Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Notices 9843 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59142 

(December 22, 2008), 73 FR 80494. 

4For a discussion of Amendment No. 1, see infra 

Section III.H. 

5See letter from Jennifer M. Lamie, Assistant 

General Counsel, Chicago Board Options Exchange 

(‘‘CBOE’’), to Florence E. Harmon, Deputy 

Secretary, Commission, dated February 4, 2009. 

6See Securities Exchange Act Release No. 58673 

(September 29, 2008), 73 FR 57707 (October 3, 

2008) (order approving proposed rule change 

relating to the acquisition). 

7See Securities Exchange Act Release No. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008). 

8 In addition, the Exchange would allow access to 

the System by ‘‘Sponsored Participants.’’ A 

Sponsored Participant is a person that has entered 

into an agreement with a Sponsoring ATP Holder 

through which it may execute transactions on the 

System. See proposed Rule 902.1NY(c). This 

proposed rule is substantially similar to Rule 6.2A 

of the Rules of NYSE Arca, Inc. (‘‘NYSE Arca’’). 

9 In a separate filing, the Exchange described the 

relationship between the Exchange and its routing 

broker and the conditions related to its operation. 

The Commission is approving that proposed rule 

change in a separate action today. See Securities 

Exchange Act Release No. 59473 (February 27, 

2009) (SR–NYSEALTR–2009–18). 

10See Securities Exchange Act Release No. 59454 

(February 25, 2009) (SR–NYSEALTR–2009–17). The 

deletions effected by SR–NYSEALTR–2009–17 will 

become operative simultaneously with the 

operativeness of the rules proposed in this filing. 

11The Exchange noted that certain terms in 

existing NYSE Alternext Rules 900G–909G will 

become outdated upon approval of the rules 

Continued 

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

changes that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule changes 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 inspection and copying in 

the Commission’s Public Reference 

Room on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filings also will be available for 

inspection and copying at the principal 

offices 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 

Nos. SR–NASDAQ–2009–010, SR–BX– 

2009–009, and SR–Phlx–2009–14, and 

should be submitted on or before March 

27, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4756 Filed 3–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59472; File No. SR– 

NYSEALTR–2008–14] 

Self-Regulatory Organizations; NYSE 

Alternext US LLC; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of the Proposed 

Rule Change, as Modified by 

Amendment No. 1 Thereto, To 

Establish Rules for the Trading of 

Listed Options 

February 27, 2009. 

I. Introduction 

On December 19, 2008, NYSE 

Alternext US LLC (‘‘Alternext’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend the rules governing the trading of 

options on the Exchange. The proposed 

rule change was published for comment 

in the Federal Register on December 31, 

2008.3 The Exchange filed Amendment 

No. 1 to the proposed rule change on 

February 27, 2009.4 The Commission 

received one comment on the proposal.5

This notice and order provides notice of 

Amendment No. 1 and grants 

accelerated approval to the proposed 

rule change, as modified by Amendment 

No. 1. 

II. Description of the Proposal 

On October 1, 2008, NYSE Euronext— 

the parent company of the New York 

Stock Exchange (‘‘NYSE’’)—through a 

series of mergers and related 

transactions (‘‘Mergers’’), acquired the 

American Stock Exchange LLC 

(‘‘Amex’’). Amex was renamed NYSE 

Alternext US LLC and became a 

subsidiary of NYSE Euronext and an 

affiliate of NYSE.6 After the Mergers, all 

physical and electronic access to 

Alternext’s trading facilities was made 

available to the former Amex’s members 

through temporary trading permits 

offered by Alternext. As Amex’s 

principal place of business at the time 

of the Mergers was 86 Trinity Place, 

New York, New York, these temporary 

trading permits are known as ‘‘86 

Trinity Permits.’’ 

Subsequently, Amex’s cash equities 

trading floor was moved from 86 Trinity 

Place to NYSE’s principal place of 

business at 11 Wall Street, New York, 

New York, and co-located with the 

NYSE’s cash equities trading floor 

(‘‘Equities Relocation’’). The system that 

supports Alternext’s cash equities 

trading is now the same system that 

supports NYSE’s cash equities trading 

and is operated by the NYSE on behalf 

of the Exchange. In connection with the 

Equities Relocation, the Exchange 

adopted new trading and membership 

rules and offered each of its members an 

Alternext cash equities trading license 

in exchange for a valid 86 Trinity 

Permit.7

Alternext now proposes to move its 

options trading business from 86 Trinity 

Place to 11 Wall Street (‘‘Options 

Relocation’’). In connection with the 

Options Relocation, the Exchange 

proposes to issue Amex Trading Permits 

(‘‘ATPs’’) that will permit holders to 

effect options transactions on the 

Exchange’s trading facilities.8 A holder 

of an 86 Trinity Permit under the 

current rules will be issued an ATP 

upon submission of the appropriate 

form to the Exchange. 

Trading on the Exchange’s relocated 

facilities at 11 Wall Street will continue 

to occur on a hybrid system, involving 

both a physical floor and an electronic 

system, the NYSE Amex System 

(‘‘System’’). Although the options 

trading floor will be physically 

separated from the NYSE and Alternext 

cash equity trading floor, the options 

trading floor will be managed and 

overseen by NYSE Euronext employees. 

Only ATP Holders that have been 

approved to perform a floor function— 

Floor Brokers and Floor Market Makers 

(including Specialists)—will be 

authorized to enter into transactions on 

the trading floor. 

Alternext has proposed to update and 

reorganize its rules for trading options 

in open outcry and to establish a new 

set of rules that will govern trading on 

the System.9 The Exchange has 

submitted a separate proposed rule 

change to delete certain existing 

Exchange rules.10

Alternext will retain many of its 

existing member rules, including those 

relating to capital, margin, 

recordkeeping, customer protection, and 

account maintenance. The Exchange 

also has proposed to keep certain 

existing options-related rules, including 

rules on position and exercise limits 

and listing standards. With respect to 

transactions in Flexible Exchange 

Options (‘‘FLEX Options’’) conducted 

on the Trading Floor, the Exchange 

stated that current NYSE Alternext 

Rules 900G through 909G will remain 

operative.11

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9844 Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Notices 

proposed herein. The Exchange represented that it 

will review these rules and will submit a separate 

filing to revise any outdated references. See 

Amendment No. 1 at 6. 

12 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

13 15 U.S.C. 78f(b)(5). 

14 15 U.S.C. 78f(b)(8). 

15See generally proposed Rules 930NY–933NY. 

16See NYSE Arca Rules 6.43–6.46. 

17See proposed Rule 920NY (as modified by 

Amendment No. 1). 

18The proposed rules provide, however, that the 

Exchange will not restrict access in any particular 

option class until the Commission approves 

objective standards for restricting such access. See 

proposed Rule 923NY(b). 

19Regarding Market Maker appointments, see 

proposed Rule 923NY (based on NYSE Arca Rule 

6.35). Regarding Market Maker obligations, see 

proposed Rule 925NY (based on NYSE Arca Rule 

6.37), which outlines such obligations (i) generally, 

(ii) within a Market Maker’s appointed classes, and 

(iii) outside of a Market Maker’s appointed classes. 

See also proposed Rule 925.1NY (based on NYSE 

Arca Rule 6.37B); proposed Rule 925.2NY (based on 

NYSE Arca Rule 6.37C). The proposed rules also 

provide a mechanism for limiting Market Maker 

risk during periods of increased and significant 

trading activity on the System in a Market Maker’s 

appointment. See proposed Rule 928NY. The 

Exchange would activate the mechanism in a 

Market Maker’s appointed class whenever a 

designated number of executions (ranging between 

five and 100 executions) occurs within one second. 

Orders and quotations received by the Exchange 

after the mechanism is activated would not be 

executed against the Market Maker. The proposed 

rule is similar to NYSE Arca Rule 6.40. 

20See Amendment No. 1 at 5. 21See Securities Exchange Act Release No. 47838 

(May 13, 2003), 68 FR 27129, 27137 (May 19, 2003) 

(SR–PCX–2002–36). 22See proposed Rule 923NY(d). 23See proposed Rule 923NY(i). 24See supra note 19. See also Securities Exchange 

Act Release No. 54236 (July 28, 2006), 71 FR 44758 

(August 7, 2006) (order approving similar rules on 

OX, NYSE Arca’s automated options trading 

system) (‘‘OX Approval Order’’). 

III. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.12 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,13 which 

requires that the rules of an exchange be 

designed to facilitate transactions in 

securities; to prevent fraudulent and 

manipulative acts and practices; to 

promote just and equitable principles of 

trade; to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities; to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system; and, in 

general, to protect investors and the 

public interest; and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Commission also finds that the 

proposed rule change is consistent with 

Section 6(b)(8) of the Act 14 in that it 

does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

Discussed below are the most salient 

features of the proposal. 

A. Market Participants 

1. Floor Brokers 

A Floor Broker as defined in the 

proposed rules is an ATP Holder who is 

registered with the Exchange for the 

purpose, while on the floor, of accepting 

and executing options orders received 

from ATP Holders and, in certain 

circumstances, orders from others.15

The proposed rules governing Floor 

Brokers include general responsibilities 

to exercise due diligence in representing 

an order and specific responsibilities 

with respect to the handling of various 

order types. These rules are 

substantially similar to those of NYSE 

Arca 16 and do not raise any novel or 

significant issues, and the Commission 

finds that they are consistent with the 

Act. 

2. Market Makers 

Currently, the Exchange has four 

general classifications of Market Maker: 

Specialist, Registered Options Trader 

(‘‘ROT’’), Supplemental Registered 

Options Trader (‘‘SROT’’), and Remote 

Registered Options Trader (‘‘RROT’’). 

