Document ID: SEC-2013-0826-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-05-01T04:00Z

[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25508-25510]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10177]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69436; File No. SR-NYSEARCA-2013-40]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 7.11 Clarifying the Exchange's Treatment of Discretionary 
Orders That Have Discretionary Prices Outside of the Limit Up-Limit 
Down Price Bands

April 23, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 10, 2013, 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 prepared by the Exchange. 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.
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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 NYSE Arca Equities Rule 7.11 to 
clarify the Exchange's treatment of Discretionary Orders that have 
discretionary prices outside the Price Bands. 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.

[[Page 25509]]

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

1. Purpose
    The Exchange is proposing to amend new NYSE Arca Equities Rule 7.11 
(``New Rule 7.11'' or the ``New Rule''), which implements the Limit Up-
Limit Down Plan,\3\ the first phase of which becomes effective on April 
8, 2013, to clarify the Exchange's treatment of Discretionary Orders 
that have discretionary prices outside the Price Bands. Under New Rule 
7.11, buy or sell interest that is priced or could be executed above or 
below the Price Bands, as that term is used in the New Rule, would be 
canceled, with one exception. That exception, set out in sub-paragraph 
(a)(6) of the New Rule, permits an ETP Holder to instruct the Exchange 
to reprice eligible limit orders that are priced above or below the 
Price Bands, rather than cancel such orders. Eligible limit orders 
would be repriced to the Price Bands.
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    \3\ As defined in New Rule 7.11, ``Plan'' means the Plan to 
Address Extraordinary Market Volatility Submitted to the Securities 
and Exchange Commission Pursuant to Rule 608 of Regulation NMS under 
the Securities Exchange Act of 1934, Exhibit A to Securities 
Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 
2012), as it may be amended from time to time.
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    The Exchange is proposing to amend New Rule 7.11 to clarify its 
treatment of Discretionary Orders, including Discretion Limit Orders 
and Passive Discretionary Orders,\4\ in certain circumstances. A 
Discretionary Order is an order to buy or sell securities at a 
specified, undisplayed price, called the ``discretionary price,'' as 
well as at a specified, displayed price. Pursuant to New Rule 
7.11(a)(6)(C), an ETP Holder can enter an instruction to re-price 
Discretionary Orders rather than cancel them. However, if a 
Discretionary Order includes a discretionary price that is priced 
outside the Price Bands, the Exchange would cancel the order because it 
would be unexecutable at the discretionary price, even if the displayed 
price of the order is repriced to the Price Bands. Accordingly, the 
Exchange proposes to clarify in the Rule that in this scenario, the 
Exchange would cancel a Discretionary Order rather than reprice it.
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    \4\ ``Discretionary Order,'' ``Passive Discretionary Order,'' 
and ``Discretion Limit Order'' are defined in paragraph (h) of Arca 
Equities Rule 7.31.
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 2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\5\ in general, and 
furthers the objectives of Section 6(b)(5),\6\ 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 proposal would clarify to ETP Holders how the Exchange would treat 
Discretionary Orders with discretionary prices outside the Price Bands. 
The Exchange believes that the clarifying change removes impediments to 
and perfects the mechanism of a free and open market because it makes 
clear that an order with a discretionary price that is outside the 
Price Bands, and therefore unexecutable, would be cancelled.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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. The Exchange believes that 
the proposed amendment will not impose any burdens on competition 
because the proposal would clarify to ETP Holders how Discretionary 
Orders with discretionary prices outside the Price Bands would be 
treated, which would provide ETP Holders with more information in 
setting discretionary prices for such orders.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission has waived the five-day prefiling requirement in this 
case.
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    A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\10\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange immediately to clarify its treatment of 
Discretionary Orders that may be affected by the Limit Up-Limit Down 
Plan, which was implemented on April 8, 2013. Accordingly, the 
Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\11\
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact 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 such 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.

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

[[Page 25510]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2013-40 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-2013-40. 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 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-NYSEARCA-2013-40 and should 
be submitted on or before May 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10177 Filed 4-30-13; 8:45 am]
BILLING CODE 8011-01-P