NYSE changes handling of orders in issues priced under $1.00

By: Ray Pellecchia

File Under: NYSE

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NYSE is notifying member firms that we've decided to quote and trade in penny increments only, and we're adopting a non-regulatory trading halt procedure in securities that are priced below $1.00 per share. Although we won't trade those securities at NYSE, we'll still permit them to remain listed so they can continue to be traded by other markets, including NYSE Arca, on an unlisted-trading-privileges basis.

Once halted, trading will not resume at NYSE until the security has traded on all other automated trading centers for at least one entire trading day at a price that at all times is above $1.10.

This affects four issues:
-- Bally Total Fitness Hldg. Corp. (BFT)
-- Conseco, Inc. Warrants (CNO WS)
-- Milacron Inc. (MZ)
-- Revlon Inc. (REV)

Today, March 20, after the close, NYSE will cancel all Good 'til Canceled (GTC) orders in these issues.

Beginning tomorrow, March 21, all orders routed to NYSE in those four issues will be sent directly to NYSE Arca Tradebook for execution. The following order types will be rejected by NYSE Arca Tradebook:
o Good to Canceled (GTC) orders
o Cancel and Replace orders
o Any order submitted by a non-NYSE Arca ETP holder or non-sponsored participant

The NYSE Arca transaction pricing model will apply: $.0020 credit when providing liquidity and $.0030 charge when taking liquidity.

Here are the full Information Memo regarding Amendment to Rule 123D to halt trading in a security whose price is below below $1.00, and our rule filing to the SEC.

If you're still with me here, and are curious why we're choosing not to go sub-penny, this explanation is excerpted from the rule filing (footnotes are deleted):

Regulation NMS, adopted by the Commission in April 2005, provides that each trading center intending to qualify for trade-through protection under Regulation NMS Rule 611 ("Rule 611") is required to have a Regulation NMS-compliant trading system...

Regulation NMS Rule 612 ("Rule 612"), permits markets to accept bids, offers, orders, and indications of interest in increments smaller than a $0.01 per share, but not less than $0.0001 per share, for stocks priced below $1.00 per share and to quote and trade such stocks in sub-pennies. Markets may choose not to accept such bids, offers, orders or indications of interest and the NYSE has done so, maintaining a minimum trading and quoting variation of $0.01 per share for all securities trading below $100,000 per share.

However, the Commission has said that Rule 611's proscription against trade-throughs extends to quotes which include a sub-penny component in stocks priced below $1.00 per share, provided they are better priced by a minimum of $0.01 per share. Rule 612 requires a market that routes an order to another market in compliance with Rule 611 and receives a sub-penny execution to accept the sub-penny execution, report that execution to the customer, and compare, clear and settle that trade.

The Exchange states that, currently, there are no markets quoting or trading NYSE-listed securities that are priced under $1.00 per share in sub-penny increments. The Exchange's trading system does not currently accommodate sub-penny trading, nor can it recognize a quote disseminated by another market center if such quote has a sub-penny component. The Exchange had previously determined that it would not be cost effective to make the changes that would allow its trading system to fully accommodate sub-penny trading. In making this determination, the Exchange weighed the resource allocation choices that would be necessary against the fact that only a very small number of securities listed on the Exchange have fallen below $1.00 in the last three years.

Tags: New York Stock Exchange, Hybrid Market, NYSE, NYSE Group, NYX, trading, stock market