The Exchange states that these 

classifications will remain essentially 

the same under the proposal, although 

ROTs and SROTs would be combined 

into one classification as Floor Market 

Makers (‘‘FMMs’’), and RROTs would 

become Remote Market Makers 

(‘‘RMMs’’). 

The general term Market Maker in the 

proposed rules includes Specialists, eSpecialists, FMMs, and RMMs.17 The 

Exchange is permitted to appoint one 

Specialist on the floor per option class, 

additional e-Specialists, and any 

number of Market Makers in each class, 

unless limited by quotation system 

capacity.18

The proposed rules governing Market 

Maker appointments and obligations 

generally—including rules concerning 

evaluation of Market Maker 

performance, suspension or termination 

of Market Maker appointments, and 

appeal for review of Exchange actions 

adversely affecting a Market Maker—are 

closely modeled on similar rules of 

NYSE Arca.19

The Exchange represented that NYSE 

Alternext U.S. Rule 3(j), which governs 

the use of material, non-public 

information, applies to ATP Holders 

trading on the System. The Exchange 

also represented that Rule 3(j) requires 

a Market Maker to maintain information 

barriers—reasonably designed to 

prevent the misuse of material, nonpublic information by such Market 

Maker—between the Market Maker and 

any of its affiliates that may act as 

specialist or market maker in any 

security underlying the options in 

which the Market Maker makes a market 

on the Exchange.20 The Exchange stated 

that it believes that requiring 

information barriers between the Market 

Maker and its affiliates with respect to 

transactions in the option and the 

underlying security is important to 

reduce the opportunity for unfair 

trading advantages or misuse of 

material, non-public information. The 

Commission believes that the proposed 

rules relating to the duties and 

obligations of Market Makers generally, 

and in particular the rules that govern 

the use of material, non-public 

information, are consistent with the 

Act.21

a. FMMs and RMMs 

FMMs and RMMs are required to 

apply and be approved for an 

appointment in one or more options 

classes. The number of options issues 

that an FMM or RMM may select is 

based on the number of ATPs the FMM 

or RMM holds.22 In addition, an FMM 

is required to select an appointment to 

a Trading Zone on the floor. FMMs and 

RMMs are required to provide 

continuous, two-sided quotes in their 

appointed issues, in accordance with 

maximum prescribed width 

requirements, for 60% of the time the 

Exchange is open for trading in each 

issue, and to trade at least 75% of their 

contract volume per quarter in classes 

within their appointments.23 All 

transactions effected by an FMM in 

open outcry in the FMM’s designated 

Trading Zone will be considered as 

transactions towards satisfying the rule 

requiring that an FMM trade at least 

75% of its contract volume per quarter 

in classes within its appointments. 

The Commission believes that the 

proposed rules governing Market Maker 

activity on the Exchange are consistent 

with the Act.24

b. Specialists and E-Specialists 

The proposed rules include 

provisions governing the appointment 

and activities of Specialists, who are 

assigned a location on the floor where 

their issues will trade, and e-Specialists, 

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Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Notices 9845 

25See proposed Rule 923NY(b). 

26The provisions regarding Specialists are set 

forth primarily in proposed Rules 925.1NY(b) and 

927–927.3NY. 

27These obligations will apply to all of the 

Specialist’s appointed issues collectively, rather 

than on an issue-by-issue basis. 

28There are exceptions to these quoting 

requirements for systems failures and limitations 

and other mitigating circumstances. 

29See generally proposed Rules 927.4–927.6NY. 

30Each e-Specialist organization is required to 

maintain a sufficient number of ATPs to include 

appointments in classes where the organization is 

acting as an e-Specialist. 

31The Exchange will grant e-Specialists 

allocations in option classes based on factors 

including performance, capacity, performance 

commitments, efficiency, competitiveness, and 

operational factors. See proposed Rule 927.4(b). 

32See proposed Rule 927.5NY(a) (as modified by 

Amendment No. 1), which specifies that an eSpecialist is required to meet the 90% quoting 

obligations of Specialists set forth in Rule 

925.1NY(b). 

33See, e.g., NYSE Arca Rules 6.82–6.83 (regarding 

Lead Market Makers); Securities Exchange Act 

Release No. 47838 (May 13, 2003), 68 FR 27129 

(May 19, 2003) (order approving rules for the PCX 

Plus options trading platform). 

34See CBOE Rules 8.92–8.94. See also Securities 

Exchange Act Release No. 49643 (April 30, 2004), 

69 FR 25647 (May 7, 2004) (order approving rules 

adding the category of e-DPMs to the types of 

market makers trading on CBOE). 

35See infra Section III.B.1.c. 

36An Order Flow Provider is defined in proposed 

Rule 900.2NY(57) to mean any ATP Holder that 

submits, as agent, orders to the Exchange. 

37See proposed Rule 925NY (as modified by 

Amendment No. 1). 

38See proposed Rule 964.1NY (as modified by 

Amendment No. 1). The above obligations will 

apply to all of the Directed Order Market Maker’s 

issues collectively for which it receives Directed 

Orders, rather than on an issue-by-issue basis. 

Compliance with this obligation will be determined 

on a monthly basis. 

39The System also will disseminate consolidated 

quotations and last-sale information, and such other 

market information as may be made available from 

time to time pursuant to agreement between the 

Exchange and other Market Centers, consistent with 

the Plan for Reporting of Consolidated Options Last 

Sale Reports and Quotation Information. 

40A ‘‘Reserve Order’’ is defined in proposed Rule 

900.3NY(d)(3) as a limit order with a portion of the 

size displayed and with a reserve portion of the size 

that is not displayed on the Exchange. Upon entry 

into the System, a marketable Reserve Order will be 

executed in whole or in part up to its full size, 

regardless of the reserve size. See Amendment No. 

1 at 3. 

41An order for the account of a ‘‘Customer’’— 

defined in proposed Rule 900.2NY(18) as an 

individual or organization that is not a brokerdealer—has priority over the bid or offer of a nonCustomer at the same price. 

42See proposed Rule 964.1NY. 

43The ‘‘Specialist Pool’’ is defined in proposed 

Rule 900.2NY(75) as the aggregated size of the best 

bid and best offer, in a given series, among the 

Specialist and e-Specialists that match in price. 

44See proposed Rule 964.2NY. 

45The term ‘‘Quote with Size’’ is defined in 

proposed Rule 900.2NY(65) to mean a quotation to 

buy or sell a specific number of option contracts at 

Continued 

who are RMMs appointed to fulfill 

certain obligations required of 

Specialists. Under the proposal, the 

Exchange is permitted to appoint one 

Specialist and an unlimited number of 

other Market Makers per class.25

Any ATP Holder registered as a 

Market Maker with the Exchange is 

eligible to be qualified as a Specialist 26

and may be allocated any one or more 

of the option issues opened for trading. 

The allocation of issues among qualified 

applicants will be determined by the 

Exchange, which will select the 

candidate that appears best able to 

perform the functions of a Specialist in 

a particular option issue. 

Each Specialist will be appointed to 

the Trading Zone designated for its 

options classes. A Specialist is required, 

among other things, to provide 

continuous two-sided quotations 

throughout the trading day in its 

appointed issues for 90% of the time the 

Exchange is open for trading 27 and 

otherwise fulfill the obligations of 

Market Makers generally. A Specialist’s 

quotations must meet the legal quote 

requirements specified in proposed Rule 

925NY.28

In addition, the Exchange is permitted 

to designate e-Specialists in an options 

class to fulfill certain obligations 

required of Specialists.29 Factors to be 

considered in approving e-Specialists 

include adequacy of resources; history 

of stability, superior electronic capacity 

and superior operational capability; 

market making and/or specialist 

experience in a broad array of securities; 

ability to interact with order flow in all 

types of markets; existence of order flow 

commitments; willingness to accept 

allocation as an e-Specialist in options 

in at least 400 underlying securities; and 

willingness and ability to make 

competitive markets on the Exchange 

and to promote the Exchange in a 

manner that is likely to enhance the 

ability of the Exchange to compete 

successfully for order flow in the 

options it trades. 

Option classes that have been 

allocated to a Specialist may be 

concurrently allocated to one or more eSpecialists,30 with the Exchange to 

determine the appropriate number.31

Each e-Specialist will be required to 

fulfill all the obligations set forth in 

proposed Rules 925NY and 925.1NY. ESpecialists have the same 90% quoting 

obligation as Specialists.32

The Commission believes that the 

proposed rules regarding Specialists and 

e-Specialists raise no novel or 

significant issues and are substantially 

similar to rules that it has previously 

approved for other exchanges.33 The 

Exchange has based its proposed rules 

regarding e-Specialists on rules the 

Commission has approved for CBOE,34

and the Commission believes that they 

are consistent with the Act. 

c. Directed Order Market Makers 

As discussed in more detail below,35

the System will permit Order Flow 

Providers 36 to direct orders to ‘‘Directed 

Order Market Makers.’’ A Directed 

Order Market Maker, who may be a 

Specialist or other Market Maker, must 

provide continuous two-sided 

quotations throughout the trading day, 

meeting legal width requirements,37 in 

issues for which it receives Directed 

Orders for 90% of the time the Exchange 

is open for trading in each issue.38

B. Ranking and Execution of Orders 

As noted above, Alternext will trade 

options on an electronic trading system 

and in open outcry on the floor. 

1. Electronic Trading 

a. Display Order Process 

The System will display all 

quotations and non-marketable limit 

orders (unless an order type indicates 

otherwise) in the ‘‘Display Order 

Process’’ of its book, at all price levels 

on an anonymous basis.39 Bids and 

offers, including the displayed portion 

of Reserve Orders,40 will be ranked and 

maintained in the Display Order Process 

according to account type (e.g., 

Customer or non-Customer) 41 and the 

following priority rules: 

The highest bid will have priority 

over all other bids, and the lowest offer 

will have priority over all other offers. 

