[Federal Register Volume 75, Number 121 (Thursday, June 24, 2010)]
[Notices]
[Pages 36140-36143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15245]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62311; File No. SR-NYSEAmex-2010-25]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of
Proposed Rule Change Amending NYSE Amex Rule 123C To Allow Exchange
Systems To Provide Order Imbalance Information With Respect to Market
At-the-Close and Marketable Limit At-the-Close Interest to Floor
Brokers Beginning Two Hours and Until Fifteen Minutes Prior to the
Scheduled Close of Trading on Every Trading Day
June 17, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on June 9, 2010, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit
[[Page 36141]]
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Amex Rule 123C (``The Closing
Procedures'') to describe the manner in which Exchange systems provide
order imbalance information to Floor brokers. The text of the proposed
rule change is available at the Exchange, 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
NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') proposes to amend
NYSE Amex Rule 123C(6) to specify that, beginning at 2:00 p.m. on every
trading day,\3\ Floor brokers will receive an electronic communication
from Exchange systems that provides the amount of, and any imbalance
between, Market ``At-The-Close'' (``MOC'') interest and marketable
Limit ``At-The-Close'' (``LOC'') interest to buy and MOC interest and
marketable LOC interest to sell in certain securities.\4\ The MOC/LOC
interest is executable only on the Close and is subject to cancellation
at any time before 3:45 p.m.\5\
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\3\ See e-mail from Theodore R. Lazo, NYSE Euronext, to Steve
Kuan, Securities and Exchange Commission, on June 16, 2010 (``June
16, 2010 e-mail''). On any day that the scheduled close of trading
on the Exchange is earlier than 4:00 p.m., the information will be
disseminated beginning two hours prior to the scheduled close of
trading.
\4\ The Exchange notes that parallel changes are proposed to the
rules of its affiliate, the New York Stock Exchange LLC. See SR-
NYSE-2010-20 and June 16, 2010 e-mail.
\5\ See NYSE Rule 123C(3) and (9).
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Background
Pursuant to NYSE Amex Rule 115 (``Disclosure of Orders by DMMs''),
DMMs may, while acting in a market making capacity, provide information
about buying or selling interest in the market, including (a)
Aggregated buying or selling interest contained in Floor broker agency
interest files other than interest the broker has chosen to exclude
from the aggregated buying and selling interest, (b) aggregated
interest of Minimum Display Reserve Orders and (c) the interest
included in DMM interest files, excluding CCS interest as described in
Rule 1000(c), in response to an inquiry from a member conducting a
market probe in the normal course of business. Market probes assist
Floor brokers in representing customer orders efficiently and
effectively. There is no limitation in Rule 115 as to the number of
market probes permitted during the trading day.
Historically, Floor brokers could only orally request a market
probe from the specialist.\6\ As the NYSE Amex evolved to a more
automated trading venue, the Exchange and the Floor community
endeavored to address an increase in the volume of market probes by
Floor brokers to specialists in the afternoon hours leading up to the
closing transaction. In May 2008, Exchange systems began electronically
providing to Floor brokers, the amount of, and any imbalance between
MOC interest and marketable LOC interest to buy and MOC interest and
marketable LOC interest to sell in each security in which a Floor
broker is representing an order or in any security that the Floor
broker electronically requests such information. In March 2010, as part
of changes to the Exchange's closing process, Exchange systems began
decrementing the total imbalance between MOC interest and marketable
LOC interest to buy and MOC interest and marketable LOC interest to
sell by any Closing Offset Orders on the opposite side of the imbalance
to calculate the imbalance (the ``MOC/LOC imbalance information''). The
dissemination of the MOC/LOC imbalance information to Floor brokers
between 2 and 3:45 p.m. was deactivated on May 17, 2010. Floor brokers
may still orally request and receive responses to market probes
directly from DMMs.
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\6\ The specialist is the predecessor to the DMM.
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Proposed Amendments to NYSE Amex Rule 123C(6)
The Exchange proposes to amend NYSE Amex Rule 123C(6) to state
that, between 2:00 p.m. and 3:45 p.m. on any trading day (or two hours
prior to the closing transaction until 15 minutes prior to the closing
transaction on any day that the scheduled close of trading on the
Exchange is earlier than 4 p.m.), Exchange systems shall automatically
provide the MOC/LOC imbalance information to Floor brokers,
approximately every 15 seconds, for any security in which the Floor
broker is representing an order and in any security that the Floor
broker specifically requests. Specific requests for information by
Floor brokers will not carry over to the next trading day and must be
re-entered on each trade date Floor brokers want to receive the
information. Beginning at 3:45 p.m., Floor brokers may receive the
Exchange's proprietary Order Information Imbalance datafeed pursuant to
NYSE Amex Rule 123C(6)(a)(iv). The Exchange provides the Order
Information Imbalance datafeed to subscribers for a fee.
