Document ID: SEC-2009-0359-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes:  NYSE Alternext US LLC
Posted Date: 2009-03-17T04:00Z

[Federal Register: March 17, 2009 (Volume 74, Number 50)]
[Notices]               
[Page 11393-11396]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr09-73]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59561; File No. SR-NYSEALTR-2009-25]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Alternext US LLC 
Eliminating the Ability To Enter Orders on the Exchange With the 
Settlement Instructions of ``Cash'', ``Next Day'' and ``Seller's 
Option'' To Conform to Amendments Filed by the New York Stock Exchange

March 11, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on March 5, 2009, NYSE Alternext US LLC (the ``Exchange'' or 
``NYSE Alternext'') filed with the Securities and Exchange Commission 
(``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 eliminate the ability to enter orders on 
the Exchange with the settlement instructions of ``cash'', ``next day'' 
and ``seller's option'' to conform to amendments filed by the New York 
Stock Exchange (``NYSE'').

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
    Through this filing the Exchange seeks to amend several NYSE 
Alternext Equities rules to conform these rules with amendments filed 
by the New York Stock Exchange \4\ to remove references to certain 
settlement instructions that are no longer compatible with the 
Exchange's more electronic market. These include instructions to settle 
on ``cash'', ``next day'' or ``seller's option'' basis.
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    \4\ See Securities Exchange Act Release No. 34-59446 (February 
25, 2009), 74 FR 9323 (March 3, 2009) (SR-NYSE-2009-17).
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I. Background

    As described more fully in a related rule filing,\5\ NYSE Euronext 
acquired The Amex Membership Corporation (``AMC'') pursuant to an 
Agreement and Plan of Merger, dated January 17, 2008 (the ``Merger''). 
In connection with the Merger, the Exchange's predecessor, the American 
Stock Exchange LLC (``Amex''), a subsidiary of AMC, became a subsidiary 
of NYSE Euronext called

[[Page 11394]]

NYSE Alternext U.S. LLC, and continues to operate as a national 
securities exchange registered under Section 6 of the Securities 
Exchange Act of 1934, as amended (the ``Act'') [sic].\6\ The effective 
date of the Merger was October 1, 2008. In connection with the Merger, 
on December 1, 2008, the Exchange relocated all equities trading 
conducted on the Exchange legacy trading systems and facilities located 
at 86 Trinity Place, New York, New York, to trading systems and 
facilities located at 11 Wall Street, New York, New York (the 
``Equities Relocation''). The Exchange's equity trading systems and 
facilities at 11 Wall Street (the ``NYSE Alternext Trading Systems'') 
are operated by the NYSE on behalf of the Exchange.\7\
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    \5\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex-
2008-62) (approving the Merger).
    \6\ 15 U.S.C. 78f.
    \7\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (approving 
the Equities Relocation).
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    As part of the Equities Relocation, NYSE Alternext adopted NYSE 
Rules 1-1004, subject to such changes as necessary to apply the Rules 
to the Exchange, as the NYSE Alternext Equities Rules to govern trading 
on the NYSE Alternext Trading Systems.\8\ The NYSE Alternext Equities 
Rules, which became operative on December 1, 2008, are substantially 
identical to the current NYSE Rules 1-1004 and the Exchange continues 
to update the NYSE Alternext Equities Rules as necessary to conform 
with rule changes to corresponding NYSE Rules filed by the NYSE.
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    \8\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (approving 
the Equities Relocation); Securities Exchange Act Release No. 58833 
(October 22, 2008), 73 FR 64642 (October 30, 2008) (SR-NYSE-2008-
106) and Securities Exchange Act Release No. 58839 (October 23, 
2008), 73 FR 64645 (October 30, 2008) (SR-NYSEALTR-2008-03) 
(together, approving the Bonds Relocation); Securities Exchange Act 
Release No. 59022 (November 26, 2008), 73 FR 73683 (December 3, 
2008) (SR-NYSEALTR-2008-10) (adopting amendments to NYSE Alternext 
Equities Rules to track changes to corresponding NYSE Rules); 
Securities Exchange Act Release No. 59027 (November 28, 2008), 73 FR 
73681 (December 3, 2008) (SR-NYSEALTR-2008-11) (adopting amendments 
to Rule 62--NYSE Alternext Equities to track changes to 
corresponding NYSE Rule 62).
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II. Proposed Amendments

