[Federal Register Volume 75, Number 59 (Monday, March 29, 2010)]
[Notices]
[Pages 15472-15475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6836]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61755; File No. SR-NYSEAmex-2010-27]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex
Equities Rule 127 To Remove the Restrictions on the Execution of Block
Cross Transactions Outside the Prevailing NYSE Amex Quotation
March 22, 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 11, 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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend NYSE Amex Equities Rule 127 (``Block
Crosses Outside the Prevailing Exchange Quotation'') to remove the
restrictions on the execution of block cross transactions outside the
prevailing NYSE Amex quotation to make such execution more consistent
with prevailing industry standard and to delete all references to
``percentage orders'' in the rule text. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Amex LLC (``NYSE Amex'' or the ``Exchange'') proposes to amend
NYSE Amex Equities Rule 127 (``Block Crosses Outside the Prevailing
Exchange Quotation'') to remove restrictions on the execution of block
cross transactions outside the prevailing NYSE Amex quotation to make
such execution more consistent with prevailing industry standard and to
delete all references to ``percentage orders'' in the rule text.
The Exchange notes that parallel changes are proposed to be made to
the rules of the New York Stock Exchange LLC.\4\
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\4\ See SR-NYSE-2010-24.
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Background: NYSE Amex Equities Rule 127 governs the execution of
block cross transactions outside the Exchange quotation. NYSE Amex
Equities Rule 127 prescribes the method of block cross executions for
member organizations when the member organization intends to represent
both sides of the proposed
[[Page 15473]]
cross as agent or will trade with one side of the cross in part or in
whole as principal. The member organization handling the block orders
must first trade with the displayed bid or offer (whichever is relevant
to the proposed cross, i.e., whether the cross is to be executed at a
price lower than the bid or higher than the offer) including any
reserve interest \5\ at that bid or offer price when the member
organization is trading as principal on one side of the transaction and
is establishing or increasing a proprietary position as a result. The
member organization then executes, in a single transaction, at the
agreed upon block price, all limit orders on the Display Book[supreg]
(``Display Book'') \6\ priced at or better than the block clean-up
price. The result is two separate tape prints. If, however, the cross
represents agency interest only or the liquidation of a member
organization's position, the member organization must execute all
orders on the Display Book priced better than the block clean-up price
at a price one cent better than the clean-up price and then execute the
block at the clean-up price. This results in three separate tape
prints. The block cross will have execution priority at the clean-up
price. None of these executions are subject to the procedural
requirements of NYSE Amex Equities Rule 76 governing ``crossing''
orders with respect to offering the security at a minimum variation
higher than the bid.
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\5\ Reserve interest is that portion of a bid or offer that is
designated as not to be displayed, i.e., is in ``reserve.''
\6\ The Display Book[supreg] system is an order management and
execution facility. The Display Book receives and displays orders to
the DMMs, contains order information and provides a mechanism to
execute and report transactions and publish the results to the
Consolidated Tape. The Display Book 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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Two Print Execution Example: The NYSE Amex quote in XYZ is $20.05
bid for 10,000 shares with 5,000 shares offered at $20.10. There is no
reserve interest at the best bid or offer or at the other bid prices.
There are bids at $20.04, $20.03 and $20.02, each for 5,000 shares. A
member organization intends to facilitate a block transaction of 50,000
shares at $20.02. The following executions occur:
The member organization sells to the 10,000 shares bid at $20.05.
Next, the member organization sells 15,000 shares at a price of $20.02
to satisfy the 5,000 shares bids at $20.04, $20.03 and $20.02. The
remaining 25,000 shares of the 50,000 share block order are crossed at
$20.02 with the member organization buying 25,000 shares as principal
from its customer.
Three Print Execution Example: The NYSE Amex quote in XYZ is $20.05
bid for 10,000 shares with 5,000 shares offered at $20.10. There is no
reserve interest at the best bid or offer or at the other bid prices.
There are bids for $20.04, $20.03 and $20.02, each for 5,000 shares. A
member organization intends to facilitate a block transaction of 50,000
shares at $20.02 either representing customer (agency) buy side
interest at $20.02 or liquidating a current position. The following
executions occur:
The member organization sells 10,000 shares at $20.05 to satisfy
the exposed bid price. Next, the member organization sells an
additional 10,000 shares one cent better than the clean-up price at
$20.03 to satisfy the bids at $20.04 and $20.03. The remaining 30,000
shares of the 50,000 share block cross order is crossed at $20.02 at
the block clean-up price.
Proposed Amendment to NYSE Amex Equities Rule 127: Historically,
NYSE Amex Equities Rule 127 provided a member organization with the
ability to execute block transactions at a negotiated price outside the
prevailing quote while providing price improvement to resting orders on
the Display Book.
Block transactions effected pursuant to the Rule must be executed
manually. The DMM assigned to the security must manually enter the
information in the Display Book to effect each of the required
transactions. Given the speed of execution and updating of quotations
in the Exchange's current more electronic market, the DMM, in most
securities, is physically unable to print the transaction at the bid
and clean-up price, or bid, one cent better and the clean-up price
prior to any quote changes or cancellations/replacements of orders. In
the time it takes the DMM to manually print the block cross transaction
pursuant to the steps set forth in NYSE Amex Equities Rule 127, quotes
and prices in the market have been updated. As such, the member
organization is unable to determine how many shares it must satisfy on
the Display Book in order to effect the block transaction at the
negotiated price.