Bids and offers for Customer accounts, 

including the displayed portion of 

Customer Reserve Orders, will have 

priority over other bids or offers at the 

same price. If there is more than one 

highest bid or lowest offer for a 

Customer account then such bid or offer 

will be ranked based on time priority. 

A bid or offer for the account of a 

Directed Order Market Maker— 

discussed below—will have second 

priority for a Directed Order if the 

Directed Order Market Maker is eligible 

to receive a guaranteed participation in 

such bid or offer.42 If there is no 

Directed Order Market Maker guarantee, 

then bids or offers in the book for the 

accounts of participants in the 

Specialist Pool 43—also discussed 

below—will have priority if the 

Specialist Pool is eligible to receive a 

guaranteed participation in such bids or 

offers.44

Orders and Quotes with Size 45 in the 

book for the accounts of all other nonmstockstill on PROD1PC66 with NOTICES

9846 Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Notices 

a specific price that a Market Maker has submitted 

to the System. 

46See Amendment No. 1 at 3. 

47A Stop Order is defined as an order that 

becomes a market order when the market for a 

particular option contract reaches a specified price 

(‘‘triggering event’’). A Stop Order to buy (sell) 

becomes a market order when the option contract 

trades at or above (below) the stop price on the 

Exchange or another Market Center or when the 

Exchange bid (offer) is quoted at or above (below) 

the stop price. See proposed Rule 900.3NY(d)(1). 

48A Stop Limit Order is defined as an order that 

becomes a limit order when the market for a 

particular option contract reaches a specified price. 

A Stop Limit Order to buy (sell) becomes a Limit 

Order when the option contract trades at or above 

(below) the stop price on the Exchange or another 

Market Center or when the Exchange bid (offer) is 

quoted at or above (below) the stop price. See 

proposed Rule 900.3NY(d)(2). 

49See infra notes 54–58 and accompanying text. 

50See proposed Rule 964NY(b)(2)(E) (as modified 

by Amendment No. 1). 

51See supra note 40. 

52See proposed Rule 900.3NY(d)(3) (as modified 

by Amendment No. 1). 

53See proposed Rule 900.3NY(d)(1) (as modified 

by Amendment No. 1). 

54See proposed Rule 900.3NY(d)(5) (as modified 

by Amendment No. 1). 

55A ‘‘Market Center’’ is defined in proposed Rule 

900.2NY(36) as a national securities exchange that 

has qualified for participation in the Options 

Clearing Corporation (‘‘OCC’’) pursuant to the 

provisions of the rules of the OCC. 

56The Exchange provided two examples: (1) The 

NBBO market in a series is 2.05–2.15. The 

Exchange’s displayed bid is 2.00, but there is a 

Tracking Order in the Working Order File bidding 

2.10 for 10 contracts. An order is received on the 

Exchange to sell six contracts at 2.05. This order 

would be matched against the 2.10-buy Tracking 

Order at a price of 2.05, matching the NBBO. (2) 

After the same initial scenario, a second Tracking 

Order to buy 20 contracts paying 2.05 is placed in 

the book. An order is received to sell 15 contracts 

at 2.05. The incoming sell order, being larger in size 

than the first Tracking Order, cannot be executed 

against it. The incoming order is therefore matched 

against the second Tracking Order, and will be 

executed at 2.05, the NBBO price. 

57See proposed Rule 964NY(b)(2)(F) (as modified 

by Amendment No. 1). 

58As stated by the Exchange, Tracking Orders are 

intended only to provide liquidity in the event a 

marketable order would otherwise route to another 

exchange. See Amendment No. 1 at 7. 

59See proposed Rule 935NY, Commentary .04 (as 

added by Amendment No. 1). 

60See proposed Rule 935NY, Commentary .05 (as 

added by Amendment No. 1). 

61See proposed Rule 964.1NY. 

62See proposed Rule 900.3NY(s). 

63The Directed Order Market Maker will be 

allocated a number of contracts equal to the greater 

of the guaranteed participation or its ‘‘size pro rata’’ 

allocation, but in either case, no greater than the 

size of the Directed Order Market Maker’s 

disseminated size. 

64Such quotations must meet the legal quote 

width requirements of Rule 925NY. These quoting 

obligations will apply collectively to all series in all 

of the issues for which the Directed Order Market 

Maker receives Directed Orders, rather than on an 

issue-by-issue basis. Compliance will be 

determined on a monthly basis. See proposed Rule 

964.1NY(iv) (as added by Amendment No. 1). 

Customers have next priority. If there is 

more than one highest bid or lowest 

offer for the account of a non-Customer, 

then such bids or offers will be afforded 

priority on a ‘‘size pro rata’’ basis and 

will comprise the ‘‘size pro rata pool.’’ 

b. Working Orders 

In addition to bids and offers that are 

displayed in the Display Order Process, 

the System will accept ‘‘Contingency 

Orders’’ and ‘‘Working Orders,’’ which 

are orders that are contingent upon a 

condition being satisfied or orders with 

a conditional or undisplayed price and/ 

or size. Contingency Orders and 

Working Orders are maintained in the 

‘‘Working Order File’’ of the book until 

eligible for execution and/or display.46

Such orders include Reserve Orders, 

Stop Orders,47 Stop Limit Orders,48 Allor-None Orders, and Tracking Orders.49

After displayed interest at a particular 

price has been executed, orders in the 

Working Order File have next priority. 

However, such orders do not have any 

priority or standing until they are 

eligible for execution and/or display.50

For example, when the displayed 

portion of a Reserve Order has been 

fully executed,51 the display is refreshed 

from the reserve portion of the order 

(which had been maintained in the 

Working Order File) up to the size of the 

original display with a new time 

stamp.52 Stop Orders and Stop Limit 

Orders are not eligible to execute against 

incoming orders, and become eligible to 

execute via the Display Order Process 

only after the incoming order is 

executed in full or rests in the book, or 

the Stop or Stop Limit Order is sent to 

the Display Order Process at the end of 

a triggering event.53

A Tracking Order is defined as an 

undisplayed limit order that is eligible 

for execution after the Display Order 

Process against orders equal to or less 

than the size of the Tracking Order.54 A 

Tracking Order is ranked according to 

its limit price, but is executable only at 

a price matching the NBBO. It will not 

trade through the NBBO. If a Tracking 

Order is executed but not exhausted, the 

remaining portion of the order will be 

canceled, without routing the order to 

another Market Center 55 or market 

participant.56 Tracking Orders have last 

priority and never become part of the 

Display Order Process.57 They have 

standing only if contra-side interest in 

the System would otherwise be routed 

to another market center at the NBBO.58

Tracking Orders will not execute against 

incoming Linkage Orders. 

The proposed rules provide that, prior 

to or after submitting an order to the 

System, an ATP Holder is not permitted 

to inform another ATP Holder or any 

other third party of any of the terms of 

the order.59 In addition, it will be a 

violation of Rule 935NY when an ATP 

Holder enters a Tracking Order for the 

purpose of executing as principal an 

order it also represents as agent.60

c. Participation Entitlements 

The System will include participation 

guarantees that, when the requisite 

conditions are fulfilled, will entitle 

certain participants—Specialists, eSpecialists, and Directed Order Market 

Makers—to a certain percentage of each 

incoming order, after Customer Orders 

are satisfied. 

Directed Order Market Makers. The 

System will permit Specialists and 

Market Makers to receive ‘‘Directed 

Orders.’’ 61 A Directed Order is a 

marketable order that has been directed 

to a particular Market Maker by an 

Order Flow Provider.62 If an incoming 

marketable order is so directed, the 

Directed Order Market Maker will be 

entitled to receive 40% (or such lower 

percentage as may be determined by the 

Exchange) of the portion of an order 

remaining after Customer Orders in the 

book have been satisfied, provided the 

Directed Order Market Maker is quoting 

at the NBBO at the time the order is 

received by the Exchange for at least 

that size.63

To be eligible to receive Directed 

Orders, a Directed Order Market Maker 

must provide continuous two-sided 

quotations throughout the trading day in 

issues for which it receives Directed 

Orders for 90% of the time the Exchange 

is open for trading in each issue.64

Specialists and e-Specialists. In the 

System, the proposed rules permit the 

Exchange to establish from time to time 

a participation entitlement for 

Specialists and e-Specialists, known 

collectively as the ‘‘Specialist Pool.’’ 

The Specialist Pool participation 

entitlement will not apply when a 

Directed Order Market Maker receives a 

guaranteed participation. To receive a 

participation entitlement, a Specialist 

(on the trading floor) or e-Specialist 

must be quoting at the NBBO and may 

not be allocated a total quantity greater 

than the quantity than it is quoting at 

the NBBO. The Specialist Pool will be 

entitled to up to 40% of the size of an 

incoming order (or such lower 

percentage as may be determined by the 

Exchange) that remains after all 

Customer Orders in the book at the best 

bid or offer have been satisfied. 

Within the Specialist Pool 

participation entitlement, the Specialist 

and e-Specialists quoting at the NBBO 

will participate on a size pro rata basis. 

However, the Specialist’s size pro-rata 

participation in the Specialist Pool will 

receive additional weighting, as 

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65Commentary .01 to proposed Rule 964NY 

provides that, on a quarterly basis, the Exchange 

will evaluate what percentage of the volume 

executed on the Exchange is composed of orders for 

five contracts or fewer that is allocated to the 

Specialist Pool, and will reduce the size of the 

orders included in this entitlement if such 

percentage is over 40%. 

