Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37281 

5See Securities Exchange Act Release No. 59599 

(March 19, 2009), 74 FR 12913 (March 25, 2009) 

(Order Approving File No. SR–FINRA–2008–020) 

and Securities Exchange Act Release No. 59987 

(May 27, 2009), 74 FR 26902 (June 4, 2009) (Order 

Approving File No. SR–FINRA–2009–016). 

6See Securities Exchange Act Release No. 59599 

(March 19, 2009), 74 FR 12913 (March 25, 2009) 

(Order Approving File No. SR–FINRA–2008–020). 

7 15 U.S.C. 78o–3(b)(6). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

non-substantive technical changes in 

the Consolidated FINRA Rulebook. 

The proposed rule change would 

make non-substantive changes to FINRA 

Rule 2310 (Direct Participation 

Programs) and would also update rule 

cross-references within FINRA Rules 

5110 (Corporate Financing Rule— 

Underwriting Terms and 

Arrangements), 5122 (Private 

Placements of Securities Issued by 

Members), 5130 (Restrictions on the 

Purchase and Sale of Initial Equity 

Public Offerings), 6635 (FINRA Rules), 

9610 (Application), 12805 

(Expungement of Customer Dispute 

Information under Rule 2080) and 

13805 (Expungement of Customer 

Dispute Information under Rule 2080) 

that are needed as the result of 

Commission approval of two recent 

FINRA proposed rule changes.5 In 

addition, with respect to FINRA Rule 

9610, the proposed rule change would 

update rule cross-references to reflect 

the adoption of Rule 5122.6 FINRA has 

filed the proposed rule change for 

immediate effectiveness. The 

implementation date will be August 17, 

2009, the date on which FINRA–2009– 

016 will also be implemented (FINRA– 

2008–020 became effective on June 17, 

2009). 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,7 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes the 

proposed rule change will provide 

greater clarity to members and the 

public regarding FINRA’s rules. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in 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 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 8 and Rule 19b– 

4(f)(6) thereunder.9

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–046 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–FINRA–2009–046. 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, 100 F Street, NE., Washington, 

DC 20549, 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 FINRA. 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 publicly available. All 

submissions should refer to File 

Number SR–FINRA–2009–046 and 

should be submitted on or before 

August 18, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17881 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60356; File No. SR–NYSE– 

2009–08] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change 

Rescinding NYSE Rule 110 Which 

Establishes the Role of Competitive 

Traders and Exchange Rule 107A 

Which Establishes the Role of the 

Registered Competitive Market Makers 

July 21, 2009. 

I. Introduction 

On April 6, 2009, the New York Stock 

Exchange LLC (‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (the ‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

rescind NYSE Rule 110, which 

establishes the role of Competitive 

Traders (‘‘CTs’’), and Exchange Rule 

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37282 Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 

3The Exchange also proposes to make conforming 

amendments to NYSE Rules 36, 98, 123, 111, 476A, 

800, 900 and 1600 to eliminate references to 

RCMMs and CTs. 

4See Securities Exchange Act Release No. 59746 

(April 10, 2009), 74 FR 17702 (the ‘‘Notice’’). 

5See letter from Robert Baxter and Charles 

Bocklet, Partners, Green Mountain Trading LLC 

(‘‘GMT’’) to Elizabeth M. Murphy, Secretary, 

Commission (‘‘Elizabeth Murphy’’) (‘‘GMT 

Comment Letter’’). See also e-mail from Chris 

Forbes to Elizabeth Murphy, dated July 9, 2009 

(‘‘Forbes E-mail’’). 

6See letter from Pia K. Thompson, Assistant 

Secretary, New York Stock Exchange LLC to 

Elizabeth Murphy, dated July 10, 2009 (‘‘NYSE 

Response Letter’’). 

7For a detailed discussion on the background and 

functions of RCMMs and CTs, see Notice, supra 

note 4. 

8 17 CFR 240.11a1–5. See Securities Exchange Act 

Release No. 17569 (February 24, 1981), 46 FR 14888 

(March 3, 1981). Section 11(a)(1) of the Act 

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 unless an 

exception applies. 15 U.S.C. 78k(a). 

9The Exchange also proposes to make conforming 

amendments to NYSE Rules 36, 98, 476A, 111, 800, 

900 and 1600 to eliminate references to RCMMs and 

CTs. 

