Transcript Corporate Title Slide, Preferred Dark Arial 36pt Regular

Market Making on
NYSE Arca
Part 1: Market Maker Access, Obligations and Requirements
*** Upon completing your review of this training material, you are required to sign and return
the signature page found on the last page of this packet. ***
© 2007 NYSE Euronext. All Rights Reserved.
Becoming a part of a new marketplace
NYSE Arca, a fully electronic trading platform, will provide a new, innovative,
and competitive alternative to current market centers. By providing
automated order execution, a totally open order book and simplified access,
NYSE Arca levels the playing field for all investors by:
Implementing a trading structure that emphasizes displayed trading interest.
With our open limit order book, all market participants have the same
information and can anonymously display their trading interest.
Matching limit orders ranked according to price-time priority.
Using electronic order matching to find the best price on NYSE Arca or by
routing an order externally using high-speed proprietary routing.
2
NYSE Arca Trading Access
• Broker-dealer must become a NYSE Arca Equity Trading Permit (ETP)
Holder
• Must complete necessary contracts to participate
• ETP Holders can register to become a market maker firm
3
Trading Access for Non-ETP Holders
• ETP Holders can provide direct access by sponsoring broker-dealers, non
broker-dealers or non ETP holders (Sponsored Participants)
• ETP Holder is designated by a Sponsored Participant to execute, clear
and settle transactions on NYSE Arca
• Sponsored Participant agrees to comply with NYSE Arca’s Bylaws, Rules
and procedures with regard to its activity on NYSE Arca
• The Sponsoring ETP Holder is responsible for any and all actions taken
by the Sponsored Participant
4
Becoming a Market Maker Firm
• Must be an ETP Holder
• Register as a market maker by filing a written application with NYSE Arca
• The registered Market Makers will be designated as dealer-specialists on
NYSE Arca for all purposes under the Exchange Act.
When approving, NYSE Arca will consider, among other things, the ETP
Holder’s:
• capital operations
• personnel
• technical resources
• disciplinary history
5
Requirements for Market Maker Firms
• Be in good standing with NYSE Arca
• Inform NYSE Arca of any material change in financial or operational
condition or in personnel
• Have the capability to clear and settle transactions through the facilities of
a registered clearing agency
• Meet Minimum Net Capital Requirements
6
Net Capital Requirements and Financial Reports
Market Makers Subject to the Aggregate Indebtedness Requirement must
maintain minimum net capital that is the greater of:
• $100,000
• $2,500 for each security that it is registered as a Market Maker (unless a
security in which it makes a market has a market value of $5 or less, in
which event the amount of net capital shall be not less than $1,000 for
each such security) based on the average number of securities that such
Market Maker is registered during the 30 days immediately preceding the
computation date
• 6 2/3 percent of aggregate indebtedness
• The amount prescribed by SEC Rule 15c3-1
7
Net Capital Requirements and Financial Reports
Market Makers Subject to the Alternative Net Capital Requirement must
maintain minimum net capital that is greater than:
• $250,000 or
• 2 percent of aggregate indebtedness
• The amount prescribed by SEC Rule 15c3-1.
8
Books and Records Requirements / Disclosure
Market Makers are required to:
• Provide monthly financial statements consisting of FOCUS Part IIA to
FINRA for Market Maker capital compliance review
• Disclose promptly any material change in financial or operational
condition, or in personnel in accordance with the rules and procedures of
NYSE Arca (including any financial arrangements with any other person or
entity).
