The New York Stock Exchange has proposed changes to its Rule 92, which sets out the general prohibition against NYSE members trading on a proprietary basis ahead of or along with customer orders executable at the same price. NYSE proposes to amend the rule to include an exception to the general prohibition which would permit members to trade ahead of a customer order for the purpose of facilitating the execution, on a riskless principal basis, of one or more other customer orders. The proposed exception is modeled after NASD’s so-called “Manning Rule,” and would permit the member, subject to certain requirements, to aggregate like customer orders for allocation (to the extent that aggregation is permissible for the customers’ order types and instructions).
The proposed amendments also would eliminate the requirement to obtain order-by-order consent for a member firm to trade along with a customer’s order, instead allowing customers to affirmatively grant blanket consent for subsequent trade alongs, if appropriate disclosure is provided to the customer. Finally, the proposal would create an exemption from Rule 92 to allow members who are facilitating a customer order to route intermarket sweep orders (ISOs) as required by Regulation NMS without violating Rule 92, upon certain conditions. For purposes of the exemption, when routing ISOs the member must yield its principal executions to any open customer orders required to be protected by Rule 92 and capable of accepting the fill. In addition, the exemption would require that if the member executes an ISO to facilitate a customer order at a price inferior to a protected quotation, then either the customer must consent to not receiving the better price obtained by the ISO or the member must yield its principal execution to the customer.
The comment period for this proposal closes June 21.