Pursuant to Section 19(b)(1)
The Exchange proposes to amend its rules governing order exposure requirements on the OX system. This proposal will revise Rule 6.47A. A copy of this filing is available on the Exchange's Web site at
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.
The purpose of the proposed rule change is to reduce the exposure period contained in Rule 6.47A, Order Exposure Requirements—OX, from three seconds to one second.
Rule 6.47A provides that with respect to orders routed to OX, Users may not execute as principal orders they represent as agent unless (i) Agency orders are first exposed on the Exchange for at least three (3) seconds or (ii) the User has been bidding or offering on the Exchange for at least three (3) seconds prior to receiving an agency order that is executable against such bid or offer.
Specifically, order entry firms may not execute as principal, orders they represent as agent unless: (i) the agency order has first exposed on the NYSE Arca OX trading system for at least three seconds; (ii) the order entry firm has been bidding or offering for at least three seconds prior to receiving the agency order that is executable against such bid or offer. During this three-second exposure period, other market participants may enter orders to trade
The Exchange notes that in incorporating a three-second order exposure period in Rule 6.47A, it recognized that three seconds would not be long enough to allow human interaction with the exposed orders. Rather, market participants on NYSE Arca are sufficiently automated that they can react to these orders electronically. In this context, NYSE Arca believes it would be in all market participants' best interest to minimize the exposure period to a time frame that continues to allow adequate time for market participants to electronically respond, while at the same time reducing any market risk associated with the longer exposure period. In this respect, the Exchange states that its experience with the three-second exposure time period indicates that one second would provide an adequate response time.
When adopting the existing three-second order exposure period, the Exchange realized that, in today's electronic trading environment, a three-second exposure period could provide timely executions of orders while still providing market participants with an adequate opportunity to compete for exposed bids and offers. Continuing on that same logic, the Exchange believes that reducing its order exposure period from three seconds to one second will benefit market participants. Since market participants have the ability to react to these orders electronically, and regularly do so in less than one second, the Exchange believes that reducing the time period to one second will continue to afford sufficient time to ensure effective interaction with orders. At the same time, NYSE Arca believes that reducing the time period to one second will allow it to provide investors and other market participants with more timely executions, thereby reducing market risk.
A shortened exposure period would be fully consistent with the electronic nature of the NYSE Arca OX trading system. In order to substantiate that market participants on NYSE Arca would not be disadvantaged by a reduced exposure period, the Exchange conducted a survey of OTP Firms to find out whether they had the systems capability available that would allow them to respond in a meaningful way within the proposed timeframe. The Exchange surveyed twenty-six (26) OTP Firms, representing fifty-one (51) different OTP Holders, that regularly access the Exchange on an electronic basis,
Based on the findings of the survey, the Exchange believes that the proposed exposure period will continue to provide market participants with sufficient time to respond, and compete for orders, while also reducing some of the risks associated with a prolonged exposure period.
NYSE Arca believes that the proposed rule change is consistent with Section 6(b) of the Act
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 solicited comments from a broad cross section of OTP Holders. As previously stated, the Exchange received no negative comments on the proposed rule change.
Within 35 days of the date of publication of this notice in the
(A) By order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
The Exchange has requested accelerated approval of this proposed rule change prior to the 30th day after the date of publication of the notice in the
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:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.