May 14, 2013
Gabriel J. Glass
Equities Project Manager Business Analyst
I respectfully submit my comments and views as an industry professional to the Securities and Exchange Commission ("SEC") and the New York Stock Exchange ("NYSE") pursuant to the proposed Release No. 34-69501 to amend Rule 13 - Equities to expand the availability of self-trade prevention (STP) modifiers.
I agree that in expanding the availability STP functionality to additional order types would help promote a free and open market because it would allow firms to better manage order flow and prevent unintended executions with themselves. However, I believe that we can make it even better. The current proposed rule only introduces to NYSE the modifiers STP Cancel Newest (STPN) and STP Cancel Oldest (STPO). In my opinion, there is also a need for STP Decrement and Cancel ("STPD") and STP Cancel Both ("STPC"). Both of these STP modifiers are being used by NYSE ARCA and can certainly help firms to better manage order flow and prevent unintended executions with themselves.
The need for self-trade prevention modifiers arises when there are off-settings orders due to one strategy placing a buy order and a separate strategy placing a sell order for the same security both within the same MPID. When the modifiers would take effect, they would end up canceling some or all of the quantity of the of the order. While the proposed STP modifiers may solve the issue of firms executing orders with themselves on the open market, there is an unintended consequence. The traders of one or both strategy's are not getting filled on their orders. This can possibly leave traders exposed to unnecessary market risk on portfolios that should be hedged. In order to tackle this issue, I would also suggest a new STP modifier, STP Non-tape Execution ("STPE"). This would allow the traders to get their orders filled at the prevailing market price and avoid artificially inflating the volume of the security.
I thank the commission for the opportunity to comment on this proposal.
Gabriel J. Glass