10See Securities Exchange Act Release No. 53539 

(March 22, 2006), 71 FR 16353 (March 31, 2006) 

(SR–NYSE–2004–05) (establishing the Hybrid 

Market). 

11See Securities Exchange Act Release No. 52648 

(October 21, 2005), 70 FR 62155 (October 28, 2005) 

(SR–NYSE–2005–63). 

12See Securities Exchange Act Release Nos. 

54140 (July 13, 2006), 71 FR 41491 (July 21, 2006) 

(SR–NYSE–2006–48); 54985 (December 21, 2006), 

72 FR 171 (January 3, 2007) (SR–NYSE–2006–113); 

55992 (June 29, 2007), 72 FR 37289 (July 9, 2007) 

(SR–NYSE–2007–57); 56556 (September 27, 2007), 

72 FR 56421 (October 3, 2007) (SR–NYSE–2007– 

86); 57072 (December 31, 2007), 73 FR 1252 

(January 7, 2008) (SR–NYSE–2007–125); and 57601 

(April 2, 2008), 73 FR 19123 (April 8, 2008) (SR– 

NYSE–2008–22). The Moratorium was also 

amended to grant RCMM firms the ability to replace 

a RCMM who relinquishes his or her registration 

and ceases to conduct business as a RCMM during 

the Moratorium with a newly qualified and 

registered RCMM. See Securities Exchange Act 

Release No. 53549 (March 24, 2006), 71 FR 16388 

(March 31, 2006) (SR–NYSE–2006–11). 

13See Securities Exchange Act Release No. 58845 

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

(SR–NYSE–2008–46). 

14See Securities Exchange Act Release Nos. 

58033 (June 26, 2008), 73 FR 38265 (July 3, 2008) 

(SR–NYSE–2008–49); 58713 (October 2, 2008), 73 

FR 59024 (October 8, 2008) (SR–NYSE–2008–96); 

and 59069 (December 8, 2008), 73 FR 76081 

(December 15, 2008) (SR–NYSE–2008–124). The 

Exchange extended the Moratorium three additional 

times due to the filing of this current proposed rule 

change in order to maintain the Moratorium until 

the completion of the Rule 19b–4 rule filing process 

for this proposed rule change. See Securities 

Exchange Act Release Nos. 59551 (March 10, 2009), 

74 FR 11624 (March 18, 2009) (SR–NYSE–2009–24); 

60062 (June 8, 2009), 74 FR 28297 (June 15, 2009) 

(SR–NYSE–2009–53); and 60197 (June 30, 2009), 74 

FR 32663 (July 8, 2009) (SR–NYSE–2009–62). 

15Registration as an RCMM is applicable only to 

individual members, not member organizations. See 

NYSE Rule 107A(1). Accordingly, RCMM trading 

licenses are issued to individual members. 

107A, which establishes the role of the 

Registered Competitive Market Makers 

(‘‘RCMMs’’).3 The proposed rule change 

was published for comment in the 

Federal Register on April 16, 2009.4

The Commission received two comment 

letters on the proposal.5 On July 10, 

2009 the Exchange filed a comment 

response letter.6 This order approves the 

proposed rule change. 

II. Description of the Proposal 

Currently, NYSE Rule 107A governs 

the registration and obligations of 

RCMMs. Similarly, NYSE Rule 110 

governs the registration and obligations 

of CTs. CTs and RCMMs were first 

established by the Exchange in 1964 and 

1978, respectively, as classes of floor 

traders that could commit capital to 

trade in a manner that provides 

additional liquidity, contribute to 

mitigating price fluctuations, and 

enhance competition.7 In 1981, the 

Commission adopted Rule 11a1–5, 

which provides that: 

Any transaction by a New York Stock 

Exchange registered competitive market 

maker * * * effected in compliance with 

[NYSE’s] governing rules shall be deemed to 

be of a kind which is consistent with the 

purposes of section 11(a)(1) of the Act, the 

protection of investors, and the maintenance 

of fair and orderly markets.8

Included among RCMM’s affirmative 

obligations under Section B of Rule 

107A are requirements for a RCMM to: 

