Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 16021 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A)(iii). 

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 240.19b–4(f)(6). 

15 17 CFR 240.19b–4(f)(6)(iii). 

16 17 CFR 200.30–3(a)(12). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Rule 104 and similarly delete the 

requirement for an annual certification. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,10 in general, and 

further the objectives of Section 6(b)(5) 

of the Act,11 in particular, in that they 

are designed to prevent fraudulent and 

manipulative acts and practices, 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 proposed 

rule change supports the objectives of 

the Act by permitting greater and more 

effective communication between 

DMMs and DMM unit’s on the Floor 

and their upstairs offices, while at the 

same time providing for a more robust 

audit trail that would enable FINRA to 

enhance the regulatory program 

associated with reviewing DMM 

communications from the Trading 

Floor. The Exchange believes that these 

regulatory enhancements will benefit 

the market by protecting investors and 

the public interest. 

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 12 and Rule 

19b–4(f)(6) thereunder.13 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. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 14 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),15 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. 

At any time within 60 days of the 

filing of such 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 rulecomments@sec.gov. Please include File 

Number SR–NYSE–2011–10 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–2011–10. 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 website 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 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– 

2011–10 and should be submitted on or 

before April 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6708 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64086; File No. SR– 

NYSEArca–2011–09] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Adopting Rules Related 

to Qualified Contingent Cross Orders 

March 17, 2011. 

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 

14, 2011, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to adopt rules 

related to Qualified Contingent Cross 

Orders (‘‘QCCs’’). The text of the 


srobinson on DSKHWCL6B1PROD with NOTICES
16022 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 

4See Securities Exchange Act Release No. 62523 

(July 16, 2010), 75 FR 43211 (July 23, 2010) (SR– 

ISE–2010–73) (‘‘ISE Proposal’’). See also Securities 

Exchange Act Release No. 63955 (February 24, 

2011), 76 FR 11533 (March 2, 2011) (SR–ISE–2010– 

73) (‘‘ISE Approval’’). The Exchange notes that 

letters commenting on the ISE Proposal were 

submitted on its behalf by the Exchange’s parent 

company, NYSE Euronext. See e.g., letters dated 

August 9, 2010 and October 21, 2010 from Janet L. 

McGinness, Senior Vice President—Legal & 

Corporate Secretary, Legal & Government Affairs, 

NYSE Euronext (‘‘NYSE Euronext Comment 

Letters’’). 

5See Securities Exchange Act Release No. 60405 

(July 30, 2009), 74 FR 39362 (August 6, 2009) (File 

No. 4–546). 

6See Securities Exchange Act Release No. 60527 

(August 18, 2009), 74 FR 43178 (August 26, 2009) 

(SR–NYSEArca–2009–45). 

7Section 5(a) of the Distributive Linkage Plan. 

8Section 2(21) of the Distributive Linkage Plan. 

9Old Linkage Plan Sections 2(3) and 8(c)(i)(C); 

and former NYSE Arca Options Rule 6.94(d)(2). 

10See ISE Proposal at 43212. 

11See NYSE Euronext Comment Letters, supra 

note 1 [sic]. 

12See Securities Exchange Act Release No. 57620 

(April 4, 2008), 73 FR 19271 (April 9, 2008) (the 

‘‘QCT Release’’). That release superseded a release 

initially granting the Qualified Contingent Trade 

exemption. See Securities Exchange Act Release 

No. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006). 

13We propose to define a QCC trade substantively 

identical to the Commission’s definition in the QCT 

release as well as that in the ISE Proposal. A QCC 

trade must meet the following conditions: (i) At 

least one component must be an NMS Stock; (ii) all 

the components must be effected with a product 

price contingency that either has been agreed to by 

all the respective counterparties or arranged for by 

a broker-dealer as principal or agent; (iii) the 

execution of one component must be contingent 

upon the execution of all other components at or 

near the same time; (iv) the specific relationship 

between the component orders (e.g., the spread 

between the prices of the component orders) must 

be determined by the time the contingent order is 

placed; (v) the component orders must bear a 

derivative relationship to one another, represent 

different classes of shares of the same issuer, or 

involve the securities of participants in mergers or 

with intentions to merge that have been announced 

or cancelled; and (vi) the transaction must be fully 

hedged (without regard to any prior existing 

position) as a result of other components of the 

contingent trade. Consistent with the QCT Release 

and the ISE Proposal, OTP Holders must 

demonstrate that the transaction is fully hedged 

using reasonable risk-valuation methodologies. See 

QCT Release, supra note 9 [sic], at footnote 9. 

