[Federal Register Volume 75, Number 243 (Monday, December 20, 2010)]
[Notices]
[Pages 79427-79429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31816]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63541; File No. SR-NYSEAmex-2010-113]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex
Equities Rule 123C(9)(a)(1) To Extend the Operation of a Pilot
Operating Pursuant to the Rule Until June 1, 2011
December 14, 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 November 30, 2010, NYSE Amex LLC (the ``Exchange'' or
``NYSE Amex'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 Equities Rule
123C(9)(a)(1) to extend the operation of a pilot operating pursuant to
the Rule until June 1, 2011. The text of the proposed rule change is
available at the Exchange, the Commission's Public Reference Room,
http://www.sec.gov, 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 Exchange proposes to amend NYSE Amex Equities 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 June 1, 2011.\5\ The Pilot is currently scheduled to expire on
December 1, 2010.\6\
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\4\ See Securities Exchange Act Release Nos. 59755 (April 13,
2009), 74 FR 18009 (April 20, 2009) (SR-NYSEAltr-2009-15) (order
granting approval of the Pilot); 60808 (October 9, 2009), 74 FR
53539 (October 19, 2009) (SR-NYSEAmex-2009-70) (extending the
operation of the Pilot to December 31, 2009); 61265 (December 31,
2009), 75 FR 1094 (January 8, 2010) (SR-NYSEAmex-2009-96) (extending
the operation of the Pilot from December 31, 2009 to March 1, 2010);
61611 (March 1, 2010), 75 FR 10530 (March 8, 2010) (SR-NYSEAmex-
2010-15) (extending the operation of the Pilot from March 1, 2010 to
June 1, 2010); 62293 (June 15, 2010), 75 FR 35862 (June 23, 2010)
(SR-NYSEAmex-2010-50) (extending the operation of the Pilot from
June 1, 2010 to December 1, 2010).
\5\ The Exchange notes that parallel changes are proposed to be
made to the rules of New York Stock Exchange LLC. See SR-NYSE-2010-
79.
\6\ See Securities Exchange Act Release No. 62293 (June 15,
2010), 75 FR 35862 (June 23, 2010) (SR-NYSEAmex-2010-50) at note 6.
Due to a technical deficiency in a prior filing, the Exchange did
not invoke the Pilot between June 1, 2010 and June 7, 2010.
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Background
Pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), the Exchange may
suspend NYSE Amex Equities 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 Designated Market Maker (``DMM'') orally at or near
the close. The provisions of NYSE Amex Equities 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 an NYSE Amex Equities 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
December 1, 2010.\7\ At the time, the Exchange anticipated that its
quality assurance review process would be completed by December 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.
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\7\ Id.
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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
[[Page 79428]]
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 Amex Equities 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 during the course of the
Pilot to date, the Exchange invoked the provisions of NYSE Amex
Equities Rule 123C(9), including the provisions of the Extreme Order
Imbalance Pilot pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), in
two securities on June 26, 2009, the date of the annual rebalancing of
Russell Indexes. Rule 123C(9) has not been invoked at the Exchange
since that time.
The Exchange proposes to extend the operation of the pilot for a
six-month period. At this time, the Exchange is completing testing of
functionality that would enable the electronic acceptance of orders
after 4 p.m. If the tests are successful, the Exchange expects to be
able to implement the new functionality by the end of December 2010. If
the Exchange does not believe it will be able to implement the new
functionality by the end of December 2010, it will work with the
Commission to set a new target date for implementation as soon as
practicable thereafter. In conjunction with the new functionality, the
Exchange plans to file a proposed rule change to amend Rule 123C(9) to
remove the limitation set forth in Rule 123C(9)(a)(1)(iii) that only
Floor brokers can represent interest after 4 p.m. and to make Rule
123C(9) permanent.\8\
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\8\ See e-mail from Theodore Lazo, Vice President, Legal and
Government Affairs, NYSE Euronext, to David Liu, Senior Special
Counsel, Division of Trading and Markets, Commission, and Nathan
Saunders, Special Counsel, Division of Trading and Markets,
Commission, dated December 13, 2010 (``NYSE Euronext Email'').
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \9\ 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 this
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 Pilot 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.
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\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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\ The Exchange has asked the Commission to
waive the 30-day operative delay so that the proposal may become
operative immediately upon filing. The Exchange has represented that it
is completing testing of a functionality that would enable the
electronic acceptance of orders after 4 p.m., and if successful, the
Exchange expects to be able to implement the new functionality by the
end of December 2010. If the Exchange will not be able to implement the
new functionality by that date, it will work with the Commission to set
a new target date for implementation. The Exchange also has represented
that it plans to file a proposed rule change to amend Rule 123C(9) to
make the pilot permanent and to remove the limitation that only Floor
brokers can represent interest after 4 p.m.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self- regulatory organization submit to
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 filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that the Exchange has satisfied
this requirement.
\12\ See NYSE Euronext E-mail, supra note 8.
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because it will allow the pilot to continue uninterrupted, thereby
permitting offsetting interest represented by floor brokers to
alleviate extreme order imbalances occurring at the close until the
Exchange is able to allow the electronic submission of such interest
after 4 p.m. in such circumstances.\13\ Accordingly, the Commission
waives the 30-day operative delay requirement and designates the
proposed rule change operative upon filing with the Commission.
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\13\ 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. See 15 U.S.C.
78c(f).
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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-2010-113 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-2010-113. 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
[[Page 79429]]
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 publicly available. All submissions should refer to
File Number SR-NYSEAmex-2010-113 and should be submitted on or before
January 10, 2011.
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. 2010-31816 Filed 12-17-10; 8:45 am]
BILLING CODE 8011-01-P