The New York Stock Exchange has amended its Rule 97 to resolve a potential conflict between member firms’ duties under that rule and their duties under Regulation NMS. NYSE Rule 97 prohibits member organizations that hold a long position in their proprietary account as a result of facilitating customer orders during the trading day from buying the same stock as principal on a “plus tick” during the last 20 minutes of trading if the purchase price would be higher than the lowest price at which it acquired the long position. The rule is intended to prevent member firms from driving up the price of the stock at the end of the trading day; however, it also may conflict with a member organization’s duty under Regulation NMS to route proprietary intermarket sweep orders (ISOs) when facilitating a customer order that would trade through a protected bid or offer, as such ISOs might trade at a price that would violate Rule 97.

The amendments to Rule 97 create an exemption to permit member organizations to send buy ISOs to facilitate customer orders that would otherwise trade through a protected quotation during the last 20 minutes of trading, under the following circumstances: (i) the member organization has acquired its proprietary position as a result of a previous block facilitation for a customer; (ii) the facilitation trade to occur during the last 20 minutes of trading would trade through a better priced offer on another market, such that the member is obligated under Regulation NMS to send proprietary ISOs in order to facilitate the customer order; (iii) the customer has declined the better-priced ISO executions; and (iv) the better-priced away offers are such that Rule 97 otherwise would prohibit the firm from sending a proprietary buy order.