Document ID: SEC-2013-0502-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-03-14T04:00Z

[Federal Register Volume 78, Number 50 (Thursday, March 14, 2013)]
[Notices]
[Pages 16329-16331]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05882]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69080; File No. SR-NYSEArca-2013-21]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rules 
Governing Order Format and System Entry Requirements

March 8, 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 March 5, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend rules governing Order Format and 
System Entry Requirements. 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 Exchange Rule 6.67(c) by revising 
the requirements for entering an order into the Electronic Order 
Capture System (``EOC''). In addition, the Exchange proposes to delete 
all references pertaining to the Electronic Tablet, a decommissioned 
Exchange order entry mechanism.
Order Format and System Entry Requirements
    EOC is the Exchange's floor-based electronic audit trail and order 
tracking system that provides an accurate time-sequenced record of all 
orders and transactions entered and executed on the floor of the 
Exchange. EOC records the receipt of an order and documents the life of 
the order through the process of execution, partial execution, or 
cancellation. This system includes the electronic communications 
interface between booth terminals and the Floor Broker work stations 
and hand held applications. The EOC was developed by the Exchange to 
fulfill one of the undertakings contained in the Commission's Order 
Instituting Public Administrative Proceedings Pursuant to Sections 
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and 
Imposing Remedial Sanctions (``Order'').\4\ Specifically, the EOC is 
intended to respond to Section IV.B.e.(v) of the Order, which requires, 
among other things, that the Exchange incorporate into its audit trail 
all non-electronic orders such that the audit trail provides an 
accurate, time-sequenced record of electronic and other orders, 
quotations and transactions, beginning with the receipt of the order 
and documenting the life of the order through the process of execution, 
partial execution, or cancellation.
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    \4\ See Securities Exchange Act Release No. 43268 (September 11, 
2000) and Administrative Proceeding File No. 3-10282.
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    In order to comply with the terms of Rule 6.67(c)(1), and thus be 
in compliance with the Order, Floor Brokers and employees of floor 
brokerage firms (collectively ''Floor Brokers'') upon receiving an 
order for execution on the Exchange must immediately, prior to 
representation in the trading crowd, record the details of the order 
into EOC. This process, commonly referred to the ``systemization'' of 
an order, creates an accurate time-sequenced record of orders on the 
Exchange.
    The Exchange has prescribed certain data elements that must be 
entered into the EOC before an order may be represented in the Trading 
Crowd. These data elements, as contained in Rule 6.68--Record of 
Orders, include:

[[Page 16330]]

