Document ID: SEC-2009-1300-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To Modify Rebates Payable to Designated Market Makers
Posted Date: 2009-09-11T04:00Z

[Federal Register: September 11, 2009 (Volume 74, Number 175)]
[Notices]               
[Page 46816-46818]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11se09-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60614; File No. SR-NYSE-2009-90]

 
 Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To 
Modify Rebates Payable to Designated Market Makers

September 2, 2009.
    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 August 31, 2009, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes 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 changes from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a et seq.
    \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 its schedule of rebates payable to 
Designated Market Makers (``DMMs''), with effect from September 1, 
2009. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.nyse.com), at the Exchange's Office of 
the Secretary, 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

[[Page 46817]]

on the proposed rule change. The text of these statements may be 
examined at the places specified in Item IV below. The NYSE has 
prepared summaries, set forth in Sections A, B and C below, of the most 
significant aspects 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 proposes to revise its schedule of rebates paid to 
DMMs for providing liquidity on the Exchange, with effect from 
September 1, 2009.
    Currently, DMMs receive:
     A rebate of $0.0030 per share when adding liquidity in 
round lots of active securities (i.e., securities with an average daily 
consolidated volume (``ADV'') in the previous month equal to or greater 
than 1,000,000 shares per month) (``More Active Securities'') if the 
More Active Security has a stock price of $1.00 or more; and
     A rebate of $0.0035 per share when adding liquidity in 
round lots of securities that have an ADV of less than 1,000,000 shares 
per month in the previous month (``Less Active Securities'') if the 
Less Active Security has a stock price of $1.00 or more. Each DMM also 
receives all of the market data quote revenue (the ``Quoting Share'') 
received by the Exchange from the Consolidated Tape Association under 
the Revenue Allocation Formula of Regulation NMS with respect to any 
Less Active Security (regardless of whether the stock price exceeds 
$1.00) in any month in which the DMM meets the quoting requirement of 
Rule 104(a)(1)(A) for that specific security.
    DMMs are entitled to the foregoing rebates when (i) posting 
displayed and non-displayed orders on Display Book, including s-quote 
and s-quote reserve orders; (ii) when providing liquidity on non-
displayed interest using the Capital Commitment Schedule; or, prior to 
the implementation of the Capital Commitment Schedule, using the 
following message activities: price improvement, size improvement (PRIN 
FILL), matching away market quotes; \4\ (iii) when executing trades in 
the crowd and at Liquidity Replenishment Points; and (iv) when 
providing liquidity on market-at-the-close and limit-at-the-close 
transactions. Rebates do not apply to executions at the open.
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    \4\ The Capital Commitment Schedule has been implemented since 
this language was included in the Price List and the language is now 
moot.
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    Commencing September 1, 2009, the schedule of rebates for DMMs 
described above will be replaced with a new schedule of rebates. Under 
the revised schedule of rebates, DMMs will receive:
     A rebate of $0.0025 per share when adding liquidity in 
round lots of More Active Securities if the More Active Security has a 
stock price of $1.00 or more and the DMM quotes at the National Best 
Bid or Offer (``NBBO'') in the applicable security at least 10% of the 
time in the applicable month (``More Active Securities Quoting 
Requirement'');
     A rebate of $0.0030 per share when adding liquidity in 
round lots of More Active Securities if the More Active Security has a 
stock price of $1.00 or more and the DMM meets both (i) the More Active 
Securities Quoting Requirement and (ii) the More Active Securities 
Quoted Size Ratio Requirement. A DMM will meet the ``More Active 
Securities Quoted Size Ratio Requirement'' when the DMM Quoted Size 
Ratio for an applicable month is 15% of the NYSE Quoted Size. The 
``NYSE Quoted Size'' will be calculated by multiplying the average 
number of shares quoted on the NYSE at the NBBO by the percentage of 
time the NYSE had a quote posted at the NBBO. The ``DMM Quoted Size 
Ratio'' will be calculated by multiplying the average number of shares 
of the applicable security quoted at the NBBO by the DMM by the 
percentage of time during which the DMM quoted at the NBBO; \5\
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    \5\ The following is an example of how the DMM Quoted Size will 
be calculated:
     The numerator is calculated as follows: if the DMM 
quotes at the NBBO for an average of 1000 shares for 60% of the time 
over the course of the month in stock ABC, then the numerator would 
be 600 shares = (1000 shares x 60% of the time over the course of 
the month);
     The denominator is calculated as follows: if the NYSE 
was at the NBBO for an average of 10,000 shares for 70% of the time 
over the course of the month, then the NYSE Quoted Size is 7,000 
shares = (10,000 shares x 70% of the time over the course of the 
month);
     The DMM Quoted Size Ratio is 8.5% = 600/7000.
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     A rebate of $0.0015 per share when adding liquidity in 
round lots of More Active Securities if the More Active Security has a 
stock price of $1.00 or more and the DMM does not meet the More Active 
Securities Quoting Requirement in the applicable security in the 
applicable month;
     A rebate of $0.0035 per share when adding liquidity in 
round lots of Less Active Securities, if the Less Active Security has a 
stock price of $1.00 or more and the DMM quotes at the NBBO in the 
applicable security at least 15% of the time in the applicable month 
(the ``Less Active Securities Quoting Requirement''). Each DMM will 
also receive all of the Quoting Share the Exchange receives from the 
Consolidated Tape Association under the Revenue Allocation Formula of 
Regulation NMS with respect to any Less Active Security (regardless of 
whether the stock price exceeds $1.00) in any month in which the DMM 
meets the Less Active Securities Quoting Requirement for that specific 
security); and
     A rebate of $0.0015 per share when adding liquidity in 
round lots of Less Active Securities if the Less Active Security has a 
stock price of $1.00 or more and the DMM does not meet the Less Active 
Securities Quoting Requirement in the applicable security in the 
applicable month.
    Rebates under the new rebate schedule will be applied when (i) 
posting displayed and non-displayed orders on Display Book, including 
s-quote and s-quote reserve orders; (ii) when providing liquidity on 
non-displayed interest using the Capital Commitment Schedule, and (iii) 
when executing trades in the crowd and at Liquidity Replenishment 
Points.\6\
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    \6\ When providing liquidity on market-at-the-close and limit-
at-the-close transactions, DMMs will continue to receive a rebate of 
$0.0005 per share. Rebates do not apply to executions at the open.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 \7\ of the Act in general and Section 
6(b)(4) of the Act \8\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities. The Exchange 
believes that the proposal does not constitute an inequitable 
allocation of dues, fees and other charges as providing credits to DMMs 
when they add liquidity to the market assists in the effective 
operation of the NYSE's market model. The removal of the reference to 
the types of messages for which the associated executions qualified for 
rebates prior to the implementation of the Capital Commitment Schedule 
is not a substantive change as the Capital Commitment Schedule has been 
implemented.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
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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 purpose of the Act.

[[Page 46818]]

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(2) \10\ 
thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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    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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2009-90 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2009-90. 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-
NYSE-2009-90 and should be submitted on or before October 2, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-21884 Filed 9-10-09; 8:45 am]

BILLING CODE 8010-01-P