[Federal Register Volume 75, Number 182 (Tuesday, September 21, 2010)]
[Notices]
[Pages 57541-57542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23489]
[[Page 57541]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62923; File Nos. SR-NYSE-2010-20 and SR-NYSEAmex-2010-
25]
Self-Regulatory Organizations; New York Stock Exchange LLC and
NYSE Amex LLC; Order Approving Proposed Rule Changes Amending 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
September 15, 2010.
I. Introduction
On June 9, 2010, New York Stock Exchange LLC (``NYSE'') and NYSE
Amex LLC (``NYSE Amex'' and, with NYSE, each an ``Exchange'' and
collectively, the ``Exchanges'') each filed with the Securities and
Exchange Commission (the ``Commission''), pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to modify the manner in which the
systems of each Exchange provide order imbalance information to Floor
brokers. The proposed rule changes were published for comment in the
Federal Register on June 24, 2010.\3\ The Commission received one
comment letter opposing NYSE's proposal and received a letter from NYSE
responding to the comment letter.\4\ This order approves the proposed
rule changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release Nos. 62312 (June 17,
2010), 75 FR 36138; and 62311 (June 17, 2010), 75 FR 36140 (each a
``Notice'' and collectively, the ``Notices'').
\4\ See Anonymous Letter dated July 14, 2010 (``Comment
Letter'') and NYSE Response Letter from Janet M. Kissane, Senior
Vice President--Legal & Corporate Secretary, NYSE Euronext, dated
August 10, 2010 (``NYSE Response Letter'').
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II. Description of the Proposals
The Exchanges each propose to amend their Rule 123C(6) \5\ to
specify that, beginning at 2 p.m. on every trading day,\6\ Floor
brokers will receive an electronic communication from the Exchanges'
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 sell in certain securities
(``Order Imbalance Information''). MOC/LOC interest is executable only
on the close and is subject to cancellation at any time before 3:45
p.m.\7\
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\5\ References to the rules herein refer to both the relevant
NYSE and NYSE Amex Equities rules unless otherwise noted. The rule
texts of NYSE Rule 123C(6) and NYSE Amex Rule 123C(6) are identical
and the proposed additions to Rule 124C(6)(b) are identical.
\6\ On any day that the scheduled close of trading on the
Exchange is earlier than 4 p.m., the information will be
disseminated beginning two hours prior to the scheduled close of
trading.
\7\ See Rule 123C(3) and (9).
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The Exchanges' current rules do not allow for Exchange systems to
send Order Imbalance Information to Floor brokers electronically.
However, under Rule 115, Designated Market Makers (``DMMs''), while
acting in a market making capacity, may provide information about
buying or selling interest in the market ``in response to an inquiry
from a member conducting a market probe in the normal course of
business'' (``market probe'').\8\ Thus, for Floor brokers to obtain the
Order Imbalance Information, they must manually request the information
from DMMs, who are permitted to provide such information in response to
a Floor broker's ``market probe.''
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\8\ See Rule 115.
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The Exchanges propose to amend 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.), the Exchanges' systems would automatically
provide the Order 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.\9\ Thus, for Order Imbalance Information, Floor
brokers would no longer need to request such information from DMMs as
part of a Rule 115 ``market probe.'' The Exchanges' electronic
dissemination of this information would be limited to Floor brokers'
hand-held devices, which cannot 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. In addition, specific requests for information by Floor
brokers would not carry over to the next trading day and would need to
be re-entered on each trade date.
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\9\ See Notices for a description of the history of the
dissemination of the MOC/LOC imbalance information to Floor brokers.
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Beginning at 3:45 p.m., Floor brokers may receive the Exchanges'
proprietary Order Imbalance Information datafeed pursuant to Rule
123C(6)(a)(iv), under which the Exchanges provide the datafeed to
subscribers for a fee.
The Exchanges also propose to amend the time period in Rule
123C(6)(a)(v) when the dissemination of Order Imbalance Information
would commence when the scheduled closing is earlier than 4 p.m.
