Federal Register / Vol. 78, No. 5 / Tuesday, January 8, 2013 / Notices 1281 

11The NYSE MKT SLP Pilot (NYSE MKT Rule 

107B—Equities) is also being extended until July 

31, 2013 or until the Commission approves it as 

permanent (See SR–NYSEMKT–2012–85). 

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

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

reward aggressive liquidity providers. 

As such, the Exchange believes that the 

rules governing the SLP Pilot (Rule 

107B) should be made permanent. 

Through this filing the Exchange seeks 

to extend the current operation of the 

SLP Pilot until July 31, 2013, in order 

to allow the Exchange to formally 

submit a filing to the Commission to 

convert the Pilot rule to a permanent 

rule.11

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 the instant filing is consistent with 

these principles because the SLP Pilot 

provides its market participants with a 

trading venue that utilizes an enhanced 

market structure to encourage the 

addition of liquidity and operates to 

reward aggressive liquidity providers. 

Moreover, the instant filing requesting 

an extension of the SLP Pilot will 

permit adequate time for: (i) The 

Exchange to prepare and submit a filing 

to make the rules governing the SLP 

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 12 and 

Rule 19b–4(f)(6) thereunder.13

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. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2012–76 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–2012–76. 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 

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–NYSE– 

2012–76 and should be submitted on or 

before January 29, 2013. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00081 Filed 1–7–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68563; File No. SR–ICEEU– 

2012–11] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

of Proposed Rule Change Relating to 

Enhanced Margin Methodology 

January 2, 2013. 

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 December 

28, 2012, ICE Clear Europe Limited 

(‘‘ICE Clear Europe’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

primarily by ICE Clear Europe. 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 

ICE Clear Europe proposes to 

implement an enhanced margin 

methodology (‘‘Decomp Model’’) that 

addresses the risk of both index and 


srobinson on DSK4SPTVN1PROD with 
1282 Federal Register / Vol. 78, No. 5 / Tuesday, January 8, 2013 / Notices 

3The Commission has modified the text of the 

summaries prepared by ICE Clear Europe. 

4 ICE Clear Europe has filed separately with the 

Commission proposed rule changes relating to 

customer clearing for CDS. See Securities Exchange 

Act Release No. 34–68152 (November 5, 2012), 77 

FR 67427 (November 9, 2012). 

5See Securities Exchange Act Release No. 34– 

68433 (December 14, 2012), 77 FR 75211 (December 

19, 2012). 

6See letter from Paul Swann, President & Chief 

Operating Officer, ICE Clear Europe to Mr. David 

Stawick, Secretary, Commodity Futures Trading 

Commission, dated May 31, 2012. 

single-name credit default swaps 

(‘‘CDS’’) cleared by ICE Clear Europe 

and permits appropriate portfolio 

margining between related index and 

single-name CDS positions. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, ICE 

Clear Europe 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 these 

statements may be examined at the 

places specified in Item IV below. ICE 

Clear Europe has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant aspects of these 

statements.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

A fundamental aspect of the Decomp 

Model is the recognition that index CDS 

instruments cleared by ICE Clear Europe 

are essentially a composition of specific 

single-name CDS. The Decomp Model 

includes the following enhancements to 

the ICE Clear Europe margin 

methodology for index CDS instruments 

(which are already in place for singlename CDS): Replacing standard 

deviation with mean absolute deviation 

(MAD) as a measure of credit spread 

variability, use of an auto regressive 

process to obtain multi-horizon risk 

measures, an increased number of 

spread response scenarios, introduction 

of liquidity requirements and 

introduction of enhanced concentration 

charge computations to reflect net 

notional amounts in addition to the 

currently used 5-Year (‘‘5Y’’) equivalent 

notional amount. These enhancements 

and the enhancements referenced below 

have been reviewed and/or 

recommended by the ICE Clear Europe 

risk management personnel, risk and 

model review working groups and 

committees, the ICE Clear Europe Risk 

Committee and an independent thirdparty risk expert (Finance Concepts). 

Implementation of these enhancements 

to the ICE Clear Europe risk 

methodology will result specifically in a 

better measurement of the risk 

associated with clearing index CDS. 

As a result of the decomposition of 

the index CDS, ICE Clear Europe will 

also be able to (1) incorporate jump-todefault risk as a component of the risk 

margin associated with index CDS 

(which is already in place for singlename CDS) and (2) provide appropriate 

portfolio margin treatment between 

index CDS and offsetting single-name 

CDS positions. Incorporating jump-todefault risk as a component of the 

Decomp Model will result in a better 

measurement of the risk associated with 

clearing index CDS (as is already the 

case for single-name CDS). Recognizing 

the highly correlated relationship 

between long-short positions in index 

CDS and the underlying single-name 

CDS constituents of an index CDS will 

provide for fundamental and 

appropriate portfolio margin treatment. 