(i) Make a bid or offer in a stock that 

contributes to the maintenance of a fair 

and orderly market in such stock 

whenever called upon by certain 

parties, and (ii) effect all purchases and 

sales for the RCMM’s proprietary 

account in a manner that contributes to 

the maintenance of price continuity 

with reasonable depth and minimizes 

the effects of a temporary disparity 

between supply and demand. In 

addition, NYSE Rule 107A requires a 

RCMM to avoid participation as a dealer 

during the opening of the stock in a 

manner that would disrupt the public 

balance of supply and demand, subject 

to certain exceptions. Further, a RCMM 

may not effect transactions for its own 

account or the account of its member 

organization that are not a part of a 

course of dealings reasonably calculated 

to contribute to the maintenance of 

price continuity with reasonable depth 

and to the minimizing of the effects of 

any temporary disparity between supply 

and demand. NYSE Rule 107A.10 

describes the conditions under which a 

RCMM must be ready to enter the 

market if called upon by a Floor Official 

or Floor broker to narrow the quotation 

spread or add liquidity to the market. 

NYSE Rule 110 describes the 

obligations applicable to CTs. For 

example, members acting as CTs that 

desire to purchase or sell stock for 

accounts in which they have an interest 

are prohibited from congregating in a 

particular stock, and individually or as 

a group, intentionally or 

unintentionally, dominating the market 

in that stock. CTs are also subject to 

meeting certain stabilization tests which 

are computed on a monthly basis. 

The Exchange proposes to rescind 

NYSE Rule 110 and NYSE Rule 107A, 

eliminating CTs and RCMMs as 

recognized classes of floor traders on the 

Exchange.9 The Exchange notes that the 

volume and speed of the securities 

markets has increased dramatically 

since the inception of the CTs and 

RCMMs and that the majority of trades 

on the Exchange are now executed 

electronically. When the Exchange 

introduced its Hybrid Market,10 the 

Exchange determined that a review of 

the viability of RCMMs and CTs to trade 

in the more electronic trading 

environment was warranted and 

undertook to assess the contributions of 

RCMMs and CTs to the liquidity 

available to the NYSE. Thus, in October 

2005, the Exchange implemented a 

moratorium on the qualification and 

registration of new CTs and RCMMs 

while the Exchange conducted a study 

on the future viability of CTs and 

RCMMs (‘‘Moratorium’’).11 The 

Moratorium was extended six times 12

while the Exchange continued its 

evaluation of CT and RCMM trading. 

In October 2008, the Commission 

approved the Exchange’s new market 

model filing (‘‘Next Generation 

NYSE’’).13 In light of the 

implementation of the NYSE’s new 

market model, the Exchange again 

extended the Moratorium several times 

to evaluate the viability of the RCMMs 

and CTs under its revised structure.14

The Exchange notes that, at the time 

the Moratorium was first imposed, there 

were 11 registered RCMMs and one 

registered, but inactive, CT. In 

December 2006, the largest RCMM firm 

ceased its RCMM business and left the 

floor, eliminating 6 RCMMs from the 

floor. This reduced the number of 

RCMMs operating on the Exchange to 

five.15 These remaining five RCMMs are 

associated with two member 

organizations. 

In its study of the CT and RCMM 

trading in the more electronic 

environment, the Exchange reviewed 

the trading data associated with the CT 

and RCMM order execution. The 

Exchange’s review found that the CT 

class of floor trader had not executed 

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16See Securities Exchange Act Release No. 58877 

(October 29, 2008), 73 FR 65904 (November 5, 2008) 

(SR–NYSE–2008–108). See also NYSE Rule 107B. 

17A SLP is required to quote at the National Best 

Bid (‘‘NBB’’) or the National Best Offer (‘‘NBO’’) at 

least 5% of the trading day for each assigned 

security in round lots to maintain its status as an 

SLP. If a SLP posts liquidity in its assigned 

securities that results in an execution, the Exchange 

will pay the SLP a financial rebate per share for 

such executions provided that the SLP meets its 

monthly quoting requirement for rebates averaging 

3% at the NBB or NBO in its assigned securities in 

round lots. 

18 In addition to the GMT Comment Letter, the 

Commission also received the Forbes E-mail from 

Chris Forbes, who identified himself as a RCMM on 

the floor of the NYSE. See supra note 5. Mr. Forbes 

expressed his belief that RCMMs can provide a vital 

service on the NYSE. Mr. Forbes did not provide 

any further substantive arguments against the 

NYSE’s proposal to eliminate CTs and RCMMs as 

classes of floor traders. 