• Disclose any financial arrangements with any person or entity pursuant to
NYSE Arca Rules
• Establish, maintain, and enforce written procedures to supervise the
business in which it engages and to supervise the activities of its
associated persons
9
Information Barrier Procedures
• A Market Maker on NYSE Arca may engage in other business activities, or
it may be affiliated with a broker-dealer that does, only if there is an
Information Barrier between the market making activities and the other
business activities
• Every ETP Holder must establish, maintain, and enforce written policies
and procedures reasonably designed, to prevent the misuse of material,
non-public information by such ETP Holder or persons associated with
such ETP Holder
• Any ETP Holder or associated person who becomes aware of a possible
misuse of material, non-public information must promptly notify NYSE
Arca’s Surveillance Department
10
About MMATs
• A MMAT is an Authorized Trader that performs market making activities
• Must be an officer, partner, employee, or another associated person of a
Market Maker, who is properly qualified to perform market making
activities and has been trained and certified in the use of NYSE Arca
• Must be Series 7 registered or have served as a dealer-specialist or
market maker for 2 consecutive years within the last 3 years
• May only submit orders for the account of its own Market Maker
• NYSE Arca may suspend the registration of an MMAT for failure to comply
with Exchange and/or SEC Rules
• The Market Maker may withdraw the registration of an MMAT upon written
request to NYSE Arca
11
Registration of Market Maker Firms
• Registration will become effective upon notice from NYSE Arca
• Registration may be suspended or terminated upon a determination of any
substantial or continued failure by the Market Maker to engage in dealings
in accordance with the Market Maker’s obligations under NYSE Arca rules
• Market Maker may voluntarily withdraw its registration by giving written
notice to NYSE Arca. The withdrawal will become effective on the tenth
business day following NYSE Arca’s receipt of the notice
• Each Market Maker firm must apply in writing to NYSE Arca to register a
Market Maker Authorized Trader (MMAT)
• MMATs must not be subject to statutory disqualification
12
Market Maker Obligations - Trading
For each security in which the Market Maker is registered, the Market Maker
Must:
• MMs must maintain continuous, two-sided quotes for each security in
which the firm is registered as set forth by the parameters in NYSE Arca
Rule 7.23.
• Cleanup Order obligation for each Market Order Auction
• Lead Market Makers must meet minimum performance requirements
which include a BBO requirement, minimum displayed size, minimum
quoted spread and participation requirements for opening and closing
auctions. Performance requirements will be determined by NYSE Arca
and detailed in the LMM Requirements document
13
Market Maker Obligations – Temporary Withdrawal
• May apply to NYSE Arca to withdraw temporarily from its Market Maker
status
• Request must be based on demonstrated legal or regulatory requirements
that necessitate temporary withdrawal
14
Registration in a Security
• Market Maker must file a security registration application form with NYSE
Arca
15
Security Registration Approval
NYSE Arca may consider:
• Financial resources available to the Market Maker
• Experience, expertise and past performances in making markets,
including the Market Maker’s performance in other securities
• Operational capability
• Maintenance and enhancement of competition among Market Makers in
each security in which it is registered
• Arrangements for clearing
• Character of the market for the security e.g., price, volatility, and relative
liquidity
16
Security Termination and Suspension
• NYSE Arca may terminate a Market Maker’s registration in a security if the
Market Maker fails to enter quotations in the security within five business
days after registration becomes effective
• NYSE Arca may suspend or terminate the Market Maker’s registration in a
security or securities whenever, in NYSE Arca’s judgment required market
maker obligations are not met
• A Market Maker may voluntarily terminate its registration in a security by
providing NYSE Arca with a one-day written notice
17
Market Making on
NYSE Arca
Part 2: Order Types and Order Processing
© 2007 NYSE Euronext. All Rights Reserved.
Order Types - Standard
Market - An order to buy or sell a stated amount of a security that is to be
executed at the NBBO when the order reaches the Corporation. Market
Orders shall not trade through Protected Quotations.
Limit – An order to buy or sell a stated amount of a security at a specified
price or better. A marketable limit order is a limit order to buy (sell) at or
above (below) the PBBO for the security.
Inside Limit Order – A Limit Order which will be routed to the market
participant with the best displayed price. Any unfilled portion of the order will
not be routed to the next price level until all quotes at the current bid or offer
are exhausted. Non-marketable Inside Limit Orders will be ranked in the
NYSE Arca Book at the limit price.
