Document ID: SEC-2012-0436-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2012-03-16T04:00Z

[Federal Register Volume 77, Number 52 (Friday, March 16, 2012)]
[Notices]
[Pages 15826-15827]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6387]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66576; File No. SR-NYSE-2012-01]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving a Proposed Rule Change To Establish an NYBX Immediate-or-
Cancel Order

March 12, 2012.

I. Introduction

    On January 11, 2012, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 1600 to establish a new order 
type known as an ``NYBX IOC order.'' A NYBX IOC order would execute 
exclusively against contra-side liquidity in the Exchange's Display 
Book (``DBK'') and/or in the New York Block Exchange (``NYBX'' or 
``Facility''). The proposed rule change was published for comment in 
the Federal Register on January 30, 2012.\3\ The Commission received no 
comment letters on the proposal. This order approves the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66218 (January 24, 
2012), 77 FR 4604 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    NYBX is a facility of the Exchange and provides for electronic 
matching and execution of non-displayed orders with the aggregate of 
all displayed and non-displayed orders residing within NYBX and the 
DBK.\4\ Only securities listed on NYSE are eligible to trade on 
NYBX.\5\
---------------------------------------------------------------------------

    \4\ See NYSE Rule 1600(a).
    \5\ See NYSE Rule 1600(b)(2)(C).
---------------------------------------------------------------------------

    NYSE proposes to establish a new order type, the NYBX IOC order, 
which is a limit order to buy or sell that is designated as immediate 
or cancel and would be cancelled if the order is not immediately able 
to execute, in whole or in part, exclusively against contra-side 
liquidity in the DBK and/or NYBX at a price that is at or within the 
national best bid or offer (``NBBO'').\6\ Any unexecuted portion of an 
NYBX IOC order would be immediately cancelled. No portion of an NYBX 
IOC order would be routed elsewhere, placed on the DBK, or remain in 
the NYBX Facility. Instead the order would be cancelled back to the 
User.\7\ Unlike other NYBX order types, the NYBX IOC order will not 
allow a minimum triggering volume quantity (``MTV'') designation.\8\
---------------------------------------------------------------------------

    \6\ See proposed NYSE Rule 1600(c)(2)(D).
    \7\ See id.
    \8\ See id. See also NYSE Rule 1600(b)(2)(E).
---------------------------------------------------------------------------

    A NYBX IOC order would be entered in the same manner as other NYBX 
orders, as provided under NYSE Rule 1600(c)(1), and, except for the 
optional time in force order parameters of NYSE Rule 1600(c)(3)(B)(i), 
would be required to contain the order parameters listed in NYSE Rule 
1600(c)(3)(A). A NYBX IOC order would be subject to order processing 
set forth in NYSE Rule 1600(d)(1).\9\ In a situation in which the size 
of the NYBX IOC order is less than the total available contra side 
liquidity that is potentially executable within the limit price in the 
NYBX and the DBK, the existing ``tie breaker'' rules set forth in NYSE 
Rule 1600(d)(1)(C)(i) for routing decision purposes will provide that 
an execution in the DBK has priority over an execution at the same 
price in the NYBX.\10\
---------------------------------------------------------------------------

    \9\ Accordingly, as set forth in the Notice, the NYBX Facility 
would apply the order execution process that is set forth in Rule 
1600(d)(1)(C)(i) to NYBX IOC orders, including that an NYBX IOC 
order may execute at multiple price points that may be available in 
the DBK and NYBX Facility that are within the limit price of the 
NYBX IOC order. Because by its terms, an NYBX IOC order does not 
route to other markets, have an MTV, or leave a residual in the 
NYBX, certain aspects of the order execution processing rules are 
inapplicable, specifically NYSE Rules 1600(d)(1)(C)(ii)-(vi) and 
1600(d)(1)(D).
    \10\ In the Notice, the Exchange provided the following example: 
If a buy NYBX IOC order for 1,000 shares arrives at the Facility 
with a limit price of $10.05, the Facility would review the 
available contra-side liquidity in the DBK (both displayed and 
undisplayed) and the NYBX. Assuming the contra-side liquidity in the 
DBK is 300 shares at $10.04 (undisplayed), 200 shares at $10.05 (NBO 
displayed), and 200 shares at $10.05 (undisplayed), and in the NYBX 
is 200 shares at $10.05, the NYBX IOC buy order would simultaneously 
be routed to DBK as 300 shares at $10.04 and 400 shares at $10.05, 
and 200 shares would execute in the Facility at $10.05, for a total 
execution of 900 shares. The remaining 100 shares of the buy NYBX 
IOC order would be cancelled. Assuming the buy NYBX IOC order is 
instead for 700 shares, pursuant to the tie-breaker rule in NYSE 
Rule 1600(d)(1)(C)(i), the full volume of the order would route to 
the DBK, executing 300 shares at $10.04 and 400 shares at $10.05, 
and the Facility's 200 share contra-side order at $10.05 would not 
be filled.
---------------------------------------------------------------------------

    Since NYBX IOC order would not be routed elsewhere, if another 
automated trading center is displaying a better price than either the 
NYBX or the DBK, and an execution in the NYBX Facility or DBK would 
result in a trade through in violation of Regulation NMS, the NYBX IOC 
order would be cancelled. Likewise, if another automated trading center 
is displaying prices that are the same or inferior to prices in the 
NYBX or the DBK, and routing is not required by Regulation NMS, the 
NYBX IOC order would execute within the DBK and/or the NYBX without 
routing to such automated trading center.
    NYSE also proposes certain technical changes to NYSE Rule 1600. 
First, the Exchange proposes to amend NYSE Rule 1600(g) to add 
references to trading pauses in individual securities, as provided for 
under NYSE Rule 80C. Second, because the Exchange has eliminated the 
class of market participants formerly known as Registered Competitive 
Market Makers, the Exchange proposes to delete NYSE Rule 1600(h)(3), 
which is no longer applicable.\11\ Third, the Exchange proposes to 
clarify NYSE Rule 1600(b)(2)(D) that NYBX orders are defined within 
NYSE Rule 1600(c)(2), not only within NYSE Rule 1600(c)(2)(A) as is 
currently reflected.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 60356 (July 21, 
2009), 74 FR 37281 (July 28, 2009) (SR-NYSE-2009-08) (Rescinding 
Rules 110 and 107A, which established the roles of Competitive 
Traders and Registered Competitive Market Makers).
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts, 
promote just and equitable principles of trade, remove

[[Page 15827]]

impediments to and perfect the mechanism of a free and open market and 
a national market system. The proposal appears reasonably designed to 
provide NYBX users flexibility and greater control over how their 
orders interact with available liquidity. The Commission notes that the 
proposal is consistent with the order protection rule of Regulation 
NMS, because an NYBX IOC order would not be permitted to trade through 
a protected quotation of another automated trading center.
---------------------------------------------------------------------------

    \12\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NYSE-2012-01) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6387 Filed 3-15-12; 8:45 am]
BILLING CODE 8011-01-P