19See GMT Comment Letter, supra note 5. 

20 Id. 

21 Id. 

22See NYSE Response Letter, supra note 6. 

23 Id. 

24 Id. 

25 Id. 

26 Id. 

any transactions on the floor as a result 

of the non-usage of the CT license and 

therefore provided no contribution to 

the quality of the NYSE Market. 

The Exchange also states that, from 

May 2004 to December 2004, RCMM 

trading volume comprised only .018% 

of the total NYSE trading volume for 

that time period. In 2005, the year that 

the Moratorium was implemented, 

RCMM trading volume comprised only 

.017% of the total NYSE trading volume 

for the year. In 2006, the RCMM trading 

volume comprised .008% of the total 

NYSE trading volume for the year. After 

the largest RCMM firm ceased its 

business in December 2006, RCMM 

trading volume in 2007 and 2008 

comprised only .001% of the NYSE total 

trading volume for each of those years. 

The Exchange also represents that, 

from August 2005 through February 

2008, RCMM monthly average trading 

volume for that time period never 

exceeded .021% of the Exchange’s total 

trading volume for that time period. On 

average during this time period, RCMMs 

comprised only .006% of the NYSE’s 

trading volume. The Exchange asserts 

that review of the trading volume prior 

to and during the Moratorium indicates 

that RCMM/CT trading volume was 

minimally affected by the Moratorium. 

The Exchange further states that, for 

the time period from July 2008 to 

December 2008, RCMM and CT average 

trading volume did not exceed .0011% 

of the Exchange’s total trading volume 

per month for that time period. On 

average over these six months, RCMMs 

comprised only .001% of the NYSE’s 

trading volume. The Exchange’s review 

also found that the CT class of floor 

trader still had not executed any 

transactions on the floor as a result of 

the non-usage of the CT license and 

therefore provided no contribution to 

the market quality on the NYSE. The 

Exchange reports that RCMM trading in 

2009 (as of the date the Exchange filed 

this proposed rule change) comprised 

approximately .001% of the total NYSE 

trading volume. 

In light of these statistics, the 

Exchange concluded that the level of 

participation of the RCMMs and CTs no 

longer serve as viable supplemental 

market makers because they no longer 

contribute significantly to the overall 

liquidity available on the NYSE. 

In addition to reviewing the trading 

statistics of the RCMMs and the sole, 

inactive CT, NYSE Market and NYSE 

Regulation reviewed the technology, 

operational and regulatory costs 

required to adequately support and 

surveil RCMM and CT trading activity 

in a predominantly electronic trading 

environment. Following such review, 

the Exchange concluded that the 

development of technology specifically 

designed to comport with the RCMM 

and CT trading rules in the context of 

Next Generation NYSE would not be 

cost effective in view of the minimal 

current trading volume of the five 

RCMMs and the nonexistent trading 

volume of the one registered CT. 

Moreover, NYSE notes that it has 

developed a new class of electronic 

liquidity providers, Supplemental 

Liquidity Providers (‘‘SLPs’’) 16 that, the 

Exchange contends, has largely 

supplanted the role once filled by 

RCMMs and CTs. SLPs are off-floor 

entities that quote and trade on the 

NYSE electronically. The operation of 

SLPs is intended to provide incentives 

for quoting and to add competition to 

the existing group of floor-based 

liquidity providers, the designated 

market makers (‘‘DMMs’’).17

III. Summary of Comments 18

In its comment letter, GMT objects to 

the Exchange’s elimination of CTs and 

RCMMs as classes of floor traders on the 

NYSE for several reasons. First, GMT 

argues that the Exchange’s assertion that 

CTs and RCMMs provide only limited 

liquidity to the Exchange as compared 

to the overall trading volume on the 

NYSE is invalid because the Exchange 

itself imposed a limitation on the 

growth of the RCMM community by 

placing the Moratorium on the 

registration of new RCMMs.19 As such, 

the GMT Comment Letter speculates 

that, had the Exchange permitted the 

registration of additional RCMMs, the 

group’s trading volume would have 

been much greater, and contended that 

over 100 NYSE members desired to 

become RCMMs. 