19
Order Types
Good Till Cancelled “GTC” – An order to buy or sell (or an unexecuted
portion thereof) which, if not executed, remains in effect until executed,
cancelled by the entering party, or expiration, whichever comes first. All
unexecuted portions of GTC Orders will be cancelled by the Corporation one
year after initial entry.
Good Till Date “GTD” - An order to buy or sell (or unexecuted portion
thereof) set to expire following the close of the core session of the predetermined date specified by the entering party which, if not executed,
remains in effect until executed, cancelled by the entering party, or
expiration, whichever comes first. All unexecuted portions of GTD Orders
will be cancelled by the Corporation one year after initial entry.
Immediate or Cancel “IOC” – A market or limit order that is to be executed
in whole or in part on NYSE Arca as soon as the order is received. Any
residual balance is canceled.
20
Order Types
Tracking Order – An undisplayed, priced round lot order that is eligible for
execution in the Tracking Order Process against orders equal to or less than
the aggregate size of Tracking Order interest available at that price. If a
Tracking Order is executed but not exhausted, the remaining portion of the
order shall be cancelled, without routing the order to another market center
or market participant. A Tracking Order shall not trade-through a Protected
Quotation.
Working Orders - Any order with a conditional or undisplayed price and/or
size including, All-or-None Orders, Discretionary Orders, Reserve Orders,
Passive Liquidity Orders, and Mid-Point Passive Liquidity Orders.
All-or-None Order - A limit order which is to be executed in its entirety or
not at all. Will not trade through a protected quotation.
21
Order Types
Discretionary Order – An order to buy or sell a stated amount of a security
at a specified, undisplayed price (the "discretionary price"), in addition to at a
specified, displayed price.
Passive Discretionary Order – The order is displayed at your specified
price (not your discretionary price) and is not eligible to route. When a bid or
offer appears in the Book at or within your discretionary price range, it will be
executed against the Book as long as it does not trade through a Protected
Quote. A discretionary price can be used in combination with a reserve
order.
Discretion Limit Order – For Nasdaq securities only. An order that is
displayed at your specific price, not your discretionary price, along with a
share quantity minimum requirement for routing discretionary prices outside
the Book. When a protected bid or offer appears on an away market at or
above your share quantity minimum, your order will be routed to protected
Quotes.
22
Order Types
Reserve Order - A limit order with a portion of the size displayed and with a
reserve portion of the size ("reserve size") that is not displayed on the
Corporation.
Sweep Reserve Order – Based upon a User's instruction, if the displayed
price of a Sweep Reserve Order is marketable against an away market
participant(s), then such order will be routed (i) serially as component
orders, such that each component corresponds to the displayed size, or (ii)
only once in its entirety, including both the displayed and reserve portions.
Random Reserve Order – A Reserve Order designated as a Random
Reserve Order will have a random reserve value (as expressed in share
quantity) which, as a range of round lots, will vary the displayed size of the
Reserve Order. A random reserve value set to zero will permit the displayed
size of the Reserve Order to vary within 20% of the original specified
displayed size.
A Reserve Order and Sweep Reserve Order shall not lock, cross or tradethrough a Protected Quotation.
23
Order Types
Passive Liquidity Order - An order to buy or sell a stated amount of a
security at a specified, undisplayed price. Passive Liquidity Orders will be
executed in the Working Order Process after all other Working Orders
except undisplayed discretionary order interest. Passive Liquidity Orders
with a price superior to that of Directed Fills or displayed orders will have
price priority and will execute ahead of those inferiorly priced.
Mid-Point Passive Liquidity Order (“MPL Order”) - Priced at the midpoint
of the PBBO. An order designated as an MPL Order will not trade-through a
Protected Quotation. MPL orders have a minimum order entry size of 100
shares. An MPL Order with a specified minimum executable size will
execute against an incoming order that meets the minimum executable size
and is priced at or better than the midpoint of the PBBO. Should the leaves
quantity become less than the minimum size, the minimum size restriction
will no longer be enforced on executions. MPL Orders do not receive price
improvement. MPL Orders are valid for any session, but do not participate in
any auctions. MPL Orders will not route to other market centers.
