[Federal Register Volume 78, Number 5 (Tuesday, January 8, 2013)]
[Notices]
[Pages 1286-1288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-00080]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68559; File No. SR-NYSEMKT-2012-84]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Extending the Operation 
of Its New Market Model Pilot Until the Earlier of Securities and 
Exchange Commission Approval To Make Such Pilot Permanent or July 31, 
2013

January 2, 2013.
    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 December 18, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the operation of its New Market 
Model Pilot, currently scheduled to expire on January 31, 2013, until 
the earlier of Securities and Exchange Commission (``Commission'') 
approval to make such pilot permanent or July 31, 2013. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the operation of its New Market 
Model Pilot (``NMM Pilot'') that was adopted pursuant to its merger 
with the New York Stock Exchange LLC (``NYSE'').\5\ The NMM Pilot was 
approved to operate until October 1, 2009. The Exchange filed to extend 
the operation of the Pilot to November 30, 2009, March 30, 2010, 
September 30, 2010, January 31, 2011, August 1, 2011, January 31, 2012, 
July 31, 2012, and January 31, 2013, respectively.\6\ The Exchange now 
seeks to extend the operation of the NMM Pilot, currently scheduled to 
expire on January 31, 2013, until the earlier of Commission approval to 
make such pilot permanent or July 31, 2013.
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    \5\ NYSE Euronext acquired The Amex Membership Corporation 
(``AMC'') pursuant to an Agreement and Plan of Merger, dated January 
17, 2008 (the ``Merger''). In connection with the Merger, the 
Exchange's predecessor, the American Stock Exchange LLC (``Amex''), 
a subsidiary of AMC, became a subsidiary of NYSE Euronext called 
NYSE Alternext US LLC. See Securities Exchange Act Release No. 58673 
(September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 
and SR-Amex-2008-62) (approving the Merger). Subsequently, NYSE 
Alternext US LLC was renamed NYSE Amex LLC, which was then renamed 
NYSE MKT LLC and continues to operate as a national securities 
exchange registered under Section 6 of the Securities Exchange Act 
of 1934, as amended (the ``Act''). See Securities Exchange Act 
Release Nos. 59575 (March 13, 2009), 74 FR 11803 (March 19, 2009) 
(SR-NYSEALTR-2009-24) and 67037 (May 21, 2012), 77 FR 31415 (May 25, 
2012) (SR-NYSEAmex-2012-32).
    \6\ See Securities Exchange Act Release No. 60758 (October 1, 
2009), 74 FR 51639 (October 7, 2009) (SR-NYSEAmex-2009-65). See also 
Securities Exchange Act Release Nos. 61030 (November 19, 2009), 74 
FR 62365 (November 27, 2009) (SR-NYSEAmex-2009-83) (extending Pilot 
to March 30, 2010); 61725 (March 17, 2010), 75 FR 14223 (March 24, 
2010) (SR-NYSEAmex-2010-28) (extending Pilot to September 1, 2010); 
62820 (September 1, 2010), 75 FR 54935 (September 9, 2010) (SR-
NYSEAmex-2010-86) (extending Pilot to January 31, 2011); 63615 
(December 29, 2010), 76 FR 611 (January 5, 2011) (SR-NYSEAmex-2010-
123) (extending Pilot to August 1, 2011); 64773 (June 29, 2011), 76 
FR 39453 (July 6, 2011) (SR-NYSEAmex-2011-43) (extending Pilot to 
January 31, 2012); 66042 (December 23, 2011), 76 FR 82326 (December 
30, 2011) (SR-NYSEAmex-2011-102) (extending Pilot to July 31, 2012); 
and 67495 (July 25, 2012), 77 FR 45406 (July 31, 2012) (SR-NYSEMKT-
2012-21) (extending the Pilot to January 31, 2013).
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    The Exchange notes that parallel changes are proposed to be made to 
the rules of NYSE.\7\
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    \7\ See SR-NYSE-2012-75.
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Background \8\
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    \8\ The information contained herein is a summary of the NMM 
Pilot. See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46) for a fuller 
description.
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    In December 2008, the Exchange implemented significant changes to 
its equities market rules, execution technology and the rights and 
obligations of its equities 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 that it 
implemented through the NMM Pilot.
    As part of the NMM Pilot, the Exchange eliminated the function of 
equity specialists on the Exchange creating a new category of market 
participant, the Designated Market Maker or DMM.\9\ 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 \10\ in 
their assigned securities and no longer have a negative obligation. 
DMMs are also no longer agents for public customer orders.\11\
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    \9\ See NYSE MKT Rule 103--Equities.
    \10\ See NYSE MKT Rule 104--Equities.
    \11\ See NYSE MKT Rule 60--Equities; see also NYSE MKT Rules 
104--Equities and 1000--Equities.
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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

[[Page 1287]]

known as the DMM Capital Commitment Schedule (``CCS'').\12\ CCS 
provides the Display Book[supreg] \13\ with the amount of shares that 
the DMM is willing to trade at price points outside, at and inside the 
Exchange Best Bid or Best Offer (``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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    \12\ See NYSE MKT Rule 1000--Equities.
    \13\ The Display Book 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 BBO. During the 
operation of the NMM Pilot, orders or portions thereof that establish 
priority \14\ 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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    \14\ See NYSE MKT Rule 72(a)(ii)--Equities.
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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 several occasions \15\ in order to prepare a rule filing 
seeking permission to make the above described changes permanent. The 
Exchange is currently still preparing such formal submission but does 
not expect that filing to be completed and approved by the Commission 
before January 31, 2013.
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    \15\ See supra note 6.
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Proposal To Extend the Operation of the NMM Pilot
    The Exchange established the NMM Pilot to provide incentives for 
quoting, to enhance competition among the existing group of liquidity 
providers and to add 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 July 31, 2013, 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 basis under the Securities Exchange Act of 1934 (the ``Act'') 
for this proposed rule change is the requirement under Section 6(b)(5) 
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 this filing is consistent with these principles because 
the NMM Pilot provides 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. Moreover, requesting 
an extension of the NMM Pilot will permit adequate time for: (i) The 
Exchange to prepare and submit a filing to make the rules governing the 
NMM Pilot permanent; (ii) public notice and comment; and (iii) 
completion of the 19b-4 approval process.

 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

    Because the foregoing proposed rule does not (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
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, provided that the self-regulatory 
organization has given 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 proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6"><span class="__cf_email__" data-cfemail="0173746d642c626e6c6c646f7572417264622f666e77">[email protected]</span></a>. Please include 
File Number SR-NYSEMKT-2012-84 on the subject line.

Paper Comments

    <bullet> 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-NYSEMKT-2012-84. This 
file number should be included on the subject line if email 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

[[Page 1288]]

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 10:00 a.m. and 3:00 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-NYSEMKT-2012-84 and should be submitted on or before 
January 29, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00080 Filed 1-7-13; 8:45 am]
BILLING CODE 8011-01-P


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