66 If an incoming market order is not entirely 

filled after trading against any eligible interest in 

the Working Order File, the balance of the order 

will be executed at the next available price level 

based on split-price execution or, if such order is 

marketable against the NBBO, the order would be 

executed against any eligible Tracking Order or 

routed away. E-mail from Andrew Stevens, Chief 

Counsel—U.S. Equities & Derivatives, NYSE 

Euronext, Inc., to Michael Gaw, Assistant Director, 

Division of Trading and Markets, Commission, on 

February 26, 2009. 

67See proposed Rule 964NY(c)(2) (as modified by 

Amendment No. 1). 

68See proposed Rule 935NY. The Exchange 

stated that attempts to use a Tracking Order to 

execute a cross transaction is considered a violation 

of Rule 935NY, as that rule requires an order to be 

exposed (displayed) if it is part of a cross 

transaction. See Amendment 1 at 7. See also supra 

note 60 and accompanying text. 

69See Securities Exchange Act Release No. 57844 

(May 21, 2008), 73 FR 30988 (May 29, 2008) 

(directed orders on NASDAQ OMX PHLX). Other 

exchanges have similar directed order or ‘‘preferred 

market maker’’ programs. See, e.g., CBOE Rule 8.13; 

International Securities Exchange (‘‘ISE’’) Rule 713; 

current Exchange Rule 997–ANTE. 

70See proposed Rule 964.1NY(iv) (as added by 

Amendment No. 1). 

71Other exchanges have similar rules. See, e.g., 

ISE Rule 713; NASDAQ OMX PHLX Rule 1014(g). 

72Similar orders have previously been approved 

in the equities markets. See Securities Exchange Act 

Release No. 53117 (January 13, 2006), 71 FR 3910 

(January 24, 2006) (SR–PCX–2005–87). 

73See, e.g., CBOE Rule 6.8, Interpretations and 

Policies .02(b). 

74See supra note 5. 

75Proposed Rule 935NY provides that, with 

respect to orders routed to the System, users may 

not execute as principal orders they represent as 

agent unless (i) agency orders are first exposed on 

the Exchange for at least three seconds or (ii) the 

user has been bidding or offering on the Exchange 

for at least three seconds prior to receiving an 

agency order that is executable against such bid or 

offer. 

determined by the Exchange and 

announced via Regulatory Bulletin, but 

in no case greater than 662⁄3% if there is 

only one e-Specialist, and no more than 

50% if there are two or more eSpecialists. 

For all orders of five contracts or 

fewer, the Specialist Pool will be 

allocated any balance of the order after 

any Customer Orders on the book have 

been satisfied, provided the Specialist 

Pool is quoting at the NBBO and a 

Directed Order Market Maker did not 

receive a guaranteed allocation. These 

orders of five contracts or fewer, or any 

balances thereof after Customer Orders 

in the book have been satisfied, will be 

allocated to each participant in the 

Specialist Pool on a rotating basis, 

provided the recipient Specialist’s 

quoted size is equal to or greater than 

the size of the allocation.65

d. Additional Provisions 

If an incoming limit order is not 

entirely filled after trading against any 

eligible interest in the Working Order 

File, the balance of the order will be 

executed at the next available price 

level or, if the limit order locks or 

crosses the NBBO, matched against any 

available Tracking Order (prior to being 

routed) or routed to the away market(s) 

displaying the NBBO.66 If the above 

conditions do not apply, and the order 

is no longer marketable, or if the order 

has been designated as an order type 

that is not eligible to be routed away, 

the order would be placed in the book 

or, if it would lock or cross the NBBO, 

canceled.67

The proposed rules also include a 

provision providing that ATP Holders 

may not execute as principal orders they 

represent as agent on the System unless 

(i) agency orders are first exposed on the 

Exchange for at least three seconds; or 

(ii) the user has been bidding or offering 

on the Exchange for at least three 

seconds prior to receiving an agency 

order that is executable against such bid 

or offer.68

The Commission believes that the 

Exchange’s proposed priority and 

allocation rules are consistent with the 

Act. The Commission has previously 

approved participation guarantees for 

Market Makers, to which orders are 

directed by other exchange members, of 

up to 40% of the size of such directed 

orders (after any Customer Orders have 

been satisfied), provided such Market 

Maker is quoting at the NBBO when the 

order is received by the Exchange and 

meets specified, higher quoting 

obligations.69 In its comment letter, 

CBOE stated that the proposed Directed 

Order Market Maker program is similar 

to other options exchanges’ programs, 

but noted that the Alternext proposal, 

unlike the rules of other exchanges, 

appeared not to require Directed Order 

Market Makers to be subject to a 

heightened quoting requirement to 

qualify as Directed Order Market 

Makers. In Amendment No. 1, the 

Exchange added a provision that 

establishes such a heightened 

standard.70

The Commission has also previously 

approved Specialist Pool participations 

of up to 40% of the size of incoming 

orders (after any Customer Orders have 

been satisfied and only when the 

Directed Order guarantee has not been 

applied), provided that the Specialist 

Pool is quoting at the NBBO when the 

order is received by the Exchange. The 

Commission believes that these 

guarantees strike a reasonable balance 

between rewarding certain participants 

for making markets (in the case of 

Specialists and e-Specialists) or bringing 

liquidity to the exchange (in the case of 

Directed Order Market Makers), with 

providing other market participants an 

incentive to quote aggressively. 

The Commission also believes that the 

proposed rules providing for the 

allocation of orders of five contracts or 

fewer to the Specialist Pool are 

consistent with the Act.71

With regard to Working Orders and 

their conditions of execution, the 

Commission has previously approved 

most of the order types that the 

Exchange proposes to implement. 

Although the Commission has not 

previously approved an order type in 

the options markets with exactly the 

same features as the Tracking Order,72

the Commission also finds the proposed 

rules relating to Tracking Orders to be 

consistent with the Act. As set forth in 

the proposed rules, an incoming order 

will never be executed against a 

Tracking Order at a price that is inferior 

to the NBBO. Thus, an execution against 

a Tracking Order would never trade 

through the best price available on 

another market. An incoming order also 

will never be executed at a price better 

than the NBBO. Thus, Tracking Orders 

do not constitute hidden interest at a 

better price than the publicly 

disseminated market. 

Tracking Orders are intended only to 

provide liquidity in the event a 

marketable order would otherwise route 

to another exchange. Tracking Orders 

provide participants on the System the 

ability to pre-set orders to automatically 

‘‘step up’’ to the NBBO to trade against 

an incoming order when no other 

interest at that price is available on the 

Exchange, before the order is routed to 

another exchange. In this regard, the use 

of Tracking Orders is similar to 

automatic step-up features on other 

exchanges that the Commission has 

approved.73

In its comment letter on the proposed 

rule change,74 CBOE expressed its 

understanding that, because Tracking 

Orders are not exposed in the System, 

they should not be eligible for crossing 

pursuant to proposed Rule 935NY.75 In 

Amendment No. 1, the Exchange 

responded to this comment by adding a 

new Commentary .05 to proposed Rule 

935NY stating explicitly that it will be 

a violation of Rule 935NY when an ATP 

Holder enters a Tracking Order for the 

purpose of executing as principal an 

order it also represents as agent. The 

Commission believes that this provision 

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76 17 CFR 242.602. The Quote Rule, in relevant 

part, requires a national securities exchange to 

collect, process, and make available to vendors the 

best bid, the best offer, and aggregate quotation 

sizes for each subject security that is communicated 

on any national securities exchange by a 

responsible broker or dealer. A ‘‘bid’’ or ‘‘offer’’ is 

defined as ‘‘the bid price or the offer price 

communicated by a member of a national securities 

exchange or member of a national securities 

association to any broker or dealer, or to any 

customer.* * *’’ 17 CFR 242.600(b)(8). Because 

Tracking Orders and the non-displayed size of 

Reserve Orders are sent only to the Exchange 

systems and not ‘‘communicated * * * to any 

broker, dealer, or customer,’’ such orders are not 

‘‘bids’’ or ‘‘offers.’’ Thus, the Quote Rule does not 

require the Exchange to disseminate information 

about Tracking Orders and the non-displayed size 

of Reserve Orders. However, if an ATP Holder were 

to inform a third party of the terms of a Tracking 

Order or the non-displayed size of a Reserve Order, 

such Orders would become ‘‘bids’’ or ‘‘offers’’ 

subject to the Quote Rule. 

77 ‘‘Penny price improvement’’ rules permit 

members of an exchange to submit bids and offers 

that provide price improvement in one cent 

increments that are not displayed in the book, in 

options in which the standard increment is more 

than one cent. Such bids and offers are displayed 

by rounding to the nearest standard increment. 

78See proposed Rule 900.3NY(d)(5). 

79Thus, for example, the bid or offer of a nonCustomer in the trading crowd that was made 

before that of a Customer represented by a Floor 

Broker in the trading crowd would take priority 

over the Customer Order (provided the 

requirements of Section 11(a) of the Act and the 

rules thereunder are met). 

80See proposed Rule 934NY(a). 

81See proposed Rule 963NY(f). 

82See proposed Rule 934NY(b). 

is reasonably designed to prevent use of 

Tracking Orders to circumvent the 

general requirement to expose agency 

orders before executing against them as 

principal, and is therefore consistent 

with the Act. The Exchange also added 

a new Commentary .04 to proposed Rule 

935NY to provide that, prior to or after 

submitting an order to the System, an 

ATP Holder is not permitted to inform 

another ATP Holder or any other third 

party of any of the terms of the order. 

