Document ID: SEC-2010-1962-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-12-20T05:00Z

[Federal Register: December 20, 2010 (Volume 75, Number 243)]
[Notices]               
[Page 79427-79429]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de10-974]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63541; File No. SR-NYSEAmex-2010-113]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rule 123C(9)(a)(1) To Extend the Operation of a Pilot 
Operating Pursuant to the Rule Until June 1, 2011

December 14, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on November 30, 2010, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Amex Equities Rule 
123C(9)(a)(1) to extend the operation of a pilot operating pursuant to 
the Rule until June 1, 2011. The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, 
http://www.sec.gov, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Amex Equities Rule 
123C(9)(a)(1) to extend the operation of a pilot that allows the 
Exchange to temporarily suspend certain rule requirements at the close 
when extreme order imbalances may cause significant dislocation to the 
closing price (``Extreme Order Imbalances Pilot'' or ``Pilot'') \4\ 
until June 1, 2011.\5\ The Pilot is currently scheduled to expire on 
December 1, 2010.\6\
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    \4\ See Securities Exchange Act Release Nos. 59755 (April 13, 
2009), 74 FR 18009 (April 20, 2009) (SR-NYSEAltr-2009-15) (order 
granting approval of the Pilot); 60808 (October 9, 2009), 74 FR 
53539 (October 19, 2009) (SR-NYSEAmex-2009-70) (extending the 
operation of the Pilot to December 31, 2009); 61265 (December 31, 
2009), 75 FR 1094 (January 8, 2010) (SR-NYSEAmex-2009-96) (extending 
the operation of the Pilot from December 31, 2009 to March 1, 2010); 
61611 (March 1, 2010), 75 FR 10530 (March 8, 2010) (SR-NYSEAmex-
2010-15) (extending the operation of the Pilot from March 1, 2010 to 
June 1, 2010); 62293 (June 15, 2010), 75 FR 35862 (June 23, 2010) 
(SR-NYSEAmex-2010-50) (extending the operation of the Pilot from 
June 1, 2010 to December 1, 2010).
    \5\ The Exchange notes that parallel changes are proposed to be 
made to the rules of New York Stock Exchange LLC. See SR-NYSE-2010-
79.
    \6\ See Securities Exchange Act Release No. 62293 (June 15, 
2010), 75 FR 35862 (June 23, 2010) (SR-NYSEAmex-2010-50) at note 6. 
Due to a technical deficiency in a prior filing, the Exchange did 
not invoke the Pilot between June 1, 2010 and June 7, 2010.
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Background
    Pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), the Exchange may 
suspend NYSE Amex Equities Rule 52 (Hours of Operation) to resolve an 
extreme order imbalance that may result in a price dislocation at the 
close as a result of an order entered into Exchange systems, or 
represented to a Designated Market Maker (``DMM'') orally at or near 
the close. The provisions of NYSE Amex Equities Rule 123C(9)(a)(1) 
operate as the Extreme Order Imbalance Pilot.
    As a condition of the approval to operate the Pilot, the Exchange 
committed to provide the Commission with information regarding: (i) How 
often an NYSE Amex Equities Rule 52 temporary suspension pursuant to 
the Pilot was invoked during the six months following its approval; and 
(ii) the Exchange's determination as to how to proceed with technical 
modifications to reconfigure Exchange systems to accept orders 
electronically after 4 p.m.
    During the operation of the Pilot, the Exchange believed that the 
systems modifications to allow Exchange systems to accept orders 
electronically after 4 p.m. would not be as onerous as previously 
believed when the Pilot was initially commenced. The Exchange completed 
the system modifications necessary to accept orders electronically 
after 4 p.m. and began the process of testing the modifications. The 
Exchange therefore filed to extend the Extreme Order Imbalance Pilot 
until the earlier of SEC approval to make such Pilot permanent or 
December 1, 2010.\7\ At the time, the Exchange anticipated that its 
quality assurance review process would be completed by December 1, 2010 
and it would be able to operate under the new system. The quality 
assurance review determined that additional testing was required in 
order to assure the optimal functioning of the system modifications.
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    \7\ Id.
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Proposal To Extend the Operation of the Extreme Order Imbalance Pilot
    The Exchange established the Extreme Order Imbalance Pilot to 
create a mechanism for ensuring a fair and orderly close when interest 
is received