14NYSE Arca will adopt policies and procedures 

to ensure that OTP Holders use the Qualified 

Contingent Cross Order properly. First, we will 

require OTP Holders to properly mark all Qualified 

Contingent Cross Orders as such. In addition, 

FINRA, on behalf of NYSE Arca, will implement an 

examination and surveillance program to assess 

OTP Holder compliance with the requirements 

applicable to Qualified Contingent Cross Orders, 

including the requirement that the stock leg of the 

transaction be executed at or near the same time as 

the options leg. 

15While the QCC would not provide exposure for 

price improvement for the options leg of a stockoption order, the options leg must be executed at 

the NBBO or better. The Commission has 

previously approved crossing transactions with no 

opportunity for price improvement. See e.g., ISE 

Rule 721(a) and Chicago Board Options Exchange 

(‘‘CBOE’’) Rule 6.74A, Interpretations and Policies 

.08. 

proposed rule change is available at the 

Exchange, the Exchange’s Web site at 

http://www.nyse.com, on the 

Commission’s Web site at http:// 

www.sec.gov, and at the Commission’s 

Public Reference Room. 

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 

The purpose of this filing is to adopt 

rules related to QCCs. The proposed 

rule change is based on an International 

Securities Exchange (‘‘ISE’’) proposal 

recently approved by the Securities and 

Exchange Commission (‘‘Commission’’).4

Background 

The Exchange is currently a party to 

the Options Order Protection and 

Locked/Crossed Market Plan 

(‘‘Distributive Linkage Plan’’),5 and has 

implemented Exchange rules in 

conjunction with that plan (the 

‘‘Distributive Linkage Rules’’).6 Similar 

to Regulation NMS under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’ 

or ‘‘Act’’), the Distributive Linkage Plan 

requires, among other things, that the 

Exchange establish, maintain and 

enforce written policies and procedures 

that are reasonably designed to prevent 

‘‘Trade-Throughs.’’ 7 A Trade-Through is 

a transaction in an options series at a 

price that is inferior to the best price 

available in the market.8

The Distributive Linkage Plan 

replaced the Plan for the Purpose of 

Creating and Operating an Intermarket 

Option Linkage (‘‘Old Linkage Plan’’), 

and the Distributive Linkage Rules 

replaced the then-existing NYSE Arca 

rules implementing the Old Linkage 

Plan (the ‘‘Old Linkage Rules’’). The Old 

Linkage Plan and the Old Linkage Rules 

provided a limited Trade-Through 

exemption for ‘‘Block Trades,’’ defined 

to be trades of 500 or more contracts 

with a premium value of at least 

$150,000.9 However, as with Regulation 

NMS, the Distributive Linkage Plan does 

not provide a Block Trade exemption. 

The ISE Proposal stated that the loss 

of the Block Trade exemption, among 

other things, adversely affects the ability 

of its members to effect large trades that 

are tied to stock,10 and therefore 

proposed the QCC as a limited 

substitute for the Block Trade 

exemption. While our views with 

respect to the potential impact that the 

ISE Proposal may have on market 

structure remain unchanged,11 we 

nonetheless are proposing to adopt rules 

related to QCCs based on those 

approved for ISE. In particular, we 

believe that such a rule change would 

permit the Exchange to remain 

competitive with ISE, and the other 

options exchanges that may also adopt 

rules for QCCs, by making QCCs 

available to OTP Holders and their 

customers through the Exchange. 

Discussion 

While Regulation NMS does not 

provide a block trade exemption from 

trade-through liability for stocks, the 

Commission, by order, has provided 

trade-through relief for ‘‘Qualified 

Contingent Trades’’ (‘‘QCTs’’).12 The 

QCT Release provides an exemption 

from trade-through liability in the 

equity market for multi-component, 

fully-hedged trades where one order is 

contingent on the execution of one or 

more additional orders. Building on this 

concept, and as approved for ISE, the 

Exchange proposes that when an NYSE 

Arca OTP Holder effects a QCT trade in 

a Regulation NMS Stock, that OTP 

Holder be permitted to cross the options 

leg of the trade on the Exchange 

immediately upon entry if the order is 

for at least 1,000 contracts, is part of a 

QCT, is executed at a price at least equal 

to the national best bid or offer 

(‘‘NBBO’’), and there are no Customer 

Orders on the Exchange’s Consolidated 

Book at the same price.13

The QCC would permit OTP Holders 

to provide their customers a net price 

for the entire trade, and then allow the 

OTP Holder to execute the options leg 

of the trade on NYSE Arca at a price at 

least equal to the NBBO while using the 

QCT exemption to effect the trade in the 

equities leg at a price necessary to 

achieve the net price.14 Under the 

proposal, the Exchange would not 

permit the options component of a 

stock-option order to trade through the 

NBBO.15 However, there are times when 

the quotation spread for the option on 

the Exchange would not permit an 

execution of the options component 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 16023 