The Commission believes that this 

provision is consistent with the Act 

because it is reasonably designed to 

prevent ATP Holders from providing 

material, non-public information to 

third parties and to promote compliance 

with the Commission’s Quote Rule.76

CBOE also argued that, prior to 

effecting any transactions in open 

outcry, Exchange members should be 

required to electronically ‘‘sweep’’ the 

book for any Tracking Order interest in 

the System, so as not to violate the 

priority of such orders. CBOE pointed to 

rules at other exchanges that require 

members seeking to trade in open outcry 

to electronically sweep the book for any 

penny interest from ‘‘penny price 

improvement orders’’ 77 before 

executing an order. The Exchange 

responded that a Tracking Order does 

not have any standing with regard to 

open-outcry trading, as it is not 

displayed and, unlike price-improving 

orders and quotations, is not 

represented by a displayed bid or offer 

at an indicative price. The Commission 

agrees with the distinction made by the 

Exchange. As set forth in the proposed 

rules, a Tracking Order has standing 

only if contra-side interest in the System 

would otherwise be routed to another 

market center at the NBBO.78 The 

Commission also notes that Tracking 

Orders can be entered in the System 

only at standard trading increments, and 

thus cannot be used to gain priority over 

displayed interest by a sub-increment 

amount. 

CBOE further questioned the 

proposed provision that, when a 

Tracking Order in the System is at a 

better price than another Tracking 

Order, but cannot be executed due to 

insufficient size, it does not have 

priority. CBOE also questioned in 

general why an incoming order does not 

trade against a Tracking Order at a price 

better than the NBBO when the 

Tracking Order is submitted at such a 

price. In Amendment No. 1, the 

Exchange responded that the order 

handling instruction on a Tracking 

Order is that it is to be executed only 

at a price that matches the NBBO on the 

same side of the market, and only 

against lesser or equal-sized contra-side 

interest. The limit price on a Tracking 

Order serves only to provide a boundary 

on the order’s possible execution price 

and to establish its ranking. The 

Commission believes that the 

Exchange’s response adequately 

addresses CBOE’s question, and that it 

is consistent with the Act for the 

Exchange to offer an order type with 

these conditions. 

e. Open-Outcry Trading 

Proposed Rule 963NY describes 

priority and order allocation for openoutcry trading, including procedures to 

be followed when there is interest at the 

same price in the book as on the trading 

floor. The proposed rules governing 

open-outcry trading on the Exchange 

floor are similar to those at other 

exchanges with trading floors, and the 

Commission finds that they are 

consistent with the Act. 

When a Floor Broker or Market Maker 

makes a bid or offer or calls for a market 

and more than one ATP Holder 

responds at the same best price, the 

Floor Broker or Market Maker must 

designate the sequence in which 

responses are vocalized. As between 

two bids or offers at the same best price, 

priority is afforded in the sequence they 

are made.79 If they were made 

simultaneously or it is impossible to 

determine clearly the order in which 

they were made, such orders would be 

deemed to be on parity, and priority 

will be afforded, insofar as practicable, 

on an equal basis. However, a Customer 

Order displayed in the book at the same 

price as the best price in the crowd will 

have priority over any bid or offer at the 

post. After any Customer Orders 

displayed in the book at the best bid or 

offer in the crowd are satisfied, the 

Specialist is entitled to trade with 40% 

of the order, provided the Specialist has 

vocally responded to the Floor Broker’s 

call for a market and has responded 

with a price that is the best bid or offer. 

Bids and offers of broker-dealers 

(including Quotes with Size and orders 

of Market Makers displayed on the 

book) would have priority after all 

trading crowd interest is exhausted. 

Customer-to-Customer Crosses. The 

proposed rules include procedures by 

which a Floor Broker who holds a 

Customer Order to buy and a Customer 

Order to sell may cross such orders on 

the floor.80 After providing an 

opportunity for bids and offers to be 

made by members of the trading crowd, 

the Floor Broker must bid above the 

highest bid in the crowd and offer below 

the lowest offer in the crowd. After 

satisfying all better priced bids or offers 

on the book and any Customer Orders 

on the book at the same price, the Floor 

Broker is permitted to cross the orders 

at such higher bid or lower offer by 

announcing by open outcry that he is 

crossing orders on behalf of Customers, 

and giving the quantity and price. The 

Floor Broker is permitted to cross the 

orders at split prices if the rules 

governing split price transactions are 

met.81

Non-Facilitation (Regular Way) 

Crosses. The proposed rules also 

include procedures by which a Floor 

Broker who holds a Customer Order and 

a non-Customer order may cross such 

orders.82 After providing an opportunity 

for bids and offers to be made by 

members of the trading crowd, the Floor 

Broker must expose the Customer Order 

by bidding above the highest bid in the 

crowd or offering below the lowest offer 

in the crowd, by at least one minimum 

price variation (‘‘MPV’’). After satisfying 

all better priced bids or offers on the 

book, any Customer Orders on the book 

at the same price, and any interest by 

members of the trading crowd at such 

higher bid or lower offer, the Floor 

Broker is permitted to cross the orders 

(or any part remaining unexecuted) at 

such higher bid or lower offer by 

announcing by open outcry that he is 

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83See proposed Rule 934.1NY. A ‘‘Facilitation 

Order’’ is an order represented on behalf of an ATP 

Holder that may be executed in whole or in part in 

a cross transaction with the ATP Holder’s Customer 

Order and that is clearly designated as a Facilitation 

Order. 

84 If a trade pursuant to proposed Rule 934.1NY 

occurs at the Specialist’s vocalized bid or offer in 

its appointed class, the Specialist’s guaranteed 

participation will apply only to the number of 

contracts remaining after all Customer Orders that 

trade ahead of the cross transaction and the number 

of contracts crossed have been satisfied. The 

Specialist’s guaranteed participation will be a 

percentage that, when combined with the 

percentage the originating firm crossed, does not 

exceed 40% of the order. See proposed Rule 

934.1NY(4)(C). 

85The proposed rule for At-Risk Crosses applies 

only to equity options. The minimum eligible order 

size for an At-Risk Cross is 50 contracts. See 

proposed Rule 934.2NY. 

86See, e.g., Amex Rule 950–ANTE(d), 

Commentaries .02–.04; CBOE Rule 6.74; NYSE Arca 

Rule 6.47. 

87See proposed Rule 934.3NY. 

88See proposed Rule 934.3 (as modified by 

Amendment No. 1). 

89See, e.g., Amex Rule 950–ANTE(d), 

Commentaries .02 and .04. 

90 15 U.S.C. 78k(a)(1). 

91 15 U.S.C. 78k(a)(1)(A)–(I). 

92 17 CFR 240.11a2–2(T) and 240.11a1–1(T). 

crossing the orders, and giving the 

quantity and price. 

Facilitation Crosses. The proposed 

rules further include procedures by 

which a Floor Broker who holds a 

Customer Order and a Facilitation Order 

may cross such orders.83 After providing 

an opportunity for bids and offers to be 

made by crowd members, the Floor 

Broker, on behalf of the Customer whose 

order is subject to facilitation, must 

disclose any contingencies with respect 

to the order, identify the order as being 

subject to facilitation, and establish 

priority by either bidding or offering at 

or between the best bid or offer in the 

market. After all other crowd members 

are given an opportunity to accept the 

bid or offer made on behalf of the 

Customer, the Floor Broker is permitted 

to cross all or any remaining part of 

such order and the Facilitation Order at 

the price of the Customer’s bid or offer 

by announcing by open outcry that he 

is crossing such orders, and stating the 

quantity and price. 

Notwithstanding the above, if the 

proposed cross transaction meets the 

eligible size requirement of 50 contracts 

or larger, a Facilitation Order can trade 

with up to 40% of the Customer Order, 

after satisfying all better-priced bids or 

offers on the book or in the trading 

crowd and any Customer Orders at the 

same price.84

‘‘At-Risk’’ Crosses. The proposed rules 

establish an alternative to the 

Facilitation Cross procedures for a Floor 

Broker that seeks to cross a Customer 

Order with an order from the ATP 

Holder from which the Customer Order 

originated.85 After providing an 

opportunity for bids and offers to be 

made by members of the trading crowd, 

the Floor Broker must represent the 

Customer Order to the trading crowd, 

indicating that it is a Customer Order 

and providing the order’s size, side of 

the market, and a price. After giving the 

trading crowd an opportunity to 

improve its quote, the Floor Broker may 

improve the crowd’s market on behalf of 

the ATP Holder to one MPV away from 

the Customer Order and thereby 

establish priority over the crowd at this 

new price. The crowd may trade with 

the Customer Order at that order’s price, 

or trade with the ATP Holder’s order at 

its proposed price. To the extent the 

crowd does not trade with the Customer 

Order, the Floor Broker may effect the 

cross. 

The Commission finds that the 

Exchange’s proposed crossing rules are 

consistent with the Act. They are 

similar to other crossing rules that the 

Commission has previously approved 

for Amex and other exchanges 86 and do 

not appear to raise any novel or 

significant issues. 

Solicited Orders. The proposed rules 

include procedures by which a Floor 

Broker representing an order 

(‘‘originating order’’) may cross it with 

an order solicited from another ATP 

Holder or non-member broker-dealer 

outside the trading crowd (‘‘solicited 

party’’).87 The Floor Broker must 

announce to the trading crowd the same 

terms and conditions about the 

originating order as disclosed to the 

solicited party. The Floor Broker would 

also announce the price at which he is 

prepared to buy from or sell to the 

solicited party. After all other market 

participants are given a reasonable 

opportunity to accept the bid or offer, 

the solicited party may trade with any 

remaining part of the originating order. 