[[Page 79428]]

at or near the close that could negatively affect the closing 
transaction. The Exchange believes that this tool has proved very 
useful to resolve an extreme order imbalance that may result in a 
closing price dislocation at the close as a result of an order entered 
into Exchange systems, or represented to a DMM orally at or near the 
close.
    NYSE Amex Equities Rule 123C(9) was intended to be and has been 
invoked to attract offsetting interest in rare circumstances where 
there exists an extreme imbalance at the close such that a DMM is 
unable to close the security without significantly dislocating the 
price. This is evidenced by the fact that during the course of the 
Pilot to date, the Exchange invoked the provisions of NYSE Amex 
Equities Rule 123C(9), including the provisions of the Extreme Order 
Imbalance Pilot pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), in 
two securities on June 26, 2009, the date of the annual rebalancing of 
Russell Indexes. Rule 123C(9) has not been invoked at the Exchange 
since that time.
    The Exchange proposes to extend the operation of the pilot for a 
six-month period. At this time, the Exchange is completing testing of 
functionality that would enable the electronic acceptance of orders 
after 4 p.m. If the tests are successful, the Exchange expects to be 
able to implement the new functionality by the end of December 2010. If 
the Exchange does not believe it will be able to implement the new 
functionality by the end of December 2010, it will work with the 
Commission to set a new target date for implementation as soon as 
practicable thereafter. In conjunction with the new functionality, the 
Exchange plans to file a proposed rule change to amend Rule 123C(9) to 
remove the limitation set forth in Rule 123C(9)(a)(1)(iii) that only 
Floor brokers can represent interest after 4 p.m. and to make Rule 
123C(9) permanent.\8\
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    \8\ See e-mail from Theodore Lazo, Vice President, Legal and 
Government Affairs, NYSE Euronext, to David Liu, Senior Special 
Counsel, Division of Trading and Markets, Commission, and Nathan 
Saunders, Special Counsel, Division of Trading and Markets, 
Commission, dated December 13, 2010 (``NYSE Euronext Email'').
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \9\ that an Exchange have rules that 
are designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. The Exchange believes that this 
filing is consistent with these principles. Specifically, an extension 
will allow the Exchange to determine the efficacy of providing any 
additional functionality under this Pilot rule. The Pilot operates to 
protect investors and the public interest by ensuring that the closing 
price at the Exchange is not significantly dislocated from the last 
sale price by virtue of an extreme order imbalance at or near the 
close.
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    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule 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 \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\ The Exchange has asked the Commission to 
waive the 30-day operative delay so that the proposal may become 
operative immediately upon filing. The Exchange has represented that it 
is completing testing of a functionality that would enable the 
electronic acceptance of orders after 4 p.m., and if successful, the 
Exchange expects to be able to implement the new functionality by the 
end of December 2010. If the Exchange will not be able to implement the 
new functionality by that date, it will work with the Commission to set 
a new target date for implementation. The Exchange also has represented 
that it plans to file a proposed rule change to amend Rule 123C(9) to 
make the pilot permanent and to remove the limitation that only Floor 
brokers can represent interest after 4 p.m.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self- regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Commission notes that the Exchange has satisfied 
this requirement.
    \12\ See NYSE Euronext E-mail, supra note 8.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the pilot to continue uninterrupted, thereby 
permitting offsetting interest represented by floor brokers to 
alleviate extreme order imbalances occurring at the close until the 
Exchange is able to allow the electronic submission of such interest 
after 4 p.m. in such circumstances.\13\ Accordingly, the Commission 
waives the 30-day operative delay requirement and designates the 
proposed rule change operative upon filing with the Commission.
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml ); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2010-113 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2010-113. 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

[[Page 79429]]

Commission will post all comments on the Commission's Internet Web site 
(http://www.sec.gov/rules/sro.shtml). Copies of the submission, all 
subsequent amendments, all written statements with respect to the 
proposed rule change that are filed with the Commission, and all 
written communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street, NE., Washington, DC 20549, on official 
business days between the hours of 10 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 publicly available. All submissions should refer to 
File Number SR-NYSEAmex-2010-113 and should be submitted on or before 
January 10, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31816 Filed 12-17-10; 8:45 am]
BILLING CODE 8011-01-P