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 That release superseded a release 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 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 16025 

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, ATP 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 Amex will adopt policies and procedures 

to ensure that ATP Holders use the Qualified 

Contingent Cross Order properly. First, we will 

require ATP Holders to properly mark all Qualified 

Contingent Cross Orders as such. In addition, 

FINRA, on behalf of NYSE Amex, will implement 

an examination and surveillance program to assess 

ATP 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. 

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. 

17The Commission notes that the Exchange 

inadvertently omitted the following paragraph from 

its filing and requested that the Commission 

include it in this notice: 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 

ATP 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 ATP Holders 

to execute the options legs of their customers’ large 

complex orders on the Exchange. See e-mail from 

Joseph P. Corcoran, Chief Counsel, Legal and 

Government Affairs, New York Stock Exchange 

LLC, to Jennifer L. Colihan, Special Counsel, 

Division of Trading and Markets, Commission, 

dated March 16, 2011. 

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

19 15 U.S.C. 78f(b)(5). 

20 15 U.S.C. 78s(b)(3)(A)(iii). 

21 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. 

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 ATP Holders 

to provide their customers a net price 

for the entire trade, and then allow the 

ATP Holder to execute the options leg 

of the trade on NYSE Amex 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 

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 Amex System. 

In this regard, an ATP Holder located on 

the Floor of the Exchange would not be 

allowed to enter QCCs into the NYSE 

Amex 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 985NY. This 

provision would require ATP Holders to 

maintain books and records 

demonstrating that each Qualified 

Contingent Cross Order was routed to 

the NYSE Amex 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 985NY.17

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent withSection 

6(b) of the Act 18 in general, and furthers 

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

Act,19 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 ATP 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 20 and Rule 

19b–4(f)(6) thereunder.21 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) 


srobinson on DSKHWCL6B1PROD with NOTICES
16026 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Notices 

22 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 ‘‘DMM unit’’ means any member organization, 

aggregation unit within a member organization, or 

division or department within an integrated 

proprietary aggregation unit of a member 

organization that (i) has been approved by NYSE 

Regulation pursuant to NYSE Amex Equities Rule 

98(c), (ii) is eligible for allocations under NYSE 

Amex Equities Rule 103B as a DMM unit in a 

security listed on the Exchange, and (iii) has met 

all registration and qualification requirements for 

DMM units assigned to such unit. 

4The Exchange notes that its affiliate, New York 

Stock Exchange LLC (‘‘NYSE’’), has proposed 

parallel changes its rules. See SR–NYSE–2011–10. 

5 ‘‘DMM’’ means any individual qualified to act as 

a DMM on the Floor of the Exchange. 

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–NYSEAmex–2011–14 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–2011–14. 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, 100 F Street, NE., 

Washington, DC 20549–1090 on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing will 

also be available for inspection and 

copying at the NYSE’s principal office 

and on its Internet Web site at http:// 

www.nyse.com. 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– 

NYSEAmex–2011–14 and should be 

submitted on or before April 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–6709 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64089; File No. SR– 

NYSEAmex–2011–16] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending NYSE Amex 

Equities Rule 36 To Permit Written 

Communications To Be Sent 

Electronically Between the Designated 

Market Maker Unit’s Post Location on 

The Floor and the DMM Unit’s Off-Floor 

Offices and to Persons Permitted To 

Provide Non-Trading Related Services 

to the DMM Under NYSE Amex 

Equities Rule 98 

March 17, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on March 

11, 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, II and III below, which Items 

have been prepared by NYSE Amex. 

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 amend 

NYSE Amex Equities Rule 36 to permit 

written communications to be sent 

electronically between the Designated 

Market Maker (‘‘DMM’’) unit’s post 

location on the Floor and the DMM 

unit’s off-Floor offices and to persons 

permitted to provide non-trading related 

services to the DMM under NYSE Amex 

Equities Rule 98. 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 Exchange proposes to amend 

NYSE Amex Equities Rule 36 to (i) 

expand the persons with whom DMM 

unit personnel on the Exchange Floor 

may communicate to include persons 

providing ‘‘non-trading related services’’ 

(as defined in NYSE Amex Equities Rule 

98) to the DMM Unit; and (ii) to expand 

the means of permissible 

communication to include written 

electronic communications between the 

DMM unit’s 3 post location on the Floor 

and specified off-Floor personnel.4 The 

Exchange believes that expanding the 

persons with whom and the means by 

which DMMs 5 on the Floor of the 

Exchange may communicate will both 

allow DMMs to operate more efficiently 

and enhance the audit trail associated 

with DMM communications, thus 

strengthening the regulatory program 

associated with reviewing such 

communications. 

Current NYSE Amex Equities Rule 36 

NYSE Amex Equities Rule 36 broadly 

provides that no member or member 


srobinson on DSKHWCL6B1PROD with NOTICES