[Federal Register Volume 75, Number 121 (Thursday, June 24, 2010)]
[Notices]
[Pages 36138-36140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15246]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62312; File No. SR-NYSE-2010-20]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Amending NYSE 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, New York Stock Exchange LLC (``NYSE'' 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
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 proposes to amend [sic] NYSE 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
The New York Stock Exchange LLC (``NYSE'' or ``Exchange'') proposes
to amend NYSE 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
[[Page 36139]]
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\
---------------------------------------------------------------------------
\3\ 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, NYSE Amex LLC. See SR-NYSEAmex-2010-25.
\5\ See NYSE Rule 123C(3) and (9).
---------------------------------------------------------------------------
Background
Pursuant to NYSE 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 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 2:00 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.
---------------------------------------------------------------------------
\6\ The specialist is the predecessor to the DMM.
---------------------------------------------------------------------------
Proposed Amendments to NYSE Rule 123C(6)
The Exchange proposes to amend NYSE Rule 123C(6) to state that,
between 2 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 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\
---------------------------------------------------------------------------
\7\ Current NYSE rules permit a Floor broker to communicate
information obtained through a market probe to a customer using a
wired telephone line (NYSE Rule 36.20), an NYSE approved portable
phone (NYSE Rule 36.21), or through a written electronic
communication from the Floor brokers' hand-held device as permitted
by the NYSE's ``Wireless Data Communications Initiatives'' (See
Securities Exchange Act Release No. 59626 (March 25, 2009), 74 FR
14831 (April 1, 2009) (SR-NYSE-2009-33). The Exchange records all of
the information sent to and transmitted from the hand-held devices.
---------------------------------------------------------------------------
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 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 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Dissemination of MOC/LOC imbalance information to Floor brokers
would serve as an efficiency tool to
[[Page 36140]]
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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-NYSE-2010-20 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-NYSE-2010-20. 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 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-NYSE-2010-20 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\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15246 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P