(1) CMTA Information and the name of the clearing OTP Holder or Firm; 
\5\ (2) options symbol, expiration month, exercise price and type of 
options; (3) side of the market and order type; \6\ (4) quantity of 
options; (5) limit or stop price or special conditions; (6) opening or 
closing transaction; (7) time in force; (8) account origin code; \7\ 
and (9) whether the order was solicited or unsolicited. The Exchange 
may, from time to time, also require additional information if needed. 
The remaining data elements prescribed in Rule 6.68 are to be recorded 
as the events occur and/or during trade reporting procedures.
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    \5\ The CMTA process allows an OTP Holder to enter trade that is 
subsequently settled into the account of a different Broker Dealer 
at the Options Clearing Corporation.
    \6\ Order type is also referred to as the origin code (i.e. 
Customer, Firm or Market Maker).
    \7\ Supra see note 6.
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    The Exchange now proposes to incorporate into the text of Rule 
6.67(c) specific data elements required for the proper systemization of 
an order. The Exchange proposes that in order to meet the requirements 
for the proper systemization of an order Floor Brokers will be required 
to enter into the EOC: (i) The option symbol; (ii) the expiration date 
of the option; \8\ (iii) the exercise price; (iv) buy or sell with 
applicable limit or stop price or special instructions; (v) call or 
put; (vi) the quantity of contracts; (vii) the name of the clearing OTP 
Holder or OTP Firm; and (viii) such other information as may be 
required by the Exchange from time to time. Any additional information 
with respect to the order including those data elements that [sic] 
found in Rule 6.68 that pursuant to this proposal will no longer be 
required at the time of systemization, shall be recorded 
contemporaneously upon receipt which may occur after the representation 
and execution of the order. The proposed order entry requirements for 
the EOC are consistent with the order format requirements of Rule 
6.67(b). Thus, adopting the order format requirements of Rule 6.67(b) 
for the EOC and incorporating them into Rule 6.67(c) will serve to 
align Exchange Rules on order entry requirements. In addition, the 
Exchange notes that the proposed order entry requirements necessary for 
the systemization of an order for the EOC are substantially similar to 
those prescribed by the Chicago Board Options Exchange (``CBOE'') 
pursuant to CBOE Rule 6.24(a)(2).\9\
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    \8\ In order to accommodate Quarterly Options Series and Short 
Term Option Series, the Exchange proposes to require the actual 
expiration date of an option, and not just the expiration month, as 
presently required.
    \9\ See CBOE Rule 6.24(a)(2). See also Securities Exchange Act 
Release No. 50996 (January 7, 2005), 70 FR 2436 (Jan 13, 2005) (SR-
CBOE-2004-77).
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    Pursuant to the proposed rule change, Floor Brokers will be 
required to enter much of the same information when systematizing an 
order as is presently required, with the exception of the Clearing 
Member Trade Agreement (``CMTA'') \10\ information, opening/closing 
designation, the order type or account origin code, the time in force, 
and whether the order was solicited or unsolicited. Floor Brokers have 
told the Exchange that generally these are the last bits of information 
given to them when receiving an order and that waiting to receive this 
information and enter it into EOC can delay the representation and 
execution of an order. In today's trading environment of rapidly moving 
markets and the need to execute an order and hedge a trade in real or 
near real time, even a slight delay can prove to be detrimental to the 
handling of an order. Because the CMTA information, the opening/closing 
designation, the account origin code, the time if force and whether an 
order was solicited or unsolicited are not contractual terms of a trade 
itself nor are they required data elements pursuant to the Exchange's 
order format requirements, the Exchange does not believe this 
information needs to be entered into the EOC prior to an order being 
represented in the Trading Crowd, but may be entered contemporaneously 
upon the receipt of such information, even if that occurs after the 
order had been represented and executed in the Trading Crowd.
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    \10\ The CMTA process allows an OTP Holder or OTP Firm to 
execute a trade that is subsequently settled into the account of a 
different broker dealer by the Options Clearing Corporation.
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    The Exchange notes that proposed rule changes contained in this 
filing relate only to the system entry requirements for floor based 
orders and do not amend or revise rules governing the record of orders 
(Rule 6.68). Floor Brokers must continue to maintain proper order 
records, including any order information that is presently required for 
the proper systemization of an order that will no longer be required 
for that purpose pursuant to this proposal. In addition, the Exchange 
notes that this proposal does not amend or revise rules governing trade 
reporting duties (Rule 6.69).
The Electronic Tablet
    The Electronic Tablet was an order entry system which would record 
orders in a hand written format that in turn could be transmitted to a 
Floor Broker's EOC workstation for representation in the Trading Crowd. 
The Electronic Tablet provided an alternative to the order entry 
functionality of the EOC while providing for an accurate time-sequenced 
record of orders on the Exchange. Floor Brokers could hand write order 
information into the Electronic Tablet upon receipt of an order, route 
the order to EOC and then manually key into EOC additional order and 
transaction information for reporting and clearing purposes.
    The Electronic Tablet was designed to expedite the entry of orders 
into EOC. Due to ongoing enhancements to the functionality of the EOC 
system since its introduction, the Electronic Tablet was used 
increasingly less often and eventually became obsolete. The Electronic 
Tablet was fully decommissioned by the Exchange in 2009. Because Floor 
Brokers may satisfy all order entry requirements by entering an order 
directly into EOC, the Exchange has no plans to utilize the Electronic 
Tablet functionality going forward. Accordingly, the Exchange proposes 
to delete references to the Electronic Tablet found in its Rules.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and 
furthers the objectives of Section 6(b)(5),\12\ 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to order entry requirements for the EOC is 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities by ensuring that the terms of an order 
continue to be properly systematized prior to the order being 
represented in the Trading Crowd. The Exchange notes that changes are 
consistent with the order systemization requirements in the Order which 
requires, among other things, that the Exchange incorporate into its 
audit trail all non-electronic orders such that the audit trail 
provides an accurate, time-sequenced record of electronic and other 
orders, quotations

[[Page 16331]]

and transactions, beginning with the receipt of the order and 
documenting the life of the order through the process of execution, 
partial execution, or cancellation. The Exchange believes that aligning 
the order entry requirements for the EOC with the Exchange's order 
format requirements will further promote just and equitable principles 
of trade, to foster cooperation and coordination with persons engaged 
in facilitating transactions in securities on the Exchange. Reducing 
the burden on Floor Brokers to enter order information prior to 
representation will promote just and equitable principles of trade and 
remove impediments to and perfect the mechanism of a free and open 
market by reducing the delay in representation and execution of an 
order on the Exchange. The proposal is also designed to prevent 
fraudulent and manipulative acts and practices, by ensuring that the 
Exchange is able to meet its obligation to create and maintain a time-
sequenced record of orders, quotations and transactions on the 
Exchange. In addition, the deletion of rule references pertaining to a 
decommissioned order entry system will help protect investors and the 
public interest by reducing potential confusion that may result from 
having obsolete or out-dated rules in the Exchange's rulebook. 
Furthermore, the proposal removes impediments to and perfects the 
mechanism of a free and open market and a national market system by 
allowing for more timely executions of open-outcry orders.

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 proposed rule change is 
designed to enable NYSE Arca to align the order format requirements of 
the Exchange with those of a competing options exchange. The proposal 
would allow Floor Brokers on the Exchange to be afforded the ability to 
transact business under the similar requirements as brokers on a 
competing exchange. The Exchange believes that the proposal will reduce 
the burden on Floor Brokers by coordinating different order entry 
requirements on different exchanges. By reducing Floor Brokers burden 
on order entry compliance, the Exchange believes the proposal will 
improve the competitiveness of Exchange Floor Brokers and also promote 
competition for orderflow among market participants and the options 
exchanges.

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 \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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-NYSEArca-2013-21 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-2013-21. 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 20549-1090, 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 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2013-21, and should be submitted on or before April 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05882 Filed 3-13-13; 8:45 am]
BILLING CODE 8011-01-P