Generally, non-solicited market 

participants and Floor Brokers holding 

non-solicited discretionary orders in the 

crowd have priority over the solicited 

party or the solicited order to trade with 

the original order at the best bid or offer 

price. However, if the solicited order 

improved the crowd’s quoted market, 

the Floor Broker would be permitted to 

cross the solicited order against the 

Customer Order to the extent of 40% of 

the contracts remaining after any 

Customer Orders have been filled. The 

eligible order size for this guarantee to 

apply is a minimum of 50 contracts.88

The Exchange’s proposed rules for 

solicited orders, which are similar to 

rules the Commission has previously 

approved,89 do not appear to raise any 

novel or substantive issues, and the 

Commission believes they are consistent 

with the Act. 

C. Section 11(a) Compliance 

Section 11(a)(1) of the Act 90 prohibits 

a member of a national securities 

exchange from effecting transactions on 

that exchange for its own account, the 

account of an associated person, or an 

account over which it or its associated 

person exercises discretion (each, a 

‘‘covered account,’’ and collectively, 

‘‘covered accounts’’), unless an 

exemption applies. Sections 

11(a)(1)(A)–(I) of the Act 91 and the rules 

thereunder provide certain exemptions 

from the general prohibition, including 

the exemptions set forth in Rules 11a2– 

2(T) and 11a1–1(T) under the Act.92

With respect to the general 

prohibition and exemptions of Section 

11(a)(1) and the rules thereunder, the 

Exchange proposes to adopt new Rule 

910NY. The proposed rule states that an 

ATP Holder must ensure that each of its 

transactions complies with Section 11(a) 

of the Act, which generally prohibits an 

ATP Holder from effecting a transaction 

trading for a covered account unless a 

valid exemption in the statute or the 

rules thereunder applies. The proposed 

rule further states that, when relying on 

the exemption set forth in Rule 11a2– 

2(T) under the Act, a Floor Broker may 

not enter into the System any order for 

a covered account, including an order 

sent to it by an affiliated ATP Holder 

from off the floor, if the order is for such 

affiliated ATP Holder’s own account, 

the account of an associated person, or 

an account over which it or its 

associated person exercises discretion. 

In addition, the proposed rule provides 

that, in cases where a Floor Broker’s 

transaction would occur at the same 

price as one or more orders on the book, 

the Floor Broker, if it can rely on no 

exception other than the exemption in 

Section 11(a)(1)(G) of the Act and Rule 

11a1–1(T) thereunder (as discussed in 

more detail below) must, in addition to 

complying with the other requirements 

of such exemption, yield to all orders in 

the book at the same price if the Floor 

Broker has no ability to determine that 

an order in the book is not the order of 

a non-ATP Holder. Proposed Rule 

910NY also states that, where an ATP 

Holder submits an order to the book (or 

an order is submitted on its behalf) and 

such ATP Holder is relying on the G 

Exemption, the order must be entered as 

immediate-or-cancel. 

The Exchange has represented that it 

has analyzed its rules proposed 

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9850 Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Notices 

93See Amendment No. 1 at 7. 

94 17 CFR 240.11a2–2(T). 

95The member may, however, participate in 

clearing and settling the transaction. 

96See, e.g., Securities Exchange Act Release Nos. 

59154 (December 23, 2008), 73 FR 80468 (December 

31, 2008) (SR–BSE–2008–48) (approving, among 

other things, the equity rules of the Boston Stock 

Exchange (‘‘BSE’’)); 57478 (March 12, 2008), 73 FR 

14521 (March 18, 2008) (SR–NASDAQ–2007–004 

and SR–NASDAQ–2007–080) (approving rules 

governing the trading of options on The NASDAQ 

Options Market); 49068 (January 13, 2004), 69 FR 

2775 (January 20, 2004) (SR–BSE–2002–15) 

(approving the Boston Options Exchange as an 

options trading facility of BSE); 15533 (January 29, 

1979), 44 FR 6084 (January 31, 1979) (approving the 

Amex Post Execution Reporting System, the Amex 

Switching System, the Intermarket Trading System, 

the Multiple Dealer Trading Facility of the 

Cincinnati Stock Exchange, the PCX 

Communications and Execution System, and the 

Philadelphia Stock Exchange Automated 

Communications and Execution System) (‘‘1979 

Release’’); and 14563 (March 14, 1978), 43 FR 11542 

(March 17, 1978) (approving NYSE’s Designated 

Order Turnaround System) (‘‘1978 Release’’). 

97See Amendment No. 1 at 9. The Commission 

notes that an ATP Holder may cancel or modify the 

order, or modify the instructions for executing the 

order. The Commission has stated that the nonparticipation requirement is satisfied under such 

circumstances so long as such modifications or 

cancellations are also transmitted from off the floor. 

See 1978 Release, id. (stating that the ‘‘nonparticipation requirement does not prevent 

initiating members from canceling or modifying 

orders (or the instructions pursuant to which the 

initiating member wishes orders to be executed) 

after the orders have been transmitted to the 

executing member, provided that any such 

instructions are also transmitted from off the 

floor’’). 

98 In considering the operation of automated 

execution systems operated by an exchange, the 

Commission noted that while there is no 

independent executing exchange member, the 

execution of an order is automatic once it has been 

transmitted into the systems. Because the design of 

these systems ensures that members do not possess 

any special or unique trading advantages in 

handling their orders after transmitting them to the 

exchange, the Commission has stated that 

executions obtained through these systems satisfy 

the independent execution requirement of Rule 

11a2–2(T). See 1979 Release, supra note 96. 

99See Amendment No. 1 at 9. 

hereunder, which include proposed 

Rule 910NY, and has determined that 

they are consistent with Section 11(a) of 

the Act and rules thereunder.93 For the 

reasons set forth below, the Commission 

believes that the proposed rules are 

consistent with the requirements of 

Section 11(a) of the Act and the rules 

thereunder. 

1. Rule 11a2–2(T) 

Rule 11a2–2(T) under the Act,94

known as the ‘‘effect versus execute’’ 

rule, provides exchange members with 

an exemption from the Section 11(a)(1) 

prohibition. Rule 11a2–2(T) permits an 

exchange member, subject to certain 

conditions, to effect transactions for 

covered accounts by arranging for an 

unaffiliated member to execute the 

transactions on the exchange. To 

comply with the conditions of Rule 

11a2–2(T), a member: (i) Must transmit 

the order from off the exchange floor; 

(ii) may not participate in the execution 

of the transaction once it has been 

transmitted to the member performing 

the execution; 95 (iii) may not be 

affiliated with the executing member; 

and (iv) with respect to an account over 

which the member has investment 

discretion, neither the member nor its 

associated person may retain any 

compensation in connection with 

effecting the transaction except as 

provided in the rule. The Exchange has 

requested that the Commission concur 

with its conclusion that orders for 

covered accounts entered into the 

System satisfy the conditions of Rule 

11a2–2(T). Rule 11a2–2(T)’s first 

condition is that orders for covered 

accounts be transmitted from off the 

exchange floor. The Exchange 

represents that orders sent to the System 

will be transmitted from remote 

terminals directly to the System by 

electronic means. In the context of other 

automated trading systems, the 

Commission has found that the off-floor 

transmission requirement is met if a 

covered account order is transmitted 

from a remote location directly to an 

exchange’s floor by electronic means.96

With respect to such orders transmitted 

electronically from remote terminals 

directly to the System, the Commission 

believes that the System satisfies the offfloor transmission requirement. 

The Exchange further represents that 

there may be instances where an ATP 

Holder on the physical floor of the 

Exchange may electronically submit an 

order for a covered account to the 

System. The Exchange states that, to 

rely on the exemption set forth in Rule 

11a2–2(T), an ATP Holder must ensure 

that it sends its orders from off the floor 

to an unaffiliated ATP Holder on the 

floor for execution, in addition to 

meeting the rule’s other requirements. If 

an ATP Holder sends its order from off 

the floor to an affiliated member that is 

on the floor, who then directs the order 

into the System for execution, the offfloor ATP Holder may not rely on the 

exemption set forth in Rule 11a2–2(T). 

The Commission believes that, based on 

the foregoing, those orders for covered 

accounts sent by ATP Holders to the 

System for execution from off the 

Exchange floor satisfy the off-floor 

transmission requirement for the 

purposes of the ‘‘effect versus execute’’ 

rule. The Commission notes that an ATP 

Holder that submits an order for a 

covered account for execution on the 

physical floor of the Exchange and who 

wishes to rely on the exemption in Rule 

11a2–2(T) also must submit the order 

from off the floor. 

Second, Rule 11a2–2(T) requires that 

the member not participate in the 

execution of its order once the order is 

transmitted to the floor for execution. 

The Exchange represents that, upon 

submission to the System, an order will 

enter the queue and be executed against 

another order or quote in the book based 

on an established matching algorithm. 

The Exchange states that execution 

depends not on whether an order is for 

the account of an ATP Holder, but 

rather upon what other orders are 

entered into the System at or around the 

same time as the subject order, what 

orders are resident in the book, and 

where the order is ranked based on, 

among other criteria, a price-time 

priority ranking algorithm. As such, the 

Exchange represents that at no time 

following the submission of an order to 

the System is an ATP Holder able to 

acquire control or influence over the 

result or timing of an order’s 

execution.97 Accordingly, the 

Commission believes that an Exchange 

member does not participate in the 

execution of an order submitted into the 

System. The Commission notes that an 

ATP Holder that submits an order for a 

covered account for execution on the 

physical floor of the Exchange and that 

wishes to rely on the exemption in Rule 

11a2–2(T) is similarly restricted from 

participating in the execution of such 

order after the order has been 

transmitted to the System. 

