[Federal Register Volume 75, Number 157 (Monday, August 16, 2010)]
[Notices]
[Pages 50013-50014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20149]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62667; File No. SR-NYSEAmex-2010-77]
Self-Regulatory Organizations; NYSE Amex, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Rule 995NY
August 9, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on August 2, 2010, NYSE Amex LLC (``NYSE Amex'' 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. NYSE Amex filed the proposed rule change as a ``non-
controversial'' proposal pursuant to Section 19(b)(3)(A) of the Act \4\
and Rule 19b-4(f)(6) thereunder,\5\ which renders the proposal
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
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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 Rule 995NY-Prohibited Conduct, by
adding a provision that states that the practice of unbundling an order
is considered conduct inconsistent with just and equitable principles
of trade. The text of the proposed rule change is available on the
Exchange's Web site at http://www.nyse.com, on the Commission's Web
site at http://www.sec.gov, at the Exchange, and at the Commission's
Public Reference Room. A copy of this filing is available on the
Exchange's Web site at http://www.nyse.com, at the Exchange's principal
office and at the Commission's Public Reference Room.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Rule 995NY by
adding subsection (d) which will expressly prohibit the splitting-up of
an order into smaller orders; a practice also know as unbundling, or
trade shredding. More specifically, the Exchange is proposing to add
language to its existing rules to prohibit NYSE Amex Options Trading
Permit Holders (``ATP Holders'') from splitting orders into multiple
smaller orders for any purpose other than best execution.
Unbundling, or trade shredding, is the practice of breaking up an
order into multiple smaller orders for some purpose other than best
execution of the order. The practice of unbundling has in the past been
used for such purposes as improperly maximizing commissions and fees
charged to customers, distorting trade data, or circumventing rules
pertaining to maximum order size. In addition, the unbundling of a
large order into several smaller orders could be done so as to affect
the allocation of a trade among market participants pursuant to the
allocation methodology used by the Exchange.\6\ Finally, the Exchange
believes that the unbundling of orders generally serves no purpose to
the customer that entered the order and may cause unnecessary delays in
the execution of said orders.
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\6\ For example, pursuant to NYSE Amex Options Rule
964NY(b)(C)(iv), all orders of five contracts or less are allocated
to a Specialist Pool. If an ATP Holder was to break up a large order
into several smaller orders of five contracts or less, the
Specialist Pool could unfairly garner a greater trade allocation
than it was otherwise entitled to.
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Pursuant to NYSE Amex Rule 476(a)(6), ATP Holders must observe high
standards of commercial honor and just and equitable principles of
trade. NYSE Amex would consider an ATP Holder to have engaged in
conduct inconsistent with just and equitable principles of trade were
they to unbundle an order which (1) Distorts fees and/or commissions to
the detriment of a customer or the Exchange, (2) causes an unnecessary
delay in the execution of an order, or (3) circumvents an Exchange rule
or federal securities law, including those rules
[[Page 50014]]
pertaining to order size and trade allocation. ATP Holders engaging in
conduct inconsistent with just and equitable principles of trade are
subject to formal disciplinary action by the Exchange.
NYSE Amex now proposes to adopt new Rule 995NY(d), which will
expressly state that the Exchange considers it to be conduct
inconsistent with just and equitable principals of trade for an ATP
Holder to split an order into multiple smaller orders for any purpose
other than seeking the best execution of the entire order.
The Exchange believes that by adopting this proposed new rule,
which serves to codify existing Exchange procedures when dealing with
the unlawful unbundling of orders, will deter, and help to prevent this
distortive practice, and therefore promote just and equitable
principles of trade.
The Exchange notes that other U.S. options exchanges have rules
prohibiting the unbundling of orders for a variety of reasons and
violations of these rules may be considered conduct inconsistent with
just and equitable principles of trade.\7\
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\7\ See International Securities Exchange Rule 723 Supplementary
Material .01, and NASDAQ OMX PHLX Rule 1015(a)(v).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\8\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\9\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, 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 rule is
designed to deter, and help to prevent the distortive practice of
unbundling, or trade shredding, and therefore promote just and
equitable principles of trade.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, 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 \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to provide the
Commission with 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 fulfilled this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such 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 Number SR-NYSEAmex-2010-77 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-2010-77. 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 the 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-
NYSEAmex-2010-77 and should be submitted on or before September 7,
2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20149 Filed 8-13-10; 8:45 am]
BILLING CODE 8010-01-P