16The Commission has previously approved the 

rejection of crossing transactions when there is a 

priority customer order on the book at the same 

price. See e.g., ISE Rule 721(a); and CBOE Rule 

6.74A, Interpretations and Policies .08. 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78s(b)(3)(A)(iii). 

20 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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 Commission has waived this 

requirement. 

between the Exchange BBO, particularly 

in options that trade in increments 

greater than $0.01. In those cases, the 

Exchange proposes to permit an 

execution of the options component at 

a price that matches the Exchange BBO. 

Moreover, under the proposal, the 

Exchange would not permit the 

execution of a QCC at the same price as 

a Customer Order on the Consolidated 

Book. In such a case, the QCC will be 

rejected.16

Furthermore, under this proposal, the 

Exchange would only permit QCCs to be 

submitted electronically from off the 

Floor through the NYSE Arca System. In 

this regard, an OTP Holder located on 

the Floor of the Exchange would not be 

allowed to enter QCCs into the NYSE 

Arca System, or otherwise effect them in 

open outcry. In this way, our proposal 

provides for the same means to effect 

QCCs on the Exchange as that of the ISE. 

We plan to file a separate proposed rule 

change to address effecting QCCs in 

open outcry on the Floor of the 

Exchange. 

To provide a mechanism for the 

Exchange to surveil for whether QCCs 

were entered from off of the Floor, the 

Exchange proposes to adopt 

Commentary .01 to Rule 6.90. This 

provision would require OTP Holders to 

maintain books and records 

demonstrating that each Qualified 

Contingent Cross Order was routed to 

the NYSE Arca System from off of the 

Floor. Any Qualified Contingent Cross 

Order that does not have a 

corresponding record required by this 

provision would be deemed to have 

been entered from on the Floor in 

violation of Rule 6.90. 

The Exchange’s proposal addresses 

the mechanics of executing the stock 

and options components of a net-price 

transaction. The Exchange believes that 

it is necessary that it provide OTP 

Holders and their customers with the 

same trading capabilities available on 

other exchanges with respect to QCCs, 

including the change proposed herein, 

which would permit OTP Holders to 

execute the options legs of their 

customers’ large complex orders on the 

Exchange. 

The Exchange also proposes a minor 

non-substantive correction to the 

numbering convention within NYSE 

Arca Options Rule 6.62. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) of the Act 17 in general, and furthers 

the objectives of Section 6(b)(5) of the 

Act,18 in that it is designed to promote 

just and equitable principles of trade, 

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. The proposed rules are 

consistent with the protection of 

investors in that they are designed to 

prevent Trade-Throughs. In addition, 

the proposed rule change would 

promote a free and open market by 

permitting the Exchange to compete 

with ISE for these types of orders. In 

this regard, competition would result in 

benefits to the investing public, whereas 

a lack of competition would serve to 

limit the choices that the public has for 

execution of their options business. 

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. Instead, the 

proposed rule change would prevent the 

otherwise significant burden on 

competition that would arise if ISE were 

permitted to implement QCCs without a 

similar functionality being made 

available to market participants across 

all U.S. markets for listed options, 

including OTP Holders on the 

Exchange. 

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 19 and Rule 

19b-4(f)(6) thereunder.20 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. 

At any time within 60 days of the 

filing of such 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 rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2011–09 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–NYSEArca-2011–09. 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 Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 


srobinson on DSKHWCL6B1PROD with NOTICES
16024 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 

21 17 CFR 200.30–3(a)(12). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 62523 

(July 16, 2010), 75 FR 43211 (July 23, 2010) (SR– 

ISE–2010–73) (‘‘ISE Proposal’’). See also Securities 

Exchange Act Release No. 63955 (February 24, 

2011), 76 FR 11533 (March 2, 2011) (SR–ISE–2010– 

73) (‘‘ISE Approval’’). The Exchange notes that 

letters commenting on the ISE Proposal were 

submitted on its behalf by the Exchange’s parent 

company, NYSE Euronext. See e.g., letters dated 

August 9, 2010 and October 21, 2010 from Janet L. 