24
Order Types
Q Order – A Market Maker may instruct the NYSE Arca Marketplace before
6:28 am (PT) to enter a Q Order on their behalf as follows:
(1) At the last price and size entered by the Market Maker during the
previous trading day, either including or excluding reserve size;
(2) At a specified percentage from the best bid or offer;
(3) At the standard Q defined as $0.01 bid and 2 times the previous day's
close for the offer with specified display and reserve sizes.
Upon execution, the Q Order entered with reserve size pursuant to the
above instructions will automatically repost with the original display size and
$10 below the original bid or $10 above the original offer, but never below
$0.01; provided, however, that if the Market Maker specifies a reserve size
for the Q Order, the Q Order will not automatically repost once the reserve
size is exhausted. The Market Maker will then be responsible for
immediately posting a new Q Order.
Upon execution of a Q Order entered without reserve size, the Market
Maker will then be responsible for immediately posting a new Q order.
25
Order Types
Stop Order – A Stop Order to buy becomes a market order when a
transaction in the security occurs on the Corporation or on another national
securities exchange or association at or above the stop price. A Stop Order
to sell becomes a market order when a transaction in the security occurs on
the Corporation or on another national securities exchange or association at
or below the "stop" price. Stop Orders shall not have standing in any Order
Process in the NYSE Arca Book and shall not be displayed.
Stop Limit Order - A Stop Limit Order to buy becomes a limit order when a
transaction in the security occurs on the Corporation or on another national
securities exchange or association at or above the stop price. A Stop Limit
Order to sell becomes a limit order when a transaction in the security occurs
on the Corporation or on another national securities exchange or association
at or below the stop price.
26
Order Types
Do Not Reduce - A limit order to buy, a Stop Order to sell or a Stop Limit
Order to sell which is not to be reduced by the amount of an ordinary cash
dividend on the ex-dividend date. A Do Not Reduce Order applies only to
ordinary cash dividends; it should be reduced for other distributions such as
when a stock goes "ex" a stock dividend or ex rights.
Do Not Increase - A limit order to buy, a Stop Order to sell or a Stop Limit
Order to sell which is not to be increased in shares on the ex-date as a
result of a stock dividend or stock distribution.
Timed Order – A limit order to buy or sell that is to remain in effect until a
specified time, after which such order or the portion thereof not executed is
to be treated as cancelled. The specified time interval of such order may
remain in effect for one or more consecutive trading sessions for that
particular day only.
27
Order Types
Fill-or-Return - An order to buy or sell that is to be executed in whole or in
part on the Corporation, and the portion not so executed is to be cancelled,
without routing the order to another market center or market participant.
Fill-or-Return Plus - An order to buy or sell that is to be executed in whole
or in part on the Corporation, and the portion not so executed is to be
cancelled, without routing the order to another market center or market
participant. In the event any portion of the order is not executed on the
Corporation and must be cancelled, the NYSE Arca Marketplace shall send
an administrative message to an ETP Holder stating that a portion of the
order was cancelled.
28
Order Types
Cross Order - A two sided order with both a buy and sell component
combined that trades at a stated price for a stated size specified by the user.
Cross orders must satisfy better prices displayed in the Book and any
Protected Quotes before matching the remaining shares as a cross.
Midpoint Cross – A two-sided order with both a buy and sell component
combined that trades at the midpoint of the PBBO. Orders will never be
broken up and will always execute as “clean crosses.” Orders cannot trade
ahead of the Book.
IOC Cross – A two-sided order with both a buy and sell component that
trades at a price specified by the user. An IOC Cross will not interact with
the Book or Protected Quotes, and will be rejected if order interaction would
occur. Orders will never be broken up and will always execute as “clean
crosses.” Orders cannot trade ahead of the Book.
