Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange is proposing to modify the text of Exchange Rule 11.11, 11.14 and 11.15 to (1) clarify that the Exchange's trading system (the "System"
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange 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 these 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 Exchange is proposing to amend its rules to clarify that the System will not execute Zero Display Reserve Orders during a crossed market. A Zero Display Reserve Order is a Reserve Order for which the entire order size remains hidden or undisplayed.
Exchange Rule 11.15(a)(iv) sets forth the manner in which Zero Display Reserve Orders are executed. Currently, the System will not execute a Zero Display Reserve Order during a crossed market. The Exchange is proposing to amend Rules 11.11(c)(2)(A) and 11.11(c)(2)(D), 11.14(a)(4) and Rule 11.15(a)(iv) in order to provide that (i) Zero Display Reserve Orders will not execute during crossed markets, and (ii) such Zero Display Reserve Orders will be eligible for execution when the market uncrosses (i.e., the protected bid is priced lower than the protected offer). The Exchange will make other clarifying edits to similar rules in an effort to maintain clear and cohesive Exchange rules.
Exchange Rule 11.15(a)(iv) currently provides that a Zero Display Reserve Order designated as a Post Only Order which is marketable upon entry, but not executed pursuant to Rule 11.11(c)(5)(B), is ranked in the NSX Book and "matched for execution in accordance with Rule 11.15." The Exchange proposes to amend the language in Rule 11.15(a)(iv) to explicitly provide that Zero Display Reserve Orders will not execute during a crossed market. The Exchange is also proposing to add language to Rule 11.15(a)(iv) to clarify that these orders, if not cancelled during this period, will be executed when the protected bid is priced lower than the protected offer.
The Exchange sets forth the execution priority for Reserve Orders, including Zero Display Reserve Orders, in Rule 11.14. Under this rule, Reserve Orders have time priority over Zero Display Reserve Orders. The time priority among Zero Display Reserve Orders at the same price is established by several factors including whether the order has a Minimum Execution Quantity Instruction.
These clarifying amendments provide Equity Trading Permit ("ETP") holders with additional information regarding how the System executes Reserve Orders and Zero Display Reserve Orders. The Exchange further proposes to clarify this notion in Rule 11.11(c)(2)(D) by referencing the execution process for Zero Display Reserve Orders set forth in 11.15(a)(iv). Currently, Rule 11.11(c)(2)(D) notifies ETP Holders that Zero Display Reserve Orders will not be eligible for routing to away Trading Centers. By adding the
Finally, the Exchange proposes to make some clarifying modifications to the Zero Display Reserve Order Rules in Exchange Rule 11.11(c)(2)(A). Namely, the Exchange is proposing to clarify the Exchange's language addressing Zero Display Reserve Orders, in general, by adding the definition of a "Primary Peg". In the proposed language, a Primary Peg is "a pegged Zero Display Reserve Order that tracks the inside quote of the same side of the market." This order type is currently offered by the Exchange, and the Exchange is, therefore, proposing to modify this Rule to make clear that the Primary Peg Order type is available to users. The Exchange also proposes to add this language to clarify to ETP Holders all modifiers that may be used in the NSX System with respect to Zero Display Reserve Orders.
The Exchange believes the proposed rule change is consistent with Section 6 of the Act),
The proposed rule change provides transparency and certainty with respect to how certain orders are executed on the Exchange. In so doing, the proposed rule change promotes the maintenance of a fair and orderly market, the protection of investors and the protection of the public interest, consistent with the Act and the rules promulgated thereunder.
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.
Written comments on the proposed rule change were neither solicited nor received.
Because the foregoing 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 for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
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.
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 email to
* 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-NSX-2012-16. 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 (