Currently, the Exchanges' rules state that the dissemination will
commence approximately 10 minutes before the scheduled closing time
when the scheduled closing is earlier than 4 p.m. The Exchanges state
that, when they moved to a single imbalance publication at 3:45 p.m.,
the rule text was not modified at that time 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.
III. Summary of Comment and NYSE's Response
One commenter opposes NYSE's proposal. The commenter notes that the
Order Imbalance Information is material, that investors should receive
the information at the same time as Floor brokers, and that NYSE has an
obligation to ensure all participants (DMMs, Floor brokers, and the
public) have the opportunity to receive the same data at the same time.
The commenter also disputes NYSE's rationale that Floor brokers need
the data feed to offset the decrease in Floor broker personnel. The
commenter instead suggests that Floor brokers should hire additional
staff or NYSE should extend the 15 minute time-period prior to the
close of trading if Floor brokers require more time to analyze the
Order Imbalance Information. Finally, the commenter states that the
proposal is similar to flash orders, in which select market
participants receive material public information prior to other market
participants.
NYSE responds that the Order Imbalance Information does not
represent overall supply or demand for a security, and is a small
subset of buying and selling interest, subject to change or
cancellation before the close. In addition, NYSE notes that MOC and LOC
orders represent only a small fraction of NYSE's activity.\10\ NYSE
[[Page 57542]]
believes that the Order Imbalance Information that all participants
receive beginning at 3:45 p.m. is more accurate, timely, and complete,
and is more material to investors. Finally, NYSE disagrees that the
proposal is similar to flash orders. NYSE notes that the Order
Imbalance Information is not actionable prior to 15 minutes before the
close of trading and is subject to change or cancellation and,
therefore, MOC/LOC orders cannot be executed before the public receives
the information.\11\
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\10\ NYSE noted that ``[g]enerally, MOC and LOC orders account
for less than 1% of total NYSE orders on any given trading day, both
in terms of actual number of orders and the number of shares
represented by those orders. With respect to the total number of
shares executed on NYSE on any given trading day, MOC and LOC orders
generally account for less than 10%.'' See NYSE's Response Letter at
2.
\11\ See NYSE Response Letter at 3-4.
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IV. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule changes are consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\12\ In particular, the proposed rule changes are consistent
with Section 6(b)(5) of the Act,\13\ which requires, among other
things, that the rules of a national securities exchange be 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, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Commission also finds that
the proposed rule changes are consistent with the provisions of Section
6(b)(8) of the Act,\14\ which require that the rules of an exchange not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
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\12\ In approving these proposed rule changes, the Commission
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(8).
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The proposals would allow Exchange systems to disseminate the Order
Imbalance Information directly to Floor brokers' handheld devices \15\
beginning two hours prior to the scheduled close. The Exchanges' rules
currently only permit Floor brokers to obtain this and other market
information on a one-off basis from DMMs as ``market probes'' under
Rule 115. The proposal would automate the process and allow Floor
brokers to receive Order Imbalance Information more frequently and
quickly. Thus, the proposal would permit information Floor brokers to
obtain certain market information (i.e., Order Imbalance Information)
that they are already permitted to obtain under the Exchanges' current
rules as part of ``market probes'' under Rule 115, albeit in a more
technologically advanced and more efficient format. The Commission
notes that the Exchanges have represented that the dissemination of
this information would be limited to the Floor broker's handheld
devices, and that the electronic datafeed cannot be automatically
forwarded or retransmitted.\16\ The Commission finds that the proposal
is consistent with the requirements of the Act.
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\15\ See Notices, supra note 3.
\16\ See also SR-NYSE-2010-53 and SR-NYSEAmex-2010-71.
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Finally, the Commission notes that this order does not approve any
prior dissemination of Order Imbalance Information by the Exchanges
that may have been inconsistent with the approved rules of the
Exchanges then in effect.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule changes (SR-NYSE-2010-20 and SR-
NYSEAmex-2010-25) be, and they hereby are, approved.
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\17\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23489 Filed 9-20-10; 8:45 am]
BILLING CODE 8011-01-P