Third, Rule 11a2–2(T) requires that 

the order be executed by an exchange 

member who is unaffiliated with the 

member initiating the order. The 

Commission has stated that the 

requirement is satisfied when 

automated exchange facilities, such as 

the System, are used, as long as the 

design of these systems ensures that 

members do not possess any special or 

unique trading advantages in handling 

their orders after transmitting them to 

the Exchange.98 The Exchange has 

represented that the design of the 

System ensures that ATP Holders do not 

have any special or unique trading 

advantages in the handling of their 

orders after transmission.99 Based on the 

Exchange’s representations, the 

Commission believes that the System 

satisfies this requirement. The 

Commission notes that, if an ATP 

Holder submits an order for a covered 

account for execution on the physical 

floor of the Exchange, to comply with 

this requirement of Rule 11a2–2(T), 

such order would have to be sent to an 

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100 17 CFR 240.11a2–2(T)(a)(2)(iv). In addition, 

Rule 11a2–2(T)(d) requires a member or associated 

person authorized by written contract to retain 

compensation, in connection with effecting 

transactions for covered accounts over which such 

member or associated person thereof exercises 

investment discretion, to furnish at least annually 

to the person authorized to transact business for the 

account a statement setting forth the total amount 

of compensation retained by the member in 

connection with effecting transactions for the 

account during the period covered by the statement. 

See 17 CFR 240.11a2–2(T)(d). See also 1978 

Release, supra note 96 (stating ‘‘[t]he contractual 

and disclosure requirements are designed to assure 

that accounts electing to permit transaction-related 

compensation do so only after deciding that such 

arrangements are suitable to their interests’’). 

101See Amendment No. 1 at 10. 

102See id. 

103See 15 U.S.C. 78k(a)(1)(G). 

104Rule 11a1–1(T)(a)(1)–(3) provides that each of 

the following requirements must be met: (1) A 

member must disclose that a bid or offer for its 

account is for its account to any member with 

whom such bid or offer is placed or to whom it is 

communicated, and any member through whom 

that bid or offer is communicated must disclose to 

others participating in effecting the order that it is 

for the account of a member; (2) immediately before 

executing the order, a member (other than the 

specialist in such security) presenting any order for 

the account of a member on the exchange must 

clearly announce or otherwise indicate to the 

specialist and to other members then present for the 

trading in such security on the exchange that he is 

presenting an order for the account of a member; 

and (3) notwithstanding rules of priority, parity, 

and precedence otherwise applicable, any member 

presenting for execution a bid or offer for its own 

account or for the account of another member must 

grant priority to any bid or offer at the same price 

for the account of a person who is not, or is not 

associated with, a member, irrespective of the size 

of any such bid or offer or the time when entered. 

See 17 CFR 240.11a1–1(T)(a)(1)–(3). 

105See proposed Rule 910NY. 

106See Amendment No. 1 at 10. 

107See supra notes 103–104 and accompanying 

text. 

108See proposed Rule 900.3NY(e). 

109See proposed Rule 963NY(d) (based on NYSE 

Arca Rule 6.75(e); proposed Rule 963.1NY (based 

on NYSE Arca Rule 6.75, Commentary 0.1, and 

NYSE Arca Rule 6.91, Commentaries .01 and .02). 

110See proposed Rule 965NY(b). 

111See Securities Exchange Act Release No. 

57384 (February 26, 2008), 73 FR 11688 (March 4, 

2008). 

112See proposed Rules 952NY and 953NY (based 

on NYSE Arca Rules 6.64 and 6.65 respectively). 

113See proposed Rules 990NY–993NY (based on 

NYSE Arca Rules 6.93–6.96). 

unaffiliated ATP Holder on the 

Exchange floor. 

Fourth, in the case of a transaction 

effected for an account with respect to 

which the initiating member or an 

associated person thereof exercises 

investment discretion, neither the 

initiating member nor any associated 

person thereof may retain any 

compensation in connection with 

effecting the transaction, unless the 

person authorized to transact business 

for the account has expressly provided 

otherwise by written contract referring 

to Section 11(a) of the Act and Rule 

11a2–2(T).100 The Exchange recognizes 

that ATP Holders trading for covered 

accounts over which they exercise 

investment discretion must comply with 

this condition to rely on the rule’s 

exemption.101 The Exchange represents 

that it will enforce this requirement 

pursuant to its obligation under Section 

6(b)(1) of the Act to enforce compliance 

with the federal securities laws.102

2. Section 11(a)(1)(G) and Rule 11a1– 

1(T) 

Section 11(a)(1)(G) of the Act provides 

an additional exemption from the 

general prohibition set forth in Section 

11(a)(1) for any transaction for a 

member’s own account, provided that: 

(i) Such member is primarily engaged in 

certain underwriting, distribution, and 

other activities generally associated 

with broker-dealers and whose gross 

income is derived principally from such 

business and related activities; and (ii) 

the transaction is effected in compliance 

with the rules of the Commission, 

which, as a minimum, assure that the 

transaction is not inconsistent with the 

maintenance of fair and orderly markets 

and yields priority, parity, and 

precedence in execution to orders for 

the account of persons who are not 

members or associated with members of 

the exchange.103 In addition, Rule 11a1– 

1(T) under the Act specifies that a 

transaction effected on a national 

securities exchange for the account of a 

member which meets the requirements 

of Section 11(a)(1)(G)(i) of the Act is 

deemed, in accordance with the 

requirements of Section 11(a)(1)(G)(ii), 

to be not inconsistent with the 

maintenance of fair and orderly markets 

and to yield priority, parity, and 

precedence in execution to orders for 

the account of non-members or persons 

associated with non-members of the 

exchange, if such transaction is effected 

in compliance with certain 

requirements.104

Proposed Rule 910NY provides that, 

in cases where the transaction of an 

ATP Holder on the physical floor would 

occur at the same price as one or more 

orders on the book and where such ATP 

Holder can rely on no exemption other 

than the exemption set forth in Section 

11(a)(1)(G) of the Act and Rule 11a1– 

1(T) thereunder, such ATP Holder must, 

in addition to complying with the other 

requirements of Section 11(a)(1)(G) of 

the Act and Rule 11a1–1(T) thereunder, 

yield to all orders in the book at the 

same price, if such ATP Holder cannot 

determine that an order in the book is 

not the order of a non-ATP Holder.105

The Exchange represents that, in such 

cases, if an ATP Holder seeks to rely on 

the exemption set forth in Section 

11(a)(1)(G) of the Act and Rule 11a1– 

1(T) thereunder for the execution of an 

order for its own account, such order 

may be executed only on the physical 

floor of the Exchange or must be entered 

into the System as an IOC order.106 The 

Commission notes that this exemption 

is available only for orders for the 

account of an Exchange member.107

D. Complex Orders 

The proposed rules also include 

provisions governing transactions in 

Complex Orders, which are defined as 

orders involving the simultaneous 

purchase and/or sale of two or more 

different option series having the same 

underlying security, for the same 

account, in a ratio that is equal to or 

greater than one-to-three (0.333) and 

less than or equal to three-to-one (3.00), 

and for the purpose of executing a 

particular investment strategy.108 These 

proposed rules are similar to those the 

Commission has previously approved 

for NYSE Arca,109 and raise no novel or 

significant issues. The Commission 

finds that they are consistent with the 

Act. 

The proposed rules also include 

provisions regarding transactions in 

NDX or RUT Combination Orders 110

that are virtually identical to current 

Amex rules governing such transactions 

that the Commission previously 

approved.111 The Commission expects 

the Exchange to monitor compliance 

with the requirement in these proposed 

rules that, at time of the execution of an 

NDX or RUT combination order, no 

individual leg of the order trades ahead 

of the corresponding bid or offer in the 

NDX or RUT limit order book. 

E. Trading Auctions and Trading Halts 

The proposed rules on trading 

auctions and on procedures for halting 

or suspending trading are closely 

modeled on similar rules of NYSE Arca 

that have been previously approved by 

the Commission,112 and the 

Commission believes they are consistent 

with the Act. 

F. Linkage and Routing 

The proposed rules relating to the 

intermarket options linkage (‘‘Linkage’’) 

operated pursuant to the Plan for the 

Purpose of Creating and Operating an 

Intermarket Option Linkage are closely 

modeled on similar rules of NYSE Arca, 

which previously have been approved 

by the Commission.113 In addition, 

existing NYSE Alternext Rule 940 

(Options Intermarket Linkage) will 

continue to apply. The proposed rules 

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114See proposed Rule 923NY (based on NYSE 

Arca Rule 6.35); proposed Rule 964NY(c) 

(consistent with NYSE Arca Rule 6.76A). 

115 In a separate filing, the Exchange has proposed 

to use Archipelago Securities LLC as its Routing 

Broker and described the relationship between the 

Exchange and the Routing Broker and the 

conditions related to its operation. The Commission 

is approving that proposal in a separate action 

today. See supra note 9. 

116See proposed Rule 964NY(c)(2)(E). See also 

supra note 66 and accompanying text. 

117 15 U.S.C. 78f(b)(6) and 78f(b)(7). 

118 15 U.S.C. 78f(b)(1). 

119 15 U.S.C. 78f(b)(7) and 78f(d)(1). 

120 17 CFR 240.19d–1(c)(2). 

relating to a routing broker also are 

consistent with similar rules of NYSE 

Arca, which previously have been 

approved by the Commission.114

If an incoming marketable order has 

not been executed in its entirety on the 

Exchange and has been designated as an 

order type that is eligible to be routed 

away, the order would be routed, either 

in its entirety or as component orders, 

for execution to other Market Center(s) 

displaying the NBBO, either through the 

Linkage or through a broker-dealer 

affiliate of the Exchange that acts as an 

agent for routing orders entered into the 

System (‘‘Routing Broker’’),115

according to a proprietary algorithm and 

subject to Exchange rules. Where an 

order or portion of an order is routed 

away and is not executed either in 

whole or in part at the other Market 

Center, the order upon its return would 

be ranked and displayed in the book in 

accordance with its terms.116 The 

Exchange’s proposed Linkage and 

routing rules do not raise any novel or 

substantive issues, and the Commission 

finds them to be consistent with the Act. 