In addition, GMT questions the 

reliability of the Exchange’s data on 

RCMM trading because it ‘‘only 

accounts for trading done through handheld systems or ‘paper’ trading on the 

floor.’’ 20 GMT asserts that, had the 

Exchange included volume traded away 

from the floor via the DOT system in its 

review, the trading data would have 

been ‘‘dramatically larger,’’ particularly 

if NYSE had not placed the Moratorium 

on RCMMs and if the number of 

RCMMs had numbered ‘‘500 or 1000.’’ 

Finally, GMT argues that RCMMs 

should be maintained as an additional 

source of liquidity on the floor, in 

addition to the liquidity supplied from 

DMMs and from off the floor by SLPs, 

and advocates for a trial period during 

which RCMMs could receive rebate 

incentives and upgraded handheld 

technology, among other things, to 

determine whether RCMMs could 

benefit the Exchange’s market.21

In the NYSE Response Letter, the 

Exchange notes that the RCMM 

community has never been large.22

Specifically, the Exchange states that 

there were only eleven registered 

RCMMs at the time the Moratorium was 

imposed and, since the year 2000, the 

number of registered RCMMs has never 

exceeded thirteen.23 Further, the 

Exchange notes that, in the filing, it had 

included volume data for a period 

preceding the imposition of the 

Moratorium and, as indicated, that 

volume was small in comparison to 

overall trading volume on the Exchange. 

In addition, the Exchange responded 

that the elimination of the RCMM and 

CT categories would not revoke the 

Exchange memberships of these 

individuals.24 If they retain their 

memberships, the Exchange notes that 

they would be able to trade from off the 

floor through the Exchange’s electronic 

systems, without the obligations 

currently applicable to RCMMs trading 

on the Exchange. Moreover, the 

Exchange states that the current RCMMs 

would be able to seek to become Floor 

brokers or DMMs if they wish to 

continue to trade on the floor of the 

Exchange.25 Thus, the Exchange 

contends that the elimination of RCMMs 

and CTs would not prevent these 

individuals from trading and adding 

liquidity to the Exchange. 

Finally, the Exchange states that it has 

consulted with the RCMM community 

over a period of years to determine 

whether to continue the RCMM trading 

category.26 However, the Exchange has 

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27 Id. 

28 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

29 15 U.S.C. 78f(b)(5). 30See Notice, supra note 4. 

31See GMT Comment Letter, supra note 5. 

32See Notice, supra note 4. 

33 Id. 

concluded that it is not cost effective to 

devote resources to the facilitation and 

regulation of RCMM or CT trading in 

view of the limited liquidity provided 

by these floor traders.27

IV. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.28 In particular, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,29 which requires that an exchange 

have rules 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 Commission believes that it is 

reasonable and consistent with the Act 

for the Exchange to eliminate RCMMs 

and CTs as classes of floor traders on the 

Exchange. The Commission notes that 

the Exchange analyzed this issue over a 

three-year period to review the 

contributions of RCMMs and CTs to the 

liquidity of the Exchange in light of its 

more electronic trading environment. As 

detailed above, the Exchange’s data 

demonstrated that the trading of 

RCMMs and CTs on the Exchange 

amounted to a negligible portion of the 

overall trading volume of the Exchange. 

For example, according to NYSE, from 

August 2005 through February 2008, 

RCMM monthly average trading volume 

for that time period never exceeded 

.021% of the Exchange’s total trading 

volume and, on average, RCMMs 

comprised only .006% of the NYSE’s 

trading volume. In addition, NYSE 

represents that, during the time period 

reviewed, there was no trading on the 

Exchange by CTs. 

The GMT Comment Letter takes issue 

with the Exchange’s RCMM trading 

data, stating that the low RCMM trading 

volume figures were the result of the 

Exchange imposing the Moratorium and 

thereby restricting the size of the RCMM 

community. However, as the NYSE 

Response Letter notes, the GMT 

Comment Letter fails to address the fact 

that NYSE did review and provide data 

for a period of time prior to the 

Moratorium. Specifically, the Notice 

stated that from May 2004 to December 

2004, before the Moratorium was 

imposed, RCMM trading volume 

comprised only .018% of the total 

trading volume on the Exchange and 

that in 2005, the year that the 

Moratorium was implemented (in 

October 2005), RCMM trading volume 

comprised only .017% of the total NYSE 

trading volume for the year. Thus, it 

appears that RCMM trading volume was 

quite limited in comparison to the 

overall trading volume of the Exchange, 

even before the Exchange imposed the 

Moratorium. In addition, the NYSE 

Response Letter represents that, even 

before the implementation of the 

Moratorium, the RCMM community has 

always been relatively small, with a 

maximum of only 13 individuals 

registered as RCMMs since the year 

2000. 