Upon approval of the Decomp Model, 

ICE Clear Europe would initially make 

appropriate portfolio margining 

available with respect to its Clearing 

Members’ proprietary positions. ICE 

Clear Europe does not currently clear 

CDS positions of customers of its 

Clearing Members, but it plans to 

introduce customer clearing for CDS 

upon receipt of applicable regulatory 

approvals.4 The Commission has 

granted an exemptive order permitting 

ICE Clear Europe to commingle 

customer positions in index CDS and 

single-name CDS carried through FCM/ 

BD Clearing Members in a single 

account; 5 in addition, ICE Clear Europe 

has petitioned the Commodity Futures 

Trading Commission to permit such 

commingling.6 Following the 

commencement of customer clearing for 

CDS, and receipt of all necessary 

regulatory approvals, ICE Clear Europe 

would make appropriate portfolio 

margining available to commingled 

customer positions in index and singlename CDS using the Decomp Model. 

Accordingly, the Decomp Model is an 

important component of ICE Clear 

Europe’s planned customer clearing 

offering. 

ICE Clear Europe does not believe that 

the expected phased implementation of 

the portfolio margining element of the 

proposed Decomp Model (commencing 

with proprietary positions) raises an 

issue of unfair discrimination. 

Importantly, the portfolio margining 

aspect of the Decomp Model does not 

unfairly discriminate with respect to 

similarly situated participants because it 

is available to any participant for whom 

ICE Clear Europe is currently able to 

provide portfolio margin treatment. ICE 

Clear Europe does not currently offer 

customer clearing in CDS. Once it does 

so, and upon receipt of all necessary 

regulatory approvals, ICE Clear Europe 

will offer portfolio margining with 

respect to customer positions. The 

proposed rule amendments are thus not 

designed to permit unfair 

discrimination among participants in 

the use of ICE Clear Europe’s clearing 

services. 

In addition, as part of the 

implementation of the proposed 

Decomp Model, ICE Clear Europe 

proposes to (1) reduce the current level 

of risk mutualization among ICE Clear 

Europe’s CDS Clearing Members 

through the default resources held in 

the mutualized CDS Guaranty Fund and 

significantly increase the level of 

resources held as initial margin for CDS 

Contracts (‘‘Guaranty Fund/IM 

Modification’’), (2) modify the initial 

margin risk model approach in a 

manner that will make it easier for 

market participants to measure their 

risks, by removing the conditional 

recovery rate stress scenarios and 

adding a new recovery rate sensitivity 

component (‘‘IM Recovery Rate 

Modification’’), (3) introduce the 5Y 

equivalent notional amount (‘‘5Y ENA’’) 

per single-name/index with the worst of 

concentration charge based on 5Y ENA 

or net notional amount (‘‘NNA’’) being 

applied (‘‘IM Concentration Charge 

Modification’’), (4) add a new basis risk 

component from single-name CDS 

positions that are offset by indexderived single-name CDS positions (‘‘IM 

Basis Risk Modification’’) and (5) 

combine a single guaranty fund 

calculation for index CDS and singlename CDS positions (‘‘Guaranty Fund 

Modification’’). 

Currently, ICE Clear Europe maintains 

a high percentage of its default 

resources for CDS Contracts in the CDS 

Guaranty Fund, as compared to initial 

margin for CDS Contracts. This reflects 

the fact that the current CDS Guaranty 

Fund model is designed to cover the 

uncollateralized losses that would result 

from the three single names that would 

cause the greatest losses when entering 

a state of default. The Guaranty Fund/ 

IM Modification incorporates into the 

initial margin risk model the single 

name that causes the greatest loss when 

entering a state of default (i.e., the single 

name that results in the greatest amount 

of loss when stress-tested to undergo a 

credit event). This change effectively 

collateralizes the loss that would occur 

from this single name upon default. 

Consequently, the amount of 


srobinson on DSK4SPTVN1PROD with 
Federal Register / Vol. 78, No. 5 / Tuesday, January 8, 2013 / Notices 1283 

7 15 U.S.C. 78q–1(b)(3)(F). 

uncollateralized loss that would result 

from the three single names causing the 

greatest losses when entering a state of 

default is reduced, thereby reducing the 

amount of required contributions to the 

CDS Guaranty Fund. 

It is important to note that the 

decrease in the CDS Guaranty Fund and 

the increase in initial margin 

requirements are not equivalent in terms 

of magnitudes. Instead, based on current 

portfolios, it is expected that for every 

$1 decrease in the CDS Guaranty Fund 

requirement there will be a 

corresponding increase of 

approximately $5 in initial margin 

requirements. 

