[Federal Register Volume 75, Number 44 (Monday, March 8, 2010)]
[Notices]
[Pages 10543-10545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4736]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61612; File No. SR-NYSE-2010-11]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC
Amending NYSE Rule 123C(9)(a)(1) To Extend the Operation of the Pilot
Operating Pursuant the Rule Until the Earlier of Securities and
Exchange Commission Approval To Make Such Pilot Permanent or June 1,
2010
March 1, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 24, 2010, New York Stock Exchange LLC (``NYSE'' 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 Exchange. 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\ 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 Rule 123C(9)(a)(1) to extend
the operation of the pilot operating pursuant the Rule until the
earlier of Securities and Exchange Commission approval to make such
pilot permanent or June 1, 2010. The text of the proposed
[[Page 10544]]
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 (``NYSE'' or the ``Exchange'') proposes
to amend NYSE Rule 123C(9)(a)(1) \3\ to extend the operation of the
pilot operating pursuant the Rule until the earlier of Securities and
Exchange Commission approval to make such pilot permanent or June 1,
2010.
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\3\ See Securities Exchange Release No. 61233 (December 23,
2009), 74 FR 69169 (December 30, 2009) (SR-NYSE-2009-111) (Modify
the closing process and renumbering 123C(8) to 123C(9)). The
Exchange anticipates operation of these changes to commence on or
about March 1, 2010.
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NYSE Rule 123C(9)(a)(1) allows the Exchange to temporarily suspend
certain rule requirements at the close when extreme order imbalances
may cause significant dislocation to the closing price. The rule has
operated on a pilot basis since April 2009 (``Extreme Order Imbalances
Pilot'' or ``Pilot'').\4\ Through this filing, NYSE proposes to extend
the Pilot until the earlier of Securities and Exchange Commission
approval to make such Pilot permanent or June 1, 2010.\5\
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\4\ See Securities Exchange Act Release No. 59755 (April 13,
2009), 74 FR 18009 (April 20, 2009) (SR-NYSE-2009-18).
\5\ The Exchange notes that parallel changes are proposed to be
made to the rules of NYSE Amex LLC. See SR-NYSEAmex-2010-15.
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Background
Pursuant to NYSE Rule 123C(9)(a)(1), the Exchange may suspend NYSE
Rules 52 (Hours of Operation) 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. The provisions of NYSE 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 a 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.
The Extreme Order Imbalance Pilot is scheduled to end operation on
March 1, 2010.\6\ The Exchange is currently preparing a rule filing
seeking permission to make the provisions of the Pilot permanent with
certain modifications but does not expect that filing to be completed
and approved by the Commission before March 1, 2010.
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\6\ See Securities and Exchange Act Release No. 61264 (December
31, 2009), 75 FR 1107 (January 8, 2010) (SR-NYSE-2009-131)
(extending the operation of the pilot from December 31, 2009 to
March 1, 2010).
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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 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.
As the Exchange has previously stated, NYSE Rule 123C(9) will be
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, the Exchange invoked the provisions of NYSE Rule 123C(9),
including the provisions of the Extreme Order Imbalance Pilot pursuant
to NYSE Rule 123C(9)(a)(1), on four occasions.
In addition, during the operation of the Pilot, the Exchange
determined that it would not be as onerous as previously believed to
modify Exchange systems to accept orders electronically after 4:00 p.m.
The Exchange has completed the system modifications and is now in the
process of testing the modifications. The Exchange anticipates that its
quality assurance review process will be completed by June 1, 2010.
Given the above, the Exchange believes that provisions governing
the Extreme Order Imbalance Pilot should be made permanent. Through
this filing the Exchange seeks to extend the current operation of the
Pilot in order to allow the Exchange to formally submit a filing to the
Commission to convert the provisions governing the Pilot to permanent
rules and complete the technological modifications required to accept
orders electronically after 4 p.m. The Exchange therefore requests an
extension from the current expiration date of March 1, 2010, until the
earlier of Securities and Exchange Commission approval to make such
Pilot permanent or June 1, 2010.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \7\ 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 the
instant filing is consistent with these principles. Specifically an
extension will allow the Exchange to: (i) Prepare and submit a filing
to make the provisions governing the Extreme Order Imbalance Pilot
permanent; (ii) have such filing complete public notice and comment
period; and (iii) complete the 19b-4 approval process. The rule
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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\7\ 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
[[Page 10545]]
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.\10\
However, pursuant to Rule 19b4(f)(6)(iii), the Commission may designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requested that the
Commission waive the 30-day operative delay, as specified in Rule 19b-
4(f)(6)(iii),\11\ which would make the rule change operative
immediately. The Exchange believes that continuation of the Pilot does
not burden competition and would operate 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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\10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the
Commission 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. NYSE has satisfied this requirement.
\11\ 17 CFR 240.19b-4(f)(6)(iii).
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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 would allow the Pilot to continue without interruption while
the Exchange works towards submitting a separate proposal to make the
Pilot permanent. Accordingly, the Commission designates the proposed
rule change as operative upon filing with the Commission.\12\
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\12\ For purposes only of waiving the operative delay for this
proposal, 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 may summarily abrogate 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.\13\
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\13\ 15 U.S.C. 78s(b)(3)(C).
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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-2010-11 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-2010-11. 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,\14\ 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, 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-NYSE-2010-11 and should be submitted on or before March
29, 2010.
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\14\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4736 Filed 3-5-10; 8:45 am]
BILLING CODE 8011-01-P