Without the provisions of NYSE Amex Equities Rule 127, a member
organization could electronically transmit an order to execute against
the liquidity (displayed and non-displayed) available at each limit
price until the bid/offer reached the price the member sought to cross
his or her order.\7\ However, because Rule 127 mandates that a member
organization with a block of stock it intends to cross on the Floor at
a specific clean-up price outside the current NYSE Amex quotation must
follow the provisions of paragraph (b) of the Rule, member
organizations are impeded in the execution of block cross transactions
because of the physical inability of the DMM to print the block cross
transactions consistent with the provisions of NYSE Amex Equities Rule
127. This physical impediment to the DMM's ability to print these
transactions makes compliance with NYSE Amex Equities Rule 127
virtually impossible in the liquid securities traded on the Exchange.
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\7\ This is similar to the method employed by off-Floor
participants wherein orders are sent to market centers for execution
against protected quotes and the balance of the cross order is then
printed on a trade reporting facility.
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The Exchange acknowledges that in order to provide for the
efficient execution of block cross transactions outside the prevailing
quote that affords a member organization the ability to cross stock at
a negotiated price and provide price improvement to resting orders on
the Display Book, system modifications are required. Such system
modifications would allow for these trades to be executed consistent
with the requirements of the proposed amendments to NYSE Amex Equities
Rule 127, pursuant to the customer's instructions.
Given the inability of the DMM to manually print the required
transaction pursuant to NYSE Amex Equities Rule 127 and the need for
system modification, NYSE Amex proposes to amend NYSE Amex Equities
Rule 127. The amendments would remove the current requirement in Rule
127 that a member organization with a block of stock that it intends to
cross on the Floor at a specific clean-up price outside the current
NYSE Amex quotation must comply with the provisions of Rule 127.\8\
Specifically, the Exchange seeks to amend the rule text in NYSE Amex
Equities Rule 127(b) by replacing the word ``should'' with ``may'' in
order to remove the restrictive language that would require member
organizations to execute block cross transactions outside the
prevailing NYSE Amex quotation pursuant to the specific provisions of
the rule.
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\8\ E-mail from Jennifer D. Kim, Counsel, NYSE Regulation, to
Theodore Venuti, Special Counsel, Division of Trading and Markets,
Commission, dated March 17, 2010.
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Pursuant to proposed NYSE Amex Equities Rule 127(b), the member
organization may execute block crosses
[[Page 15474]]
outside the prevailing quote prescribed in NYSE Amex Equities Rule 127
or in the same manner as large non-block trades are currently executed.
The member organization may electronically route an order to the
Display Book that will satisfy protected quotes in other markets and
sweep orders on the Display Book to the cross price and manually cross
the remainder of the initiating order if market conditions permit,
i.e., if the remainder of the initiating order will be executed at the
National Best Bid or Offer (``NBBO'') or consistent with the
intermarket sweep order exception under Reg NMS or any other applicable
trade-through exception or exemption that may apply. This cross
transaction shall be consistent with all NYSE Amex Equities Rules,
including those rules related to priority and parity.\9\ Member
organizations will continue to be required to comply with all Reg NMS
obligations.\10\
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\9\ See e.g. NYSE Amex Equities Rule 72.
\10\ 17 CFR 242.600 et seq.; See Securities Exchange Act Release
No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
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Finally, the Exchange seeks to delete all references in the rule
text to ``percentage orders.'' Percentage orders were eliminated as a
valid order type on the Exchange in a previously approved NYSE
filing.\11\ The references in NYSE Amex Equities Rule 127 were
inadvertently left in and should be deleted.
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\11\ See Securities Exchange Act Release No.58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46).
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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) \12\ that an Exchange have rules that
are designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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 the proposed rule change supports these
provisions because the proposed amendment removes the current
impediment to NYSE Amex members organizations' ability to execute block
cross orders and offers an alternate method while the Exchange develops
a better mechanism for the execution of block cross orders outside the
prevailing quotation.
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\12\ 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 \13\ and Rule 19b-4(f)(6) thereunder.\14\
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 \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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. The Commission notes that
the proposed rule change would allow member organizations to execute
block cross transactions outside the prevailing NYSE Amex quotation
consistent with the manner that large, non-block size orders may
currently be executed on the Exchange and on other market centers. The
proposed rule change is consistent with Regulation NMS and the
Commission does not believe that it raises any new substantive issues.
For these reasons, the Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission designates the proposed rule
change as operative upon filing.\19\
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\17\ 17 CFR 240.19b-4(f)(6). 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.
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ 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 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-NYSEAmex-2010-27 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-2010-27. 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,\20\ all subsequent
amendments, all written statements
[[Page 15475]]
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 available publicly. All submissions
should refer to File No. SR-NYSEAmex-2010-27 and should be submitted on
or before April 19, 2010.
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\20\ The text of the proposed rule change is available on the
Commission's Web site at http://sec.gov/rules/sro/shtml.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Florence E. Harmon,
Deputy Secretary.
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\21\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-6836 Filed 3-26-10; 8:45 am]
BILLING CODE 8011-01-P