29
Order Types
PNP Cross Order – A cross order to buy or sell that is to be executed in
whole or in part on NYSE Arca and the portion not so executed is to be
canceled, without routing any portion of the Cross Order to another market
center.
Cross-and-Post Order - A Cross Order or PNP Cross Order that is to be
executed in whole or in part on the Corporation where any unexecuted
portion of the Cross-and-Post Order will be displayed in the NYSE Arca
Book at the cross price.
Auction-Only Limit Order – A limit order that is to be executed only during
the Market Order Auction or the Trading Halt Auction, as the case may be.
NOW – Limit price order that is executed in whole or in part that will be
routed to one or more NOW recipients (those venues that respond
immediately with a fill or cancel) that are protected quotes for immediate
execution if the order cannot be executed on NYSE Arca. Orders are
immediately cancelled if not executed at the quoted price or better.
30
Order Types
Cleanup Order - NYSE Arca Marketplace will submit only one Cleanup
Order per security on behalf of each Market Maker. Must be at least 2500
shares in size and submitted before 6:15 am (PT) and remain in effect until
the conclusion of the Market Order Auction.
Cleanup Orders must be entered as both buy or sell orders, provided,
however, the Cleanup Order may only be executed on the side of the market
opposite the Imbalance. Cleanup Orders will be executed at the Indicative
Match Price as of the time of the Market Order Auction.
Cleanup Orders will only be executed if: (A) There is an Imbalance at the
conclusion of the Market Order Auction; and (B) The Imbalance is less than
or equal to the aggregate size of all Cleanup Orders in the relevant security.
The market orders which make up the Imbalance will be divided equally
among, and allocated to, all Market Makers registered in the relevant
security and executed against such Market Makers' Cleanup Orders. If no
Imbalance exists at the time of the Market Order Auction, all Cleanup Orders
shall be cancelled at that time.
31
Order Types
Post No Preference (PNP) - A limit order to buy or sell that is executed in
whole or in part on NYSE Arca. The portion not executed is posted in the
Book without routing any portion of the order to another market center. PNP
orders that lock or cross the market will be rejected.
PNP Plus - Will be automatically re-priced by the Corporation as a penny
greater than the Best Protected Bid (for sell orders) or a penny lower than
the Best Protected Offer (for buy orders) for any or all of the order that
remains unexecuted and would otherwise lock or cross the PBBO should it
be displayed in the NYSE Arca Book. The re-priced order will then be
posted in the NYSE Arca Book. The PNP Plus order will continue to be repriced with each change in the PBBO, until such time as the PBBO has
moved to a price where the original price of the PNP Order no longer would
result in a locked or crossed market, at which time the PNP Order will revert
to the original price of such order. PNP Orders designated as PNP Plus
shall be ranked in the NYSE Arca Book and assigned a new price time
priority as of the time of each reposting.
32
Order Types
PNP Blind - A PNP order priced at or through the Best Protected Bid or
Best Protected Offer that is displayed on the book at the price of the contra
quote.
(1) Where the PBBO moves away from the price of the PNP Blind, but the
prices continue to overlap, the limit price of the PNP Blind shall remain undisplayed and its tradeable price shall be adjusted to the contra side of the
best protected offer or best protected bid.
(2) Where the PBBO moves away from the price of the PNP Blind and the
prices no longer overlap, the PNP Blind shall convert to a displayed PNP
limit order.
(3) Where the PBBO moves into the price of the PNP Blind, the PNP Blind
shall adjust its tradeable price to the contra side of the best protected offer
or best protected bid.
(4) PNP Blind orders are governed by the Exchange's Display Order
Process Marketable contra orders will execute first against PNP Blind
orders, then the rest of the book. Multiple PNP Blind orders, in un-displayed
status, shall be treated in time priority, regardless of the price of the order.