The Exchange's proposed dissemination of this MOC/LOC imbalance
information is the electronic evolution of the market probe response
that Floor brokers have always been entitled to receive and may
otherwise orally request directly from DMMs. While a vast majority of
the transactions executed on the Exchange are automated, Floor brokers
play an important role for customers in those transactions that require
the expertise of a professional trading floor agent. Providing the MOC/
LOC imbalance information to Floor brokers is appropriate because a key
component of their role as agent for these sophisticated customers is
to provide market ``color'' to the extent permitted under applicable
rules. The Exchange's electronic dissemination of this information
would be limited to the Floor broker hand-held devices, which are
unable to automatically forward or re-transmit the electronic datafeed
to any other location, although Floor brokers are permitted to provide
their customers with specific data points from the feed.\7\
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\7\ Current NYSE Amex rules permit a Floor broker to communicate
information obtained through a market probe to a customer using a
wired telephone line (NYSE Amex Rule 36.20), an NYSE Amex approved
portable phone (NYSE Amex Rule 36.21), or through a written
electronic communication from the Floor brokers' hand-held device as
permitted by the NYSE Amex's ``Wireless Data Communications
Initiatives'' (See Securities Exchange Act Release No. 59627 (March
25, 2009), 74 FR 14834 (April 1, 2009) (SR-NYSEAmex-2009-02). See
June 16, 2010 e-mail. The Exchange records all of the information
sent to and transmitted from the hand-held devices.
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Finally, the Exchange proposes to correct erroneous rule text in
123C(6)(a)(v). The rule text incorrectly states that the dissemination
of the Order Imbalance Datafeed commences 10 minutes prior to the
scheduled close
[[Page 36142]]
of trading on any day that the scheduled close of trading on the
Exchange is earlier than 4 p.m. The 10 minute interval is a legacy time
frame related to the Exchange's prior publication of imbalance at 3:40
p.m. and 3:50 p.m. When the Exchange moved to a single imbalance
publication at 3:45 p.m., the rule text should have been modified to
reflect that dissemination of the Order Imbalance Information on any
day that the scheduled close was prior to 4 p.m. would commence
approximately 15 minutes before the scheduled closing time consistent
with the single imbalance publication. The Exchange therefore seeks to
amend NYSE Amex Rule 123C(6)(a)(v) accordingly.
2. Statutory Basis
The basis under the Act for the proposed rule change is the
requirement under Section 6(b)(5),\8\ which requires that an exchange
have rules that are designed to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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 proposed rule change is
consistent with these objectives in that the dissemination of MOC/LOC
imbalance information would provide Floor brokers with an understanding
of developing trends early enough to get appropriate direction from
their customers and to know where on the physical Trading Floor it
needs to deploy its brokers in preparation for the closing transaction.
Overall, the Exchange believes that dissemination of MOC/LOC imbalance
information to Floor brokers is consistent with the above objectives
because it removes impediments to and perfects the mechanism of a free
and open market through the efficient operation of the Exchange.
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\8\ 15 U.S.C. 78f(b)(5).
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Dissemination of MOC/LOC imbalance information to Floor brokers
would serve as an efficiency tool to enhance the Floor brokers' ability
to meet their best execution obligations in the face of a dilemma that
is unique to a physical Trading Floor, i.e., how to position resources
so that they are in the correct place to execute orders on behalf of
sophisticated customers whose needs are not effectively met by strictly
electronic trading. While the imbalance information is important to
Floor brokers in carrying out their obligations to those customers, the
Exchange believes this information would not be material to market
participants executing automated orders. In this regard, the Exchange
believes it is appropriate to provide Floor brokers with specific types
of information that is directly related to the unique functions they
perform on the Trading Floor.
In this particular case, the Exchange believes that the
dissemination of MOC/LOC information to Floor brokers would promote the
efficient operation of the Exchange's market by reducing the frequency
of time-consuming Floor broker oral market probes leading up to the
closing transaction, thus affording DMMs more time to monitor trading.
As trading has become more electronic, staffing on the trading Floor
has declined, so that there are now fewer Floor brokers even as the
number of listed securities has increased.\9\ Similarly, DMM units and
individual DMMs on the Floor, are managing trading in greater numbers
of stocks than ever before. The need for DMMs to be focused on their
assigned securities, particularly on high volume trading days, such as
an Expiration Friday or an index rebalancing event, or trading days
with high levels of market volatility, is critical to the maintenance
of fair and orderly markets.\10\
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\9\ The number of Floor brokers operating on the Exchange Floor
has decreased since 2004 from approximately 800 Floor brokers to
approximately 325 Floor brokers operating on the Floor today.
\10\ It should be noted that NYSE rules and the Federal
securities laws provide safeguards that are designed to deter the
potential abuse of market probe information. For example, Floor
broker member organizations are not permitted to initiate
proprietary orders on the Floor. In addition, Floor brokers
representing a principal or proprietary order that has been
initiated in the off-Floor premises of the firm are subject to the
requirements of Section 11(a) of the Securities Exchange Act of
1934.
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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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 Number SR-NYSEAmex-2010-25 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAmex-2010-25. 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, 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 the
Exchange. All comments received will be posted without change; the
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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 Number SR-
NYSEAmex-2010-25 and should be submitted on or before July 15, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15245 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P