[Federal Register Volume 75, Number 114 (Tuesday, June 15, 2010)]
[Notices]
[Pages 33872-33874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14368]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62231; File No. SR-NYSE-2010-42]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC
Amending NYSE Rule 123C(9)(a)(1) To Extend the Operation of a Pilot
Operating Pursuant to the Rule Until December 1, 2010
June 4, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on May 27, 2010, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Rule 123C(9)(a)(1) to extend
the operation of a pilot operating pursuant the Rule until December 1,
2010. The text of the proposed rule change is available at the
Exchange, on the Commission's Web site at http://www.sec.gov, the
Commission's Public Reference Room, and http://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The New York Stock Exchange (``NYSE'' or the ``Exchange'') proposes
to amend NYSE Rule 123C(9)(a)(1) to extend the operation of a pilot
that allows the Exchange to temporarily suspend certain rule
requirements at the close when extreme order imbalances may cause
significant dislocation to the closing price (``Extreme Order
Imbalances Pilot'' or ``Pilot'') \4\ until December 1, 2010.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 59755 (April 13,
2009) 74 FR 18009 (April 20, 2009) (SR-NYSE-2009-18); see also,
Securities and Exchange Act Release No. 61264 (December 31, 2009) 75
FR 1107 (January 8, 2010) (SR-NYSE-2009-131) (extending the
operation of the pilot from December 31, 2009 to March 1, 2010);
Securities Exchange Act Release No. 61612, (March 1, 2010), (SR-
NYSE-2010-11) (extending the operation of the pilot from March 1,
2010 to June 1, 2010).
\5\ The Exchange notes that parallel changes are proposed to be
made to the rules of NYSE Amex LLC. See SR-NYSEAmex-2010-50.
---------------------------------------------------------------------------
Background
Pursuant to NYSE Rule 123C(9)(a)(1), the Exchange may suspend NYSE
Rule 52 (Hours of Operation) to resolve an extreme order imbalance that
may result in a price dislocation at the close as a result of an order
entered into Exchange systems or represented to a DMM orally at or near
the close. The provisions of NYSE Rule 123C(9)(a)(1) operate as the
Extreme Order Imbalance Pilot.
As a condition of the approval to operate the Pilot, the Exchange
committed to provide the Commission with information regarding: (i) how
often a Rule 52 temporary suspension pursuant to the Pilot was invoked
during the six months following its approval; and (ii) the Exchange's
determination as to how to proceed with technical modifications to
reconfigure Exchange systems to accept orders electronically after 4
p.m.
During the operation of the Pilot, the Exchange believed that the
systems modifications to allow Exchange systems to accept orders
electronically after 4 p.m. would not be as onerous as previously
believed when the Pilot was initially commenced. The Exchange completed
the system modifications necessary to accept orders electronically
after 4 p.m. and began the process of testing the modifications. The
Exchange therefore filed to extend the Extreme Order Imbalance Pilot
until the earlier of SEC approval to make such Pilot permanent or June
1, 2010.\6\ At the time,
[[Page 33873]]
the Exchange anticipated that its quality assurance review process
would be completed by June 1, 2010 and it would be able to operate
under the new system. The quality assurance review determined that
additional testing was required in order to assure the optimal
functioning of the system modifications. Given unanticipated market
wide initiatives that were [sic] (i.e., short sale and stock-by-stock
circuit breakers), which require systemic modifications and a
significant allocation of quality assurance resources, additional
testing is not feasible at this time.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 61612, (March 1,
2010), (SR-NYSE-2010-11) (extending the operation of the pilot from
March 1, 2010 to June 1, 2010).
---------------------------------------------------------------------------
Proposal To Extend the Operation of the Extreme Order Imbalance Pilot
The Exchange established the Extreme Order Imbalance Pilot to
create a mechanism for ensuring a fair and orderly close when interest
is received at or near the close that could negatively affect the
closing transaction. The Exchange believes that this tool has proved
very useful to resolve an extreme order imbalance that may result in a
closing price dislocation at the close as a result of an order entered
into Exchange systems, or represented to a DMM orally at or near the
close.
NYSE Rule 123C(9) was intended to be and has been invoked to
attract offsetting interest in rare circumstances where there exists an
extreme imbalance at the close such that a DMM is unable to close the
security without significantly dislocating the price. This is evidenced
by the fact that since the inception of the pilot in April 2009, the
Exchange has invoked the provisions of NYSE Rule 123C(9)(a)(1) on only
four occasions.
Given the infrequency of these situations, the Exchange proposes to
extend the operation of the Pilot for a six-month period to allow the
Exchange to complete systemic modifications required to implement the
short sale and stock-by-stock circuit breakers, as well as to upgrade
server capacity and an upcoming initiative to incorporate odd-lot
orders into the round lot market and decommission its Odd-lot System.
During the six-month period, the Exchange will continue to monitor and
provide to the Commission information on how often it suspends NYSE
Rule 52 (Hours of Operation) to resolve an extreme order imbalance that
may result in a price dislocation at the close as a result of an order
entered into Exchange systems, or represented to a DMM orally at or
near the close. At the end of that period, the Exchange will be in a
better position to determine the efficacy of providing any additional
functionality under this Pilot rule. The Exchange therefore requests an
extension from the current expiration date of June 1, 2010, until
December 1, 2010.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \7\ that an Exchange have rules that
are designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest. The Exchange believes that the
instant filing is consistent with these principles. Specifically an
extension will allow the Exchange to determine the efficacy of
providing any additional functionality under this Pilot rule. The rule
operates to protect investors and the public interest by ensuring that
the closing price at the Exchange is not significantly dislocated from
the last sale price by virtue of an extreme order imbalance at or near
the close.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and
Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \10\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay.
---------------------------------------------------------------------------
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that because the pilot program was scheduled to
expire on June 1, 2010, waiver of the operative delay is necessary so
that no interruption of the pilot program will occur. In addition, the
Commission notes that the Exchange has requested the extension to allow
the Exchange time to fully evaluate the Extreme Order Imbalance Pilot.
Therefore, the Commission designates the proposed rule change operative
upon filing.\12\
---------------------------------------------------------------------------
\12\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File No. SR-NYSE-2010-42 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 33874]]
100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-NYSE-2010-42. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission,\13\ all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of NYSE.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File No. SR-NYSE-2010-42 and
should be submitted on or before July 6, 2010.
---------------------------------------------------------------------------
\13\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14368 Filed 6-14-10; 8:45 am]
BILLING CODE 8011-01-P