33
Order Types
Primary Only Order (PO) – A market or limit order that is to be routed to the
primary market. PO Orders may be entered at any time or until a cut-off time
as determined from time to time by the Corporation. The PO Order shall be
Day or IOC only, and may not be designated as GTC. If the PO Order is not
IOC, the order is not returned to the entering party and remains at the venue
routed to, until executed or cancelled.
Primary Only Order Plus (PO+) – A PO Order entered for participation in
the primary market, other than for participation in the primary market
opening or primary market re-opening, must be marked with the modifier
PO+
Primary Sweep Order (“PSO”) - A PO Order that first sweeps the Arca
book. A PSO may be entered at any time. The PSO shall be Day or IOC
only, and may not be designated as GTC. After sweeping the Arca book, the
PSO (or any unexecuted portion thereof) shall be routed directly to the
primary market. If the order is not IOC, the order is not returned to the book
and remains at the venue routed to, until executed or cancelled.
34
Order Types
Intermarket Sweep Order (“ISO”) for IOC – A designation on an IOC limit
order that allows the order to sweep the Book without regard to any external
quotes (manual or protected).
ISO for PNP – A designation on a PNP limit order that allows the order to
sweep the Book and cross the balance without regard to any external
quotes (manual or protected).
ISO for IOC Cross Orders – A designation on an IOC cross order that
allows the order to sweep the Book and cross the balance without regard to
any external quotes (manual or protected).
ISO for Post Cross Orders – A designation on a post cross order that
allows the order to sweep the Book, cross the balance, and post the takeout
amount without regard to any external quotes (manual or protected).
35
Order Types
Pegged Order - An order with a price that will track the protected best bid or
offer. Pegged orders may also make use of offsets from the same side bid
(offer) or offsets from the contra side (peg buy offset from offer). The order is
displayed in the Book.
Market-On-Close - A market order that is to be executed only during the
closing auction.
Limit-On-Close - A limit price order that is to be executed only during the
closing auction.
Don't Arb Me Modifier - A limit order in which the Corporation will re-price
the order at the block price subsequent to the limit order being tradedthrough by another market center's block trade. The order shall be ranked in
the NYSE Arca Book and assigned a new time price priority as of the time of
each reposting. This modifier will apply only to exchange-listed securities.
36
Order Types
Proactive if Locked Reserve - A Reserve Order that will route to another
market center pursuant to NYSE Arca Equities Rule 7.37(d) for the away
market's displayed size up to such reserve amount in the instance in which
the other market center has locked the order and the locking market has not
resolved the locked market situation in a timely manner based upon average
response times from ITS Participants. In the event that the order routed from
the NYSE Arca Marketplace to the other market center is not executed in its
entirety, the NYSE Arca Marketplace shall post the order or portion thereof
in the NYSE Arca Marketplace Book. Proactive if Locked Reserve will apply
only to exchange-listed securities.
37
Order Types
Fill-or-Kill Order - A limit order that is marked Fill-or-Kill is to be executed in
full as soon as such order is received. If execution is not possible, the entire
order will be immediately cancelled. Fill-or-Kill Orders will not route out of
NYSE Arca to other market centers.
Users may specify a minimum executable size for a Fill-or-Kill order, no less
than 100 shares. If Users do not specify a minimum executable size, then
the Fill-or-Kill order will be executed in its entirety or immediately cancelled.
A Fill-or-Kill order with a specified minimum executable size will execute
only against orders that (in aggregate) meet its minimum executable size.
Any remaining unexecuted portion of a Fill-or-Kill order will be immediately
cancelled. A Fill-or-Kill order with a minimum executable size that can not be
immediately executed at its minimum size will be immediately cancelled in
its entirety.
