SEC Order Disapproving Proposed Rule Changes to Codify Certain Traditional Trading Floor Functions That May Be Performed by Designated Market Makers
The SEC issued an order DISAPPROVING a number of proposed rule changes that the NYSE and NYSE Amex (collectively the SROs) had each filed with the SEC to amend certain of their respective rules relating to Designated Market Makers (DMMs) and Floor brokers. The SRO Proposals sought to amend the SRO's rules in 4 ways:
- Codify certain trading floor functions that may be performed by DMMs:
- Maintaining order among Floor brokers manually trading at the DMMs assigned panel.
- Bringing Floor brokers together to facilitate training.
- Assisting Floor brokers with respect to their orders by providing information regarding the status of a Floor brokers orders, helping to resolve errors or questioned trades, adjusting errors, and cancelling or inputting Floor broker agency interest on behalf of a Floor broker.
- Researching the status of orders or questioned trades.
- Allow DMMs to access Exchange systems that would provide DMMs with additional order information about the securities in which they are registered.
- Make certain conforming amendments to SRO rules to reflect the additional order information that would be available to DMMs through Exchange systems, and specify what information about Floor broker agency interest file ("e-Quotes") is available to the DMM.
- Modify the terms under which DMMs would be permitted to provide market information to Floor brokers and others.
The SEC expressed concern about whether the proposals would allow DMMs unfair "access to potentially valuable information about Exchange orders, that is not available to other[s] . . . , including the identity of the entering and clearing firm." The SEC noted that while the proposals may improve the ability of DMMs and Floor brokers to trade on the Exchanges, such benefits must not be disproportionate to the services provided.
View release in full here (links externally to SEC website).