. 2 from 
interested persons, and is approving the proposed rule change, as 
modified by Amendment Nos. 1 and 2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 70816 (November 6, 
2013), 78 FR 68111 (``Notice'').
    \5\ In addition, on December 24, 2013, the Commission extended 
the time period for Commission action to January 3, 2014. See 
Securities Exchange Act Release No. 71183 (December 24, 2013).
    \6\ In Amendment No. 2, the Exchange amended the proposed rule 
change by removing the language in the proposal that gives the 
Exchange discretion to adjust the specified percentage (i.e., 
``n%'') to an amount less than 60% and ``n%-x'' to an amount less 
than 40%. Amendment No. 2 has been placed in the public comment file 
for NYSEMKT-2013-86 at http://www.sec.gov/comments/sr-nysemkt-2013-86/nysemkt201386.shtml (see letter from Janet McGinness, EVP & 
Corporate Secretary, General Counsel, NYSE MKT, to Elizabeth M. 
Murphy, Secretary, Commission, dated December 26, 2013).
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II. Description of the Proposed Rule Change

    The Exchange currently ranks and tracks Electronic Complex Orders 
in the Consolidated Book in a ``complex order table.'' Although the 
Exchange stated that the complex order table has sufficient capacity to 
accept all Complex Orders submitted by all ATP Holders under normal 
operating conditions, the Exchange also noted that that capacity is not 
unlimited.\7\ Given that this capacity is not unlimited, the Exchange 
proposes to adopt Commentary .03 to Rule 980NY \8\ to provide that if 
an ATP Holder submits orders that comprise more than ``n%'' of the 
capacity of the complex order table (the ``Cap''), the Exchange will 
reject that ATP Holder's Electronic Complex Orders for the remainder of 
the trading day. Proposed Commentary .03 to Rule 980NY also provides a 
``warning threshold'' of ``n%-x'' of the complex order table. If an ATP 
Holder breaches such warning threshold, it would result in the Exchange 
rejecting the ATP Holder's Electronic Complex Orders until such time 
that the ATP Holder has notified the Exchange to re-enable the 
submission of Electronic Complex Orders. The Exchange will not reject 
any Electronic Complex Orders until after an ATP Holder has breached 
either the warning threshold (i.e., ``n%-x'') or the Cap.\9\ The 
specified percentage (i.e., ``n%'') will be no less than 60%, and ``n%-
x'' will be no less than 40%.
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    \7\ According to the Exchange, the complex order table currently 
has the capacity to hold Electronic Complex Orders containing up to 
16 million legs throughout the trading day. See Notice, supra note 4 
at 68111, n. 8.
    \8\ Rule 980NY governs trading of Complex Orders on the NYSE MKT 
System (``Electronic Complex Orders'').
    \9\ For example, if an ATP Holder submits an Electronic Complex 
Order that, once accepted, breaches the Cap, the Exchange will 
accept that order in its entirety and then will reject all 
subsequent Electronic Complex Orders from that ATP Holder for the 
remainder of the trading day.
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    The Exchange will announce the implementation date of the proposed 
rule change by Trader Update to be published no later than 60 days 
following approval by the Commission. The implementation date will be 
no later than 60 days following the issuance of the Trader Update.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule is consistent with Section 6(b)(5) of the Act,\11\ which requires, 
among other things, that the rules of an exchange be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and, in general, 
to protect investors and the public interest. The Commission believes 
that providing the Cap could provide the Exchange with a system 
protection tool to address the potential risk that a single ATP Holder 
could--either intentionally or inadvertently--utilize the entire 
complex order table, effectively shutting out all other ATP Holders' 
Electronic Complex Orders from the Exchange for the remainder of the 
trading day. By disabling the submission of Electronic Complex Orders 
of a single ATP Holder that has exceeded the Cap, the Cap should allow 
the Exchange to accommodate Electronic Complex Orders from all other 
ATP Holders, thereby helping to ensure efficient functionality of the 
complex order table and the protection of investors and the public 
interest. In approving this proposed rule change, the Commission notes 
that the Exchange represented that under normal operating conditions, 
the combined Electronic Complex Orders of all ATP Holders do not exceed 
40% of the complex order table.\12\ Therefore, the Exchange believes 
that setting the Cap for a single ATP Holder at 60% would allow 40% of 
the complex order table--which is typically sufficient to accommodate 
all ATP Holder's Electronic Complex Orders--to remain accessible to the 
balance of ATP Holders and would not unfairly deny these ATP Holders 
access to the market.\13\
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    \10\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See Notice, supra note 4 at 68112. The Commission also 
notes that the Exchange represented that a single ATP Holder would 
only exceed the Cap (or receive a warning of a near breach) in the 
event of a bona fide problem (e.g., a system error or malfeasance). 
See id.
    \13\ See id.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 2 
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-NYSEMKT-2013-86 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-NYSEMKT-2013-86. 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

[[Page 1398]]

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 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-NYSEMKT-2013-86 and should 
be submitted on or before January 29, 2014.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2

    As proposed, the proposed rule change provided that, unless 
determined otherwise by the Exchange and announced to ATP Holders via 
Trader Update, the specified percentage (i.e., ``n%'') will be no less 
than 60%, and ``n%-x'' will be no less than 40%. Amendment No. 2 
amended the proposed rule change by removing the language in the 
proposal that gives the Exchange discretion to adjust the specified 
percentage (i.e., ``n%'') to an amount less than 60% and ``n%-x'' to an 
amount less than 40%. By removing this discretion, Amendment No. 2 
reduces potential uncertainty about the application of the proposed 
rule change. Accordingly, the Commission finds good cause, pursuant to 
Section 19(b)(2) of the Act,\14\ for approving the proposed rule 
change, as modified by Amendment Nos. 1 and 2, prior to the 30th day 
after the date of publication of notice in the Federal Register.
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    \14\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\15\ that the proposed rule change (SR-NYSEMKT-2013-86), as modified by 
Amendment Nos. 1 and 2, be, and hereby is, approved on an accelerated 
basis.
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    \15\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00066 Filed 1-7-14; 8:45 am]
BILLING CODE 8011-01-P