38
Order Types
Adding Liquidity Only Order (ALO Order) - A limit order that is accepted
and posted to the NYSE Arca book only where the order adds liquidity to the
NYSE Arca book. Once accepted and placed in the NYSE Arca book, ALO
Orders will not route to an away market center. The ALO Order shall be Day
only, and may not be designated as GTC. ALO Orders will be rejected
where, at the time of entry:
(1) the ALO Order is marketable;
(2) the ALO Order will lock or cross the market;
(3) the ALO Order would interact with un-displayed orders on NYSE Arca.
39
Order Ranking and Display
• NYSE Arca shall display all non-marketable limit orders in the Display
Order Process and disseminate current consolidated quotations/last sale
information
• Ranking. Orders will be ranked and maintained in the Display Order
Process and/or Working Order Process of the Arca Book according to
price-time priority
• Display. All orders at all price levels in the Display Order Process of the
Arca Book shall be displayed on an anonymous basis
• Dissemination. The best-ranked displayed order(s) to buy and the best
ranked displayed order(s) to sell in the Arca Book and the aggregate
displayed size of such orders associated with such prices shall be
collected and made available to quotation vendors
40
Order Execution Process
• NYSE Arca is divided into three components:
• Display Order Process
• Working Order Process
• Tracking Order Process
• The NYSE Arca Book will be operated on an open basis
• All orders at all price levels in the Display Order Process of the NYSE
Arca Book will be displayed to all Users on an anonymous basis
• The NYSE Arca shall determine the trading differentials for equity
securities traded on NYSE Arca
41
1) Display Process
Trader’s
Order
NYSE Arca Book
Executed Order
- Displayed Orders
- Working Orders
- Tracking Orders
Market
Maker Fill
or
Smart Order
Routing
• Book includes limit orders and displayed portion of reserve and
discretionary orders
• Highest priority in the system
• Orders are ranked in price/time priority
42
2) Working Process
Trader’s
Order
NYSE Arca Book
Executed Order
- Displayed Orders
- Working Orders
- Tracking Orders
Market
Maker Fill
or
Smart Order
Routing
• Reserve and Discretionary portion of working orders
• Orders are ranked relative to the original time of entry
• Gives the end user the capability to interact with the market using
specialized order types
43
3) Tracking Process
Trader’s
Order
NYSE Arca Book
Executed Order
- Displayed Orders
- Working Orders
- Tracking Orders
Market
Maker Fill
or
Smart Order
Routing
• Orders pegged to the NBBO
• Provides the last opportunity for interaction before orders are routed away
44
Routing Away
Trader’s
Order
NYSE Arca Book
Executed Order
- Displayed Orders
- Working Orders
- Tracking Orders
Market
Maker Fill
or
Smart Order
Routing
• Unfilled or residual portion of the order is routed away
• Routing to other Market Centers or Market participants
• NYSE Arca uses its affiliated broker-dealer, Archipelago Securities, as its
outbound order router
45
Trading Sessions: Opening Auction
• Beginning 30 minutes prior to the Opening Session, the Indicative Match
Price of the Opening Auction, and any associated imbalance, shall be
published via electronic means
• At 4:00 am ET, Limited Price Orders designated for the Opening Session
are matched and executed in the Opening Auction
• The Opening Auction will occur at the Indicative Match Price--the price at
which the maximum volume of orders are executable at the time of the
auction
46
Trading Sessions: Market Order Auction
• Beginning at 8:00 am ET, and updated real-time thereafter, the Indicative
Match Price of the Market Order Auction and the volume of Market Orders
and Limit Orders available to trade at such price, and the Market
Imbalance and Total Imbalance, if any, shall be published via electronic
means
• Any Imbalance in the Market Order Auction may be reduced by new
orders, entered on the side of the market opposite the imbalance
• In certain cases, the midpoint of the NBBO at 9:30 am ET may be used if
volume is not sufficient to decrease the total imbalance
47
Trading Sessions: Market Order Auction
• Between 9:29 am ET and the conclusion of the Market Order Auction,
Limited Price Orders eligible for the Opening Session or the Core Trading