The IM Recovery Rate Modification 

modifies the initial margin risk model 

by removing the conditional recovery 

rate stress scenarios and adding a new 

recovery rate sensitivity component that 

is computed by considering changes in 

the recovery rate assumptions and their 

impact on the net asset value of the CDS 

portfolio. This modification will make it 

easier for market participants to 

replicate their initial margin 

requirements. 

The IM Concentration Charge 

Modification defines concentration 

charge thresholds in terms of NNA as 

well as 5Y ENA and takes the more 

conservative concentration requirement 

based on either notional amount. This 

modification captures the risk of large 

directional CDS positions that may not 

be captured by the calculation based on 

NNA. For example, a set of large NNA 

positions, whose maturity date is close 

to the current date, may not be subject 

to concentration charges based on 5Y 

ENA if the estimated 5Y ENA is below 

the established threshold. The 

alternative NNA-based concentration 

charge computations may yield 

significant additional initial margin 

requirements as the NNA exceeds the 

established threshold. 

As index-derived single-name 

positions and outright single-name 

positions are offset, an additional basis 

risk requirement is introduced to 

account for the fact that the index 

instruments are more actively traded 

than single-name instruments and thus 

are the preferred instruments to express 

changing views about the credit market 

as a whole, or even about specific 

single-name components of the indices. 

The IM Basis Risk Modification captures 

the risk associated with differences 

between outright single-name CDS 

positions and index-derived singlename CDS positions. In other words, a 

‘‘perfectly hedged’’ portfolio consisting 

of an index CDS position and opposite 

index replicating single-name CDS 

positions will still attract an initial 

margin requirement due to the basis risk 

that exists. 

Currently, ICE Clear Europe estimates 

separate guaranty fund sizes for index 

CDS positions and single-name 

positions. The Guaranty Fund 

Modification takes into account the 

portfolio benefits between index and 

single-name positions, and incorporates 

the worst 2-member uncollateralized 

losses coming from the jump-to-default, 

spread response, basis and interest rate 

stress scenario considerations. 

Section 17A(b)(3)(F) of the Act 7

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions and, to the extent 

applicable, derivative agreements, 

contracts, and transactions, and to 

assure the safeguarding of securities and 

funds which are in the custody or 

control of the clearing agency or for 

which it is responsible. ICE Clear 

Europe believes that the changes will 

facilitate the prompt and accurate 

settlement and risk management of 

security-based swaps and contribute to 

the safeguarding of securities and funds 

associated with security-based swap 

transactions. As discussed above, ICE 

Clear Europe does not believe that the 

portfolio margining-related proposed 

changes raise an issue of unfair 

discrimination in the use of ICE Clear 

Europe’s clearing services by similarly 

situated participants. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

ICE Clear Europe does not believe the 

proposed changes to its margin 

methodology would have any impact, or 

impose any burden, on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

ICE Clear Europe will notify the 

Commission of any written comments 

received by ICE Clear Europe. As noted 

above, ICE Clear Europe has consulted 

extensively with CDS Clearing Members 

and others in developing the Decomp 

Model. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–ICEEU–2012–11 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–ICEEU–2012–11. 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 

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 

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Europe and on ICE 

Clear Europe’s Web site at https:// 

www.theice.com/publicdocs/ 

regulatory_filings/ 

ICEU_SEC_122812.pdf. 

All comments received will be posted 

without change; the Commission does 


srobinson on DSK4SPTVN1PROD with 
1284 Federal Register / Vol. 78, No. 5 / Tuesday, January 8, 2013 / Notices 

8 17 CFR 200.30–3(a)(12). 

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). 

5See Securities Exchange Act Release No. 61308 

(January 7, 2010), 75 FR 2573 (January 15, 2010) 

(SR–NYSEAmex–2009–98) (establishing the NYSE 

Amex Equities SLP Pilot). See also Securities 

Exchange Act Release Nos. 61841 (April 5, 2010), 

75 FR 18560 (April 12, 2010) (SR–NYSEAmex– 

2010–33) (extending the operation of the SLP Pilot 

to September 30, 2010); 62814 (September 1, 2010), 

75 FR 54671 (September 8, 2010) (SR–NYSEAmex– 

2010–88) (extending the operation of the SLP Pilot 

to January 31, 2011); 63615 (December 29, 2010), 76 

FR 611 (January 5, 2011) (SR–NYSEAmex–2010– 

123) (extending the operation of the SLP Pilot to 

August 1, 2011); 64772 (June 29, 2011), 76 FR 39455 

(July 6, 2011) (SR–NYSEAmex–2011–44) (extending 

the operation of the SLP Pilot to January 31, 2012); 

66041 (December 23, 2011), 76 FR 82328 (December 

30, 2011) (SR–NYSEAmex–2011–103) (extending 

the operation of the SLP Pilot to July 31, 2012); and 

67496 (July 25, 2012), 77 FR 45390 (July 31, 2012) 

(SR–NYSEMKT–2012–22) (extending the operation 

of the SLP Pilot to January 31, 2013). 