The GMT Comment Letter also 

criticizes the RCMM trading data 

because it fails to take into account 

trading done on the DOT System. 

However, the Commission notes that 

GMT itself concedes that adding the 

DOT trading data for the five active 

RCMMs would not have made a 

significant difference in the figures. 

In light of the above, the Commission 

believes that the Exchange’s conclusion 

that RCMMs and CTs no longer serve as 

viable supplemental market makers and 

no longer contribute significantly to the 

overall liquidity available on the NYSE 

is reasonable. 

Further, the Commission notes that 

the Exchange also considered the 

technological, operational and 

regulatory costs required to adequately 

support and surveil RCMM and CT 

trading activity. According to the 

Exchange, the rules and functions of 

RCMMs and CTs were developed when 

NYSE was a manual trading center and 

are not well-suited for the electronic, 

high speed trading environment found 

on the Exchange today.30 The 

Commission notes that the Exchange 

concluded that it would not be cost 

effective to develop technology 

specifically designed to comport with 

the RCMM and CT trading rules in the 

context of Next Generation NYSE in 

view of the minimal current trading 

volume of the five RCMMs and the 

nonexistent trading volume of the one 

registered CT. Instead, the Exchange 

argues that SLPs ‘‘largely supplanted’’ 

the role that the RCMMs and CTs once 

filled on the Exchange. 

Though the GMT Comment Letter 

argues that more floor traders mean 

more liquidity and efficient price 

discovery and thus the Exchange should 

retain RCMMs and CTs as classes of 

floor traders,31 the Commission agrees 

with NYSE that there are a number of 

other types of market participants to 

provide liquidity, competition, and 

price discovery, even after the 

elimination of the CTs and RCMMs. 

Along with SLPs who quote and trade 

electronically from off the floor, DMMs 

and Floor brokers will still provide 

liquidity and competition on the floor of 

the Exchange. Importantly, as NYSE 

noted in its Response Letter, the 

Exchange is not rescinding RCMM and 

CT traders’ membership to the 

Exchange.32 Members currently 

operating as RCMMs and CTs may 

choose to continue to trade and provide 

liquidity to the Exchange either by 

trading from off of the floor through the 

Exchange’s electronic systems or by 

trading as a different class of trader, 

such as Floor brokers or DMMs, 

assuming they are willing and able to 

meet the requirements applicable to 

such classes of traders. 

The GMT Comment Letter also argues 

that the rule change should be delayed 

to allow for additional input and testing, 

and to implement a one-year trial 

period.33 However, according to NYSE, 

the continuation of RCMM and CT 

trading would require trading system 

enhancements, the cost of continued 

development of surveillance technology 

and procedures, and staff training and 

hours spent in these efforts. Moreover, 

as noted in the NYSE Response Letter, 

the Exchange has consulted with RCMM 

firms over several years regarding 

whether this class of traders should be 

continued. The Commission also notes 

that the Exchange has already extended 

the Moratorium a number of times over 

a period of more than three years. Thus, 

the Commission finds NYSE’s proposal 

to be reasonable in balancing the costs 

of maintaining RCMMs and CTs as 

classes of trades on the Exchange 

against the benefits that they provide to 

the Exchange. 

Finally, the Commission recognizes 

that the Exchange operates in a 

competitive marketplace and believes 

that the Exchange should have the 

ability to structure its rules to 

accommodate the implementation of its 

own business model, provided that such 

rules comply with the Act and the rules 

promulgated thereunder. Given the 

considerations noted above—the limited 

trading volume of RCMMs and CTs, the 

high costs of maintaining and surveiling 

these classes of floor traders, the 

existence of other market participants to 

provide liquidity and competition, as 

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Federal Register / Vol. 74, No. 143 / Tuesday, July 28, 2009 / Notices 37285 

34 15 U.S.C. 78s(b)(2). 

35 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A Member is any registered broker or dealer that 

has been admitted to membership in the Exchange. 

4Each pair of ports will consist of one port at the 

Exchange’s primary data center and one port at the 

Exchange’s secondary data center. 