Session may be cancelled (except for market orders, Auction-Only Limit
Orders and Cleanup Orders )
• Between 9:29 am ET and the conclusion of the Market Order Auction,
market orders and Auction-Only Limit Orders may not be entered on the
same side as the Imbalance
• Market orders and Auction-Only Limit Orders may be entered on the
opposite side of the Imbalance, however, any time before the Market
Order Auction
48
Trading Sessions: Market Order Auction
8:00 am
5000 Buy Market
500 Sell at $20
4000 Sell Market
5000 Buy
4500 Sell
8:01 am
Published Imbalance: 500 to buy at $20
8:20 am
New order to sell 500 at $20.05
8:21 am
Publish: 5000 priced at $20.05
9:30 am
Auction occurs at $20.05
49
Transition to Core Trading
• Limited Price Orders entered before 9:29 am ET shall participate in the
Market Order Auction
• Limited Price Orders designated for the Core Trading Session entered
after 9:29 am ET shall become eligible for execution at 9:30 am ET or at
the conclusion of the Market Order Auction, whichever is later
• Market orders entered after 9:29 am ET and before 9:30 am ET, which are
eligible for either the Market Order Auction or the Core Trading Session,
shall become eligible for execution at 9:30 am ET or at the conclusion of
the Market Order Auction, whichever is later
• Stop Orders entered before or during the Opening Session become
eligible for execution at 9:30 am ET or at the conclusion of the Market
Order Auction
50
Core and Late Trading Sessions
• Core Trading Session
• Begin at 9:30 am ET or at the conclusion of the Market Order Auction
(whichever comes later)
• Conclude at 4:00 pm ET
• Late Trading Session
• Begin following the conclusion of the Core Trading Session
• Conclude at 8:00 pm ET
51
Clearly Erroneous Policy
• ETP Holders that receive an execution on an order that was submitted
erroneously to NYSE Arca may request a review of the transaction
• Review requests must be made via e-mail
• The request should be submitted within fifteen (15) minutes of the time the
trade in question was executed
• Once the request has been received a review of the transaction under
dispute will be conducted and a determination will be made whether it is
clearly erroneous
52
Trading Ahead of Customer Limit Orders
• No ETP Holder may accept and hold an unexecuted limit order from its
customer (whether its own customer or a customer of another ETP
Holder) and continue to trade the security on NYSE Arca for its own
account at prices that would satisfy the customer’s limit order, without
executing that limit order
• An ETP Holder may negotiate specific terms and conditions applicable to
the acceptance of limit orders only with respect to limit orders that are for
institutional customer accounts (10,000 shares or more, unless such
orders are less than $100,000 in value)
53
Clearance and Settlement
• Each ETP Holder must be a clearing firm, clear transactions on NYSE
Arca through a clearing firm, or clear transactions through an entity duly
authorized by NYSE Arca
• Clearing firm must be an ETP Holder
• An ETP Holder must identify the clearing firm through which each
transaction on NYSE Arca will be cleared
• If there is a subsequent change in identity of the clearing firm through
whom the transaction on NYSE Arca will be cleared, the ETP Holder shall
report such change at least five (5) business days in advance
54
Communication and Equipment Requirements
• Every ETP Holder must have reasonable procedures to ensure that it
maintains the physical security of the equipment for accessing NYSE Arca
• ETP Holders must provide NYSE Arca with a completed Connectivity
Questionnaire, identifying the means of connectivity to the Exchange and
the intended uses
55
Help Desk and RTO
• Every ETP Holder must have reasonable procedures to ensure that it
maintains the physical security of the equipment for accessing NYSE Arca
• ETP Holders must provide NYSE Arca with a completed Connectivity
Questionnaire, identifying the means of connectivity to the Exchange and
the intended uses
56
Signature Page
I, __________________, confirm that I reviewed and that I understand the
policies and procedures set forth in NYSE Arca’s Market Maker Training
Program.
____________________
Name (Sign)
____________________
CRD Number
____________________
Firm
____________________
Date
57