Document ID: SEC-2009-1480-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE Amex Equities Rule 123C(8)(a)(1) To Extend the Operation of the Extreme Order Imbalances Pilot
Posted Date: 2009-10-19T04:00Z

[Federal Register: October 19, 2009 (Volume 74, Number 200)]
[Notices]               
[Page 53539-53541]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19oc09-103]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60808; File No. SR-NYSEAmex-2009-70]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE 
Amex Equities Rule 123C(8)(a)(1) To Extend the Operation of the Extreme 
Order Imbalances Pilot

October 9, 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 October 5, 2009, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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(8)(a)(1) to extend the operation of the pilot to temporarily 
suspend certain NYSE requirements relating to the closing of securities 
on the Exchange until the earlier of Securities and Exchange Commission 
approval to make such pilot permanent or December 31, 2009. The text of 
the proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Amex Equities Rule 123C(8)(a)(1) allows the Exchange to 
temporarily suspend certain rule requirements at the close when extreme 
order imbalances may cause significant dislocation to the closing 
price. The rule has operated on a pilot basis since April 2009 
(``Extreme Order Imbalances Pilot'' or Pilot).\4\ Through this filing, 
NYSE Amex proposes to extend the Pilot until the earlier of Securities 
and Exchange Commission approval to make such Pilot permanent or 
December 31, 2009.\5\
---------------------------------------------------------------------------

    \4\ See Securities and Exchange Act Release No. 597755 [sic] 
(April 13, 2009) 74 FR 18009 (April 20, 2009) (SR-NYSEALTR-2009-15).
    \5\ The Exchange notes that parallel changes are proposed to be 
made to the rules of New York Stock Exchange LLC. See SR-NYSE-2009-
104.
---------------------------------------------------------------------------

Background
    Pursuant to NYSE Amex Equities Rule 123C(8)(a)(1), the Exchange may 
suspend NYSE Amex Equities Rules 52 (Hours of Operation) 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.\6\ The provisions of 
NYSE Amex Equities Rule 123C(8)(a)(1) operate as the Extreme Order 
Imbalance Pilot.
---------------------------------------------------------------------------

    \6\ See NYSE Amex Equities Rule 123C(8)(a)(1).
---------------------------------------------------------------------------

    As a condition of the approval to operate the Pilot, the Exchange 
committed to provide the Commission with information regarding: (i) How

[[Page 53540]]

often a 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.
    The Extreme Order Imbalance Pilot is scheduled to end operation on 
October 13, 2009. The Exchange is currently preparing a rule filing 
seeking permission to make the provisions of the Pilot permanent with 
certain modifications but does not expect that filing to be completed 
and approved by the Commission before October 13, 2009.
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 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.
    As the Exchange has previously stated, invocation of the provisions 
NYSE Amex Equities Rule 123C(8) to attract offsetting interest is 
intended to be used for extreme, and likely rare circumstances where 
there exists such a large imbalance at the close that a DMM is unable 
to close the security without significantly dislocating the price of 
the security. This is evidenced by the fact that during the course of 
the Pilot, the Exchange invoked the provisions of NYSE Amex Equities 
Rule 123C(8), including the provisions of the Extreme Order Imbalance 
Pilot pursuant to NYSE Amex Equities Rule 123C(8)(a)(1), in only two 
securities on June 26, 2009, the date of the annual rebalancing of 
Russell Indexes.
    In addition, during the operation of the Pilot, the Exchange 
determined that it would not be as onerous, as previously believed, to 
modify Exchange systems to accept orders electronically after 4 p.m. 
The Exchange anticipates that such system modifications could be 
completed by December 31, 2009.
    Given the above, the Exchange believes that provisions governing 
the Extreme Order Imbalance Pilot should be made permanent. Through 
this filing the Exchange seeks to extend the current operation of the 
Pilot in order to allow the Exchange to formally submit a filing to the 
Commission to convert the provisions governing the Pilot to permanent 
rules and complete the technological modifications required to accept 
orders electronically after 4 p.m. The Exchange therefore request and 
[sic] extension from the current expiration date of October 13, 2009, 
until the earlier of Securities and Exchange Commission approval to 
make such Pilot permanent or December 31, 2009.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \7\ that an Exchange have rules that 
are designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. The Exchange believes that the 
instant filing is consistent with these principles. Specifically an 
extension will allow the Exchange to: (i) Prepare and submit a filing 
to make the provisions governing the Extreme Order Imbalance Pilot 
permanent; (ii) have such filing complete public notice and comment 
period; and (iii) complete the 19b-4 approval process. The rule 
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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) \8\ of the Act and Rule 19b-4(f)(6) \9\ thereunder. 
Because the foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) by its terms, 
does not become operative for 30 days after the date of filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6) thereunder.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\10\ However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requested that the Commission waive 
the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\11\ 
which would make the rule change operative immediately. The Exchange 
believes that continuation of the Pilot does not burden competition and 
would operate 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.
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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 date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. NYSE Amex has satisfied this requirement.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it would allow the Pilot to continue without interruption while 
the Exchange works towards submitting a separate proposal to make the 
Pilot permanent. Accordingly, the Commission designates the proposed 
rule change as operative upon filing with the Commission.\12\
---------------------------------------------------------------------------

    \12\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(C).

---------------------------------------------------------------------------

[[Page 53541]]

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-2009-70 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-2009-70. 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 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-NYSEAmex-2009-70 and should 
be submitted on or before November 9, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-25110 Filed 10-16-09; 8:45 am]

BILLING CODE 8011-01-P