6The information contained herein is a summary 

of the NMM Pilot and the SLP Pilot. See supra note 

5 and Infra note 7 for a fuller description of those 

pilots. 

7See Securities Exchange Act Release No. 58845 

(October 24, 2008), 73 FR 64379 (October 29, 2008) 

(SR–NYSE–2008–46). 

8See NYSE Rule 103. 

9See NYSE Rule 107B and NYSE MKT Rule 

107B—Equities. NYSE amended the monthly 

volume requirements to an ADV that is a specified 

percentage of NYSE CADV. See Securities Exchange 

Act Release No. 67759 (August 20, 2012), 77 FR 

54939 (September 6, 2012) (SR–NYSEMKT–2012– 

38). 

10See Securities Exchange Act Release Nos. 

58877 (October 29, 2008), 73 FR 65904 (November 

5, 2008) (SR–NYSE–2008–108) (adopting SLP Pilot 

program); 59869 (May 6, 2009), 74 FR 22796 (May 

14, 2009) (SR–NYSE–2009–46) (extending SLP Pilot 

program until October 1, 2009); 60756 (October 1, 

2009), 74 FR 51628 (October 7, 2009) (SR–NYSE– 

2009–100) (extending SLP Pilot program until 

November 30, 2009); 61075 (November 30, 2009), 

74 FR 64112 (December 7, 2009) (SR–NYSE–2009– 

119) (extending SLP Pilot program until March 30, 

2010); 61840 (April 5, 2010), 75 FR 18563 (April 12, 

2010) (SR–NYSE–2010–28) (extending the SLP Pilot 

until September 30, 2010); 62813 (September 1, 

2010), 75 FR 54686 (September 8, 2010) (SR–NYSE– 

2010–62) (extending the SLP Pilot until January 31, 

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–ICEEU–2012–11 and 

should be submitted on or before 

January 29, 2013. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2013–00084 Filed 1–7–13; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68458; File No. SR– 

NYSEArca–2012–139] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade First 

Trust Preferred Securities and Income 

ETF Under NYSE Arca Equities Rule 

8.600 

December 18, 2012. 

Correction 

In notice document 2012–30888 

appearing on pages 76148–76155 in the 

issue of December 26, 2012, make the 

following correction: 

On page 76155, in the first column, in 

the 14th line, ‘‘January 14, 2013’’ should 

read ‘‘January 16, 2013’’. 

[FR Doc. C1–2012–30888 Filed 1–7–13; 8:45 am] 

BILLING CODE 1505–01–D 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–68557; File No. SR– 

NYSEMKT–2012–85] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Extending the Operation 

of Its Supplemental Liquidity Providers 

Pilot (Rule 107B—Equities) Until the 

Earlier of the Securities and Exchange 

Commission’s 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 ‘‘noncontroversial’’ 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. 

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 Supplemental Liquidity 

Providers Pilot (‘‘SLP Pilot’’ or ‘‘Pilot’’) 

(See Rule 107B—Equities), currently 

scheduled to expire on January 31, 

2013, until the earlier of the Securities 

and Exchange Commission’s 

(‘‘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 SLP Pilot,5 currently 

scheduled to expire on January 31, 

2013, until the earlier of Commission 

approval to make such Pilot permanent 

or July 31, 2013. 

Background 6

In October 2008, the New York Stock 

Exchange LLC (‘‘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 NYSE. These 

changes were all elements of the NYSE’s 

and the Exchange’s enhanced market 

model referred to as the ‘‘New Market 

Model’’ (‘‘NMM Pilot’’).7 The NYSE SLP 

Pilot was launched in coordination with 

the NMM Pilot (see NYSE Rule 107B). 

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.’’ 8 Separately, 

the NYSE established the SLP Pilot, 

which established SLPs as a new class 

of market participants to supplement 

the liquidity provided by DMMs.9

The NYSE adopted NYSE Rule 107B 

governing SLPs as a six-month pilot 

program commencing in November 

2008. This NYSE pilot has been 

extended several times, most recently to 

January 31, 2013.10 The NYSE is in the 


srobinson on DSK4SPTVN1PROD with