Document ID: SEC-2011-0746-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-05-26T04:00Z

[Federal Register Volume 76, Number 102 (Thursday, May 26, 2011)]
[Notices]
[Pages 30745-30746]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13023]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64525; File No. SR-NYSEArca-2011-30]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Its Rules 
To Remove the Concept of an ``Odd Lot Dealer''

May 19, 2011.
    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 May 12, 2011, 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 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.
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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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to remove the concept of 
an ``Odd Lot Dealer.'' The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, 
http://www.nyse.com, and the Commission's Web site at http://www.sec.gov.

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 Equities proposes to amend its rules to remove the 
concept of an Odd Lot Dealer.
    An Odd Lot Dealer is any Market Maker who has agreed to buy and 
sell securities in odd lots (i.e., orders less than 100 shares) at the 
Best Protected Bid and the Best Protected Offer throughout the duration 
of Core Trading Hours and who is registered as an Odd Lot Dealer in 
accordance with NYSE Arca Equities Rule 7.25.
    Before August 13, 2009, the Exchange charged $0.03 per share for 
odd lot orders executed against orders residing in the book in Tape A 
and Tape B securities, and $0.0035 per share for Tape C securities and 
paid a $0.02 per share credit to Market Makers that executed against an 
odd lot order.\4\ The Exchange also had odd lot pricing associated with 
odd lots routed to different market centers.\5\ As of August 13, 2009, 
the Exchange eliminated this differential odd lot pricing structure and 
thereafter charged and credited ETP Holders executing odd lots in the 
same way that it charged and credited them for round-lot executions, 
thereby simplifying the Exchange's fee structure.\6\ Thereafter, in 
November 2009, the Exchange eliminated the requirement that for each 
security in which a Market Maker was registered as a Lead Market Maker 
(``LMM''), the LMM also was required to register as an Odd Lot Dealer 
in that security.\7\ Thereafter, LMMs could choose to register as an 
Odd Lot Dealer, but were not be required to do so.
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    \4\ See Exchange Act Release No. 60495 (Aug. 13, 2009), 74 FR 
41957 (August 19, 2009) (SR-NYSEArca-2009-72).
    \5\ Id. at 41958.
    \6\ Id.
    \7\ See Exchange Act Release No. 61025 (November 18, 2009), 74 
FR 61726 (November 25, 2009) (SR-NYSEArca-2009-102).
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    Since March 2010, no Market Maker has maintained a registration as 
an Odd Lot Dealer. Because (1) Exchange systems can process odd lot 
orders and they are treated the same as round lot and mixed lot orders 
for purposes of ranking and execution, (2) there is no financial 
incentives or requirements to act as an Odd Lot Dealer, and (3) there 
currently is no ETP Holder acting as an Odd Lot Dealer, the Exchange 
believes that it is appropriate to eliminate the concept of Odd Lot 
Dealer from its rules. As such, the proposed rule change eliminates the 
description of an Odd Lot Dealer (or references to rules relating to 
Odd Lot Dealers) and make conforming changes in NYSE Arca Equities 
Rules 1.1, 7.25, 7.31, 7.38, 10.12 and 10.13.\8\
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    \8\ To add clarity, Rule 7.37 also would be amended to provide 
that round lot, mixed lot and odd lot orders shall be treated in the 
same manner in the NYSE Arca Marketplace.
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    In addition, the Exchange proposes to delete Rule 7.38(c) which 
prohibits ETP Holders from: (i) Combining odd lot orders given by 
different customers into a round lot order or orders unless 
specifically requested to do so by the customers giving the orders; 
(ii) unbundling round lots for the purpose of entering odd lot limit 
orders in comparable amounts; (iii) failing to aggregate odd lot orders 
into round lots when such orders are for the same account or for 
various accounts in which there is a common monetary interest; and (iv) 
entering both buy and sell odd lot limit orders in the same stock 
before one of the orders is executed for the purpose of capturing the 
spread in the stock. The Exchange proposes to delete these requirements 
because the issues associated with such odd lot orders are moot now 
that the Exchange's systems can process odd lot orders in the same 
manner as round lot

[[Page 30746]]

and mixed lot orders for purposes of ranking and execution.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\9\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\10\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Exchange 
does not believe that the removal of rules surrounding Odd Lot Dealers 
will affect the protection of investors or public interest because 
Exchange systems can process odd lot orders and they are treated the 
same as round lot and mixed lot orders for purposes of ranking and 
execution, there is no financial incentive or requirements to act as an 
Odd Lot Dealer, and there currently is no ETP Holder acting as an Odd 
Lot Dealer.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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.

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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, 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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its 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 Exchange has fulfilled this requirement.
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    At any time within 60 days of the filing of the 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
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-30 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-2011-30. 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 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 a.m. and 3 p.m. Copies of the 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-2011-30 and should be submitted on or before June 16, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13023 Filed 5-25-11; 8:45 am]
BILLING CODE 8011-01-P