G. Disciplinary Proceedings 

Existing Alternext Rules 475, 476, and 

477 will continue to govern the 

Exchange’s disciplinary proceedings 

related to the options trading. Alternext 

Rule 476A (Imposition of Fines for 

Minor Violation(s) of Rules) will 

continue to govern imposition of fines. 

The Exchange proposes to amend Rule 

476A to include options rule violations 

and their applicable fines that will be in 

effect after the Options Relocation. 

The Commission finds that the 

disciplinary procedures, as applied to 

the options trading on the Exchange, are 

consistent with the Act, in particular 

Sections 6(b)(6) and 6(b)(7) of the 

Act.117 The Commission believes that 

Rules 475, 476, and 477, as applied to 

the trading of options on the Exchange, 

will continue to provide due process for 

ATP Holders involved in any 

disciplinary proceeding. The 

Commission, therefore, believes that 

these rules will continue to provide the 

Exchange with the ability to comply, 

and with the authority to enforce 

compliance by its members and persons 

associated with its members, with the 

provisions of the Act, the rules and 

regulations thereunder, and the rules of 

the Exchange, consistent with Section 

6(b)(1) of the Act.118 In addition, 

because Rule 476A as revised by this 

filing provides procedural rights to 

contest the fine and permits disciplinary 

proceedings on the matter, the 

Commission believes that this rule 

provides a fair procedure for the 

disciplining of ATP Holders and 

persons associated with ATP Holders, 

consistent with Sections 6(b)(7) and 

6(d)(1) of the Act.119

Finally, the Commission finds that the 

proposed changes to Rule 476A are 

consistent with the public interest, the 

protection of investors, or otherwise in 

furtherance of the purposes of the Act, 

as required by Rule 19d–1(c)(2) under 

the Act,120 which governs minor rule 

violation plans. The Commission 

believes that Rule 476A will strengthen 

the Exchange’s ability to carry out its 

oversight and enforcement 

responsibilities as a self-regulatory 

organization in cases where full 

disciplinary proceedings are unsuitable 

in view of the minor nature of the 

particular violation. 

H. Amendment No. 1 and Accelerated 

Approval 

In Amendment No. 1, the Exchange 

made certain revisions to the proposed 

rule text and corresponding changes to 

the Purpose Section of its Form 19b–4 

describing the proposed rule change. In 

particular, Amendment No. 1: 

• Revised the definition of Reserve 

Order in proposed Rule 900.3NY(d)(3) 

to clarify how the displayed portion of 

a Reserve Order is refreshed from the 

reserve size, and to add that, upon entry 

into the System, a marketable Reserve 

Order will be executed in whole or in 

part up to its full size, regardless of the 

reserve size; 

• Eliminated Stock Contingency 

Orders from the proposed rule change; 

• Revised the definitions of certain 

Contingency Orders and clarified how 

such orders are held and processed by 

the System; 

• Revised the definition of Tracking 

Order in proposed Rule 900.3NY(d)(5) 

to clarify the function of such orders, 

prohibit an ATP Holder from informing 

third parties of any terms of such orders, 

and provide that it is a violation of Rule 

935NY for an ATP Holder to enter a 

Tracking Order for purposes of 

executing as principal an order it also 

represents as agent; 

• Revised proposed Rule 902NY 

concerning an ATP Holder’s conduct on 

the Options Trading Floor to add 

restrictions on possession of NYSE 

Floor Broker Hand Held Terminals 

while on the Options Trading Floor; 

• Revised the definition of Market 

Maker to clarify, among other things, 

that the definition applies to an eSpecialist; 

• Revised proposed Rule 934.3NY to 

add that the eligible order size for the 

40% guaranteed participation for 

solicited orders will be not less than 50 

contracts; 

• Clarified procedures for routing 

orders to away market centers and for 

handling the routed orders that are not 

executed and are returned to the book; 

• Eliminated references to Exchange 

Official from Rule 970NY as that term 

is now obsolete; 

• Clarified the quoting obligations of 

a Directed Order Market Maker to state 

it must provide continuous two-sided 

quotations throughout the trading day in 

issues for which it receives Directed 

Orders for 90% of the time the Exchange 

is open for trading in each issue; 

• Added a new proposed Rule 

910NY, which obligates all ATP Holders 

to ensure that each of their transactions 

complies with Section 11(a) of the Act; 

• Clarified that existing Exchange 

rules relating to the trading of FLEX 

Options would continue to apply; and 

• Corrected the list of existing 

Exchange rules that would be 

superseded by new rules proposed in 

this filing. 

In addition to making certain 

revisions to the proposed rule text as 

described above, in Amendment No. 1 

the Exchange also made certain 

representations: 

• The Exchange represented that 

NYSE Alternext US Rule 3(j), which 

governs the use of material, non-public 

information, applies to ATP Holders 

trading on the System. The Exchange 

also represented that Rule 3(j) requires 

a Market Maker to maintain information 

barriers—reasonably designed to 

prevent the misuse of material, nonpublic information by such Market 

Maker—between the Market Maker and 

any of its affiliates that may act as 

specialist or market maker in any 

security underlying the options in 

which the Market Maker makes a market 

on the Exchange; and 

• The Exchange represented that it 

had analyzed its rules proposed 

hereunder, which include proposed 

Rule 910NY, and had determined that 

they are consistent with Section 11(a) of 

the Act and rules thereunder. 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

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121 15 U.S.C. 78s(b)(2). 

122 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On September 29, 2008, the Commission 

approved the Exchange’sbusiness combination with 

NYSE Euronext, Inc. (‘‘Merger’’). See Securities 

Exchange Act Release No. 58673 (September 29, 

2008), 73 FR 57707 (October 3, 2008) (order 

approving SR–NYSE–2008–60 and SR–Amex– 

2008–62). Pursuant to the Merger, NYSE Euronext 

became the overall parent company of the 

Exchange. NYSE Euronext now operates three selfregulatory entities: The Exchange, the NYSE, and 

NYSE Arca, Inc. ArcaSec is also a wholly owned 

subsidiary of NYSE Euronext, and is therefore an 

affiliate of the Exchange. 

4ArcaSec acts as the outbound order routing 

facility of the NYSE andNYSE Arca. See Securities 

Exchange Act Release No. 52497 (September 22, 

2005), 70 FR 56949 (September 29, 2005) (SR–PCX– 

2005–90). See also Securities Exchange Act Release 

Nos. 44983 (October 25, 2001), 66 FR 55225 

(November 1, 2001) (SR–PCX–00–25); 58681 

(September 29, 2008), 73 FR 58285 (October 6, 

2008) (order approving SR–NYSEArca-2008–90); 

55590 (April 5, 2007), 72 FR 18707 (April 13, 2007) 

(notice of immediate effectiveness of SR–NYSE– 

2007–29); and 58680 (September 29, 2008), 73 FR 

58283 (October 6, 2008) (order approving SR– 

NYSE–2008–76). 

On November 24, 2008, the Commission also 

approved ArcaSec to act as the outbound order 

routing facility for NYSE Alternext for the purpose 

of routing equities orders to away market centers. 

Securities Exchange Act Release No. 59009 

(November 24, 2008), 73 FR 73363 (December 2, 

2008) (SR–NYSEALTR–2008–07). 

Currently, FINRA is the examining authority for 

the Routing Broker designated by the Commission 

pursuant to Rule 17d–1 of the Act. As such, FINRA 

is responsible for the oversight and enforcement of 

the Routing Broker for compliance with the 

applicable financial responsibility rules. 

Act,121 for approving the proposal, as 

modified by Amendment No. 1, prior to 

the thirtieth day after the date of 

publication of notice of filing of 

Amendment No. 1 in the Federal 

Register. The changes made by 

Amendment No. 1 are designed to 

clarify the proposed rules and do not 

raise any novel or substantive issues. 

The proposal has otherwise been subject 

to a full comment period. Therefore, the 

Commission believes that good cause 

exists to approve the amended proposal 

on an accelerated basis. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the filing, as 

modified by Amendment No. 1, 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–NYSEALTR–2008–14 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–NYSEALTR–2008–14. 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 inspection and copying in 

the Commission’s Public Reference 

Room on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEALTR–2008–14 and should be 

submitted on or before March 27, 2009. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (SR–NYSEALTR– 

2008–14), as amended, be, and hereby 

is, approved on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.122

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4778 Filed 3–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59473; File No. SR– 

NYSEALTR–2009–18] 

Self-Regulatory Organizations; NYSE 

Alternext U.S. LLC; Notice of Filing and 

Order Granting Accelerated Approval 

of Proposed Rule Change To Use Its 

Broker Dealer Affiliate, Archipelago 

Securities, LLC, as Its Routing Broker 

for Options Orders 

February 27, 2009. 

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 February 

25, 2009, NYSE Alternext U.S. LLC 

(‘‘NYSE Alternext’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been substantially prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons, and is granting 

accelerated approval to the proposed 

rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to use its 

broker dealer affiliate,3 Archipelago 

Securities LLC (‘‘ArcaSec’’), as its 

Routing Broker to route options orders 4

to away market centers when that 

market center is displaying the national 

best bid and offer, in accordance with 

Exchange Rules. A copy of this filing is 

available on the Exchange’s Web site at 

http://www.nyse.com, at the Exchange’s 

principal office 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 III 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 Exchange is proposing to use 

ArcaSec as its Routing Broker to route 

options orders to away market centers 

when that market center is displaying 

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