5BATS FIX ports are the only ports that may be 

used to send orders and related instructions to the 

Exchange. All other port types, including Multicast 

PITCH and GRP Ports, permit Members and nonmembers to receive information from the Exchange. 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(4). 

well as the fact that those currently 

trading as RCMMs or CTs may choose 

to continue trading in another role as 

members of the Exchange—the 

Commission believes that the 

Exchange’s decision to eliminate 

RCMMs and CTs from the Exchange is 

reasonable and within the business 

judgment of the Exchange, and is 

consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,34 that the 

proposed rule change (SR–NYSE–2009– 

08) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.35

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17879 Filed 7–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60364; File No. SR–BATS– 

2009–026] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing of 

Proposed Rule Change To Amend 

BATS Fee Schedule to Impose Fees for 

Ports Used for Order Entry and Receipt 

of Market Data 

July 22, 2009. 

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 July 21, 

2009, BATS Exchange, Inc. (‘‘BATS’’ or 

the ‘‘Exchange’’) 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 

by the Exchange. 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 has filed a proposed 

rule change to amend the fee schedule 

applicable to Members 3 and nonmembers of the Exchange pursuant to 

BATS Rules 15.1(a) and (c). Pursuant to 

the proposed rule change the Exchange 

will commence charging fees to 

Members and non-members for ports 

used to enter orders into Exchange 

systems and to receive data from the 

Exchange. The Exchange will 

implement the proposed rule change on 

the first day of the month immediately 

following Commission approval (or on 

the date of approval, if on the first 

business day of a month). 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.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 

Exchange 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. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to begin charging a monthly 

fee for ports used to enter orders in the 

Exchange’s trading system and to 

receive data from the Exchange. The 

Exchange proposes to charge $250.00 

per month per pair 4 of any port type 

other than a Multicast PITCH Spin 

Server Port or a GRP Port. Thus, this 

proposed charge will apply to all 

Exchange FIX, FIXDROP, DROP, TCP 

PITCH, TCP FAST PITCH and TOP 

ports.5 In addition, the Exchange 

proposes to provide all Exchange 

constituents that receive the Exchange’s 

Multicast PITCH Feed with 12 pairs of 

Multicast PITCH Spin Server Ports free 

of charge and, if such ports are used, 

one free pair of GRP Ports. The 

Exchange proposes to charge such 

customers $250.00 per month per 

additional pair of GRP Ports or 

additional set of 12 pairs of Multicast 

PITCH Spin Server Ports. The 

Exchange’s proposal to provide certain 

ports free of charge to Multicast Pitch 

customers is designed to encourage use 

of the Exchange’s Multicast PITCH Feed 

because such feed is a relatively new 

offering by the Exchange and because 

the Exchange believes that the feed is its 

most efficient feed, and thus, will 

reduce infrastructure costs for both the 

Exchange and those who utilize the 

feed. Any Member or non-member that 

has entered into the appropriate 

agreements with the Exchange is 

permitted to receive Multicast Pitch 

Spin Server Ports and GRP Ports from 

the Exchange. 

Based on the proposal, the change 

applies to Members that obtain ports for 

direct access to the Exchange, nonmember service bureaus that act as a 

conduit for orders entered by Exchange 

Members that are their customers, and 

market data recipients. The Exchange 

has previously provided ports free of 

charge to all Members and non-members 

that use such ports for order entry to the 

Exchange or for receipt of market data. 

However, over time, the Exchange’s 

infrastructure costs have increased. In 

addition, the Exchange believes that 

providing ports free of charge has not 

encouraged Members and non-members 

to reserve and maintain ports efficiently, 

but rather, has led to a significant 

number of ports that are reserved and 

enabled by such market participants but 

are never used or are under used. 

Accordingly, the Exchange believes that 

the imposition of port fees will help the 

Exchange to continue to maintain and 

improve its infrastructure, while also 

encouraging Exchange customers to 

request and enable only the ports that 

are necessary for their operations related 

to the Exchange. 

2. Statutory Basis 

The rule change proposed in this 

submission is consistent with the 

requirements of the Act and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the Act.6

Specifically, the Exchange believes that 

the proposed change is consistent with 

Section 6(b)(4) of the Act,7 because it 

provides an equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using its facilities. The Exchange 

believes that its proposed port fees are 

reasonable in light of the benefits to 

members of direct market access and 

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