The New York Stock Exchange has announced amendments to its Rule 80A to update and clarify the definition of “Program Trading” and the related reporting requirements. Under the prior definition, program trading was defined as either index arbitrage or any trading strategy involving the related purchase of a basket of 15 or more stocks with a total market value of $1 million or more. The rule provided that program trading included purchases and sales made as part of a “coordinated trading strategy,” even if certain other characteristics (such as contemporaneous execution) were absent.
The amended rule, set forth in NYSE Regulation Information Memo 07-52, eliminates the $1 million threshold and focuses instead on what constitutes a “coordinated trading strategy” for purposes of the definition. In the Memo, the NYSE makes clear that not all computer-driven strategies constitute program trading and that trading strategies need not be computer-driven to be considered program trading. Instead, the determination is based on the investment objective of the trading and the linkage or dependency between trades in different securities as they relate to that objective. The Memo identifies certain factors that should be present in a coordinated trading strategy and provides examples of programs that constitute program trading.
In connection with the amended rules, the NYSE has redefined two of the existing Program Trading related audit trail account types (J and K) and has eliminated the requirement that firms submit Daily Program Trading Reports (DPTR). The new account types are available immediately and members must be in compliance by September 30. The DPTR reporting requirements also cease on September 30, but firms must continue to maintain relevant Program Trading data and must make such data available to NYSE upon request within a similar timeframe to that required for DPTRs.