[Federal Register Volume 75, Number 56 (Wednesday, March 24, 2010)]
[Notices]
[Pages 14221-14223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6377]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61724; File No. SR-NYSE-2010-25]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC
Proposing To Extend the Operation of Its New Market Model Pilot,
Currently Scheduled To Expire on March 30, 2010, Until the Earlier of
Securities and Exchange Commission Approval To Make Such Pilot
Permanent or September 30, 2010
March 17, 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 March 15, 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 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 New York Stock Exchange LLC (``Exchange'' or ``NYSE'') proposes
to extend the operation of its New Market Model Pilot, currently
scheduled to expire on March 30, 2010, until the earlier of Securities
and Exchange Commission approval to make such pilot permanent or
September 30, 2010. 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.
[[Page 14222]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to extend the operation of its New Market
Model Pilot \4\ (``NMM Pilot'') approved by the Securities and Exchange
Commission (``SEC'' or ``Commission'') currently scheduled to expire on
March 30, 2010 until the earlier of Securities and Exchange Commission
approval to make such pilot permanent or September 30, 2010.
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\4\ See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46); See also
Securities Exchange Act Release No. 60756 (October 1, 2009), 74 FR
51628 (October 7, 2009) (SR-NYSE-2009-100) (extending the operation
of the NMM Pilot until the earlier of Securities and Exchange
Commission approval to make such pilot permanent or November 30,
2009).
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The Exchange notes that parallel changes are proposed to be made to
the rules of the NYSE Amex LLC.\5\
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\5\ See SR-NYSEAmex-2010-28.
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Background \6\
In October 2008, the NYSE implemented significant changes to its
market rules, execution technology and the rights and obligations of
its market participants all of which were designed to improve execution
quality on the Exchange. These changes are all elements of the
Exchange's enhanced market model. Certain of the enhanced market model
changes were implemented through a pilot program.
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\6\ The information contained herein is a summary of the NMM
Pilot, for a fuller description of the pilots see supra note 1
[sic].
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As part of the NMM Pilot, NYSE eliminated the function of
specialists on the Exchange creating a new category of market
participant, the Designated Market Maker or DMM.\7\ The DMMs, like
specialists, have affirmative obligations to make an orderly market,
including continuous quoting requirements and obligations to re-enter
the market when reaching across to execute against trading interest.
Unlike specialists, DMMs have a minimum quoting requirement \8\ in
their assigned securities and no longer have a negative obligation.
DMMs are also no longer agents for public customer orders.\9\
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\7\ See NYSE Rule 103.
\8\ See NYSE Rules 104.
\9\ See NYSE Rule 60; See also NYSE Rules 104 and 1000.
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In addition, the Exchange implemented a system change that allowed
DMMs to create a schedule of additional non-displayed liquidity at
various price points where the DMM is willing to interact with interest
and provide price improvement to orders in the Exchange's system. This
schedule is known as the DMM Capital Commitment Schedule (``CCS'').\10\
CCS provides the Display Book[reg] \11\ with the amount of shares that
the DMM is willing to trade at price points outside, at and inside the
Exchange BBO. CCS interest is separate and distinct from other DMM
interest in that it serves as the interest of last resort.
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\10\ See NYSE Rule 1000.
\11\ The Display Book[reg] system is an order management and
execution facility. The Display Book system receives and displays
orders to the DMMs, contains the order information, and provides a
mechanism to execute and report transactions and publish the results
to the Consolidated Tape. The Display Book system is connected to a
number of other Exchange systems for the purposes of comparison,
surveillance, and reporting information to customers and other
market data and national market systems.
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The NMM Pilot further modified the logic for allocating executed
shares among market participants having trading interest at a price
point upon execution of incoming orders. The modified logic rewards
displayed orders that establish the Exchange's best bid or Exchange's
best offer. During the operation of the NMM Pilot orders or portions
thereof that establish priority \12\ retain that priority until the
portion of the order that established priority is exhausted. Where no
one order has established priority, shares are distributed among all
market participants on parity.
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\12\ See NYSE Rule 72(a)(ii).
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The NMM Pilot was originally scheduled to end operation on October
1, 2009, or such earlier time as the Commission may determine to make
the rules permanent. The Exchange filed to extend the operation of the
Pilot on two occasions in order to prepare a rule filing seeking
permission to make the above described changes permanent.\13\ The
Exchange is currently still preparing such formal submission but does
not expect that filing to be completed and approved by the Commission
before March 30, 2010.
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\13\ See Securities Exchange Act Release Nos. 60756 (October 1,
2009), 74 FR 51628 (October 7, 2009) (SR-NYSE-2009-100) (extending
Pilot to November 30, 2009), 61031 (November 19, 2009, 74 FR 62368
(November 27, 2009) (SR-NYSE-2009-113) (extending Pilot to March 30,
2010).
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Proposal to Extend the Operation of the NMM Pilot
The NYSE established the NMM Pilot to provide incentives for
quoting, to enhance competition among the existing group of liquidity
providers and to have its market maker be a new competitive market
participant. The Exchange believes that the NMM Pilot allows the
Exchange to provide its market participants with a trading venue that
utilizes an enhanced market structure to encourage the addition of
liquidity, facilitate the trading of larger orders more efficiently and
operates to reward aggressive liquidity providers. As such, the
Exchange believes that the rules governing the NMM Pilot should be made
permanent. Through this filing the Exchange seeks to extend the current
operation of the NMM Pilot until September 30, 2010, in order to allow
the Exchange time to formally submit a filing to the Commission to
convert the pilot rules to permanent rules.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(5) of the Act,\14\ in that
it is designed to prevent fraudulent and manipulative practices, to
promote just and equitable principles of trade, to remove impediments
to, and perfect the mechanisms of, a free and open market and a
national market system, and, in general, to protect investors and the
public interest.
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\14\ 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 \15\ and Rule 19b-4(f)(6) thereunder.\16\
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; or (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)
[[Page 14223]]
of the Act and Rule 19b-4(f)(6)(iii) thereunder.\17\
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to 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 date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 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.
The Commission notes that because the pilot program will expire on
March 30, 2010, waiver of the operative delay is necessary so that no
interruption of the pilot program will occur. In addition, the
Commission notes that the Exchange has requested extension of the pilot
to allow the Exchange time to formally request permanent approval.
Therefore, the Commission designates the proposal operative upon
filing.\20\
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\20\ 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.
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-2010-25 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-2010-25. 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 Section 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-2010-25 and should be submitted on or before April
14, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6377 Filed 3-23-10; 8:45 am]
BILLING CODE 8011-01-P