McGinness, Senior Vice President—Legal & 

Corporate Secretary, Legal & Government Affairs, 

NYSE Euronext (‘‘NYSE Euronext Comment 

Letters’’). 

5See Securities Exchange Act Release No. 60405 

(July 30, 2009), 74 FR 39362 (August 6, 2009) (File 

No. 4–546). 

6See Securities Exchange Act Release No. 60526 

(August 18, 2009), 74 FR 43185 (August 26, 2009) 

(SR–NYSEAmex–2009–19). 

7Section 5(a) of the Distributive Linkage Plan. 

8Section 2(21) of the Distributive Linkage Plan. 

9Old Linkage Plan Sections 2(3) and 8(c)(i)(C); 

and former NYSE Amex Options Rule 991NY. 

10See ISE Proposal at 43212. 

11See NYSE Euronext Comment Letters, supra 

note 1[sic]. 

12See Securities Exchange Act Release No. 57620 

(April 4, 2008), 73 FR 19271 (April 9, 2008) (the 

‘‘QCT Release’’). That release superseded a release 

initially granting the Qualified Contingent Trade 

exemption. See Securities Exchange Act Release 

No. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006). 

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–NYSEArca2011–09 and should be submitted on or 

before April 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6750 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64085; File No. SR– 

NYSEAmex–2011–14] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Adopting Rules Related 

to Qualified Contingent Cross Orders 

March 17, 2011. 

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 14, 

2011, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt rules 

related to Qualified Contingent Cross 

Orders (‘‘QCCs’’). 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing is to adopt 

rules related to QCCs. The proposed 

rule change is based on an International 

Securities Exchange (‘‘ISE’’) proposal 

recently approved by the Securities and 

Exchange Commission (‘‘Commission’’).4

Background 

The Exchange is currently a party to 

the Options Order Protection and 

Locked/Crossed Market Plan 

(‘‘Distributive Linkage Plan’’),5 and has 

implemented Exchange rules in 

conjunction with that plan (the 

‘‘Distributive Linkage Rules’’).6 Similar 

to Regulation NMS under the Securities 

Exchange Act of 1934 (‘‘Exchange Act or 

‘‘Act’’), the Distributive Linkage Plan 

requires, among other things, that the 

Exchange establish, maintain and 

enforce written policies and procedures 

that are reasonably designed to prevent 

‘‘Trade-Throughs.’’ 7 A Trade-Through is 

a transaction in an options series at a 

price that is inferior to the best price 

available in the market.8

The Distributive Linkage Plan 

replaced the Plan for the Purpose of 

Creating and Operating an Intermarket 

Option Linkage (‘‘Old Linkage Plan’’), 

and the Distributive Linkage Rules 

replaced the then-existing NYSE Amex 

rules implementing the Old Linkage 

Plan (the ‘‘Old Linkage Rules’’). The Old 

Linkage Plan and the Old Linkage Rules 

provided a limited Trade-Through 

exemption for ‘‘Block Trades,’’ defined 

to be trades of 500 or more contracts 

with a premium value of at least 

$150,000.9 However, as with Regulation 

NMS, the Distributive Linkage Plan does 

not provide a Block Trade exemption. 

The ISE Proposal stated that the loss 

of the Block Trade exemption, among 

other things, adversely affects the ability 

of its members to effect large trades that 

are tied to stock,10 and therefore 

proposed the QCC as a limited 

substitute for the Block Trade 

exemption. While our views with 

respect to the potential impact that the 

ISE Proposal may have on market 

structure remain unchanged,11 we 

nonetheless are proposing to adopt rules 

related to QCCs based on those 

approved for ISE. In particular, we 

believe that such a rule change would 

permit the Exchange to remain 

competitive with ISE, and the other 

options exchanges that may also adopt 

rules for QCCs, by making QCCs 

available to ATP Holders and their 

customers through the Exchange. 

Discussion 

While Regulation NMS does not 

provide a block trade exemption from 

trade-through liability for stocks, the 

Commission, by order, has provided 

trade-through relief for ‘‘Qualified 

Contingent Trades’’ (‘‘QCTs’’).12 The 

QCT Release provides an exemption 

from trade-through liability in the 

equity market for multi-component, 

fully-hedged trades where one order is 

contingent on the execution of one or 

more additional orders. Building on this 

concept, and as approved for ISE, the 

Exchange proposes that when an NYSE 

Amex ATP Holder effects a QCT trade 

in a Regulation NMS Stock, that ATP 

Holder be permitted to cross the options 

leg of the trade on the Exchange 

immediately upon entry if the order is 


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