    Currently, in addition to regular way settlement (i.e., settlement 
on the third business day following trade date), a customer may submit 
an order with settlement instructions for cash, next day or seller's 
option. An order with cash settlement instructions requires delivery of 
the securities the same day as the transaction in contrast to a regular 
way transaction, where the seller is required to deliver the securities 
on the third business day. Next day settlement instructions require 
delivery of the securities on the first business day following the 
transaction. Orders that have settlement instructions of seller's 
option afford the seller the right to deliver the security or bond at 
any time within a specified period, ranging from not less than two 
business days to not more than 180 days for stocks and not less than 
two business days and no more than sixty days for U.S. government 
securities.
    Orders that include cash, next and seller's option settlement 
instructions may be submitted electronically to the Exchange; however, 
the orders containing any of those settlement instructions cannot be 
immediately and automatically executed. Rather, the orders must bypass 
the Exchange matching/execution engine, Display Book, and are literally 
printed on paper at the trading post for manual processing on the 
Floor.
Proposed Elimination of Cash, Next Day, Seller's Option Settlement 
Instructions
    In the Exchange's current more electronic market, orders received 
by Exchange systems that are marketable upon entry are eligible to be 
immediately and automatically executed. Order types and settlement 
instructions that require manual intervention pose significant 
impediments to the efficient functioning of the NYSE Alternext Trading 
Systems operated by the NYSE on behalf of the Exchange. To this end the 
NYSE filed with the Commission to remove legacy orders that require 
manual processing. Specifically, on January 31, 2008, the NYSE filed 
with the Commission to amend NYSE Rule 13 to invalidate the use of the 
manual order types ``Alternative Order--Either/Or Order'', ``Orders 
Good Until a Specified Time'', ``Scale Order'' and ``Switch Order--
Contingent Order'' and Rule 124's order types ``Limited Order, With or 
Without Sale'' and ``Basis Price Order'' as being incompatible with the 
more electronic NYSE market environment.\9\ These changes were already 
reflected in NYSE Alternext's rules following the merger with the NYSE.
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    \9\ See Securities and [sic] Exchange Act Release No. 57295 
(February 8, 2008), 73 FR 8731 (February 14, 2008) (SR-NYSE-2008-
11).
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    The Exchange's commitment to provide its market participants with 
the ability to have their orders executed in the most efficient manner 
necessitates the elimination of cash, next day and seller's option as 
valid settlement instructions for orders submitted to the Exchange. 
These instructions result in these orders printing to paper at the 
trading Post \10\ when they are submitted electronically in Exchange 
systems. The DMM and the trading assistant must realize that the 
document printed was in fact an order thus causing delay in the 
execution of the order. The DMM is then responsible for the manual 
execution of the order. The manual intervention required of the DMM and 
trading assistant at the Post in the processing of these orders puts 
the orders at the very real risk of ``missing the market'' as a result 
of the current speed of order execution in the Exchange market. In 
addition, since orders with these settlement instructions will no 
longer be supported by New York Stock Exchange systems, NYSE Alternext 
will also no longer be able to accept them for the securities traded in 
the NYSE Alternext market.
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    \10\ Trading Posts are the horseshoe shaped counters manned by 
DMMs and trading assistants on the Trading Floor of the NYSE where 
individual stocks are bought and sold.
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    The Exchange now seeks to eliminate cash, next day and seller's 
option as valid settlement instructions for orders submitted to the 
Exchange. The Exchange therefore proposes to delete the references to 
those settlement instructions from NYSE Alternext Rules 12 (``Business 
Day''), 64 (Bonds, Rights and 100-Share-Unit Stocks), 66 (U.S. 
Government Securities) \11\, 123 (Records of Orders), 124 (Odd-Lot 
Orders), 130 (Overnight Comparison of Exchange Transactions), 137 
(Written Contracts), 137A (Samples of Written Contracts), 189 (Unit of 
Delivery), 235 (Ex-Dividends, Ex-Rights), 236 (Ex-Warrants), 241 
(Interest--Added to Contract Price), 257 (Deliveries After ``Ex'' 
Date), 282 (Buy-In Procedures) and 440G (Transactions in Stocks and 
Warrants for the Accounts of Members, Principal Executives and Member 
Organizations). In addition, the Exchange seeks to eliminate entirely 
NYSE Alternext Rules 73 (``Seller's Option''), 177 (Delivery Time--
``Cash'' Contracts) and 179 (``Seller's Option''). In addition, the 
Exchange proposes to remove language in NYSE Alternext Rules 64 and 66 
that provide for the possibility of using multiple settlement periods 
for bids and offers entered on the Exchange since, for all practical 
purposes, the Exchange will now only accept orders for regular way 
settlement.
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    \11\ The Exchange does not have the capability to accept these 
order types for U.S. Government securities.
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    The Exchange also proposes to amend NYSE Alternext Rule 66 to add 
the provision that exists in NYSE Alternext Rule 64 to allow the 
Exchange, in its

[[Page 11395]]

discretion, to provide for additional settlement periods. The Exchange 
is proposing this addition to bring the provisions of the two rules 
into harmony as they address similar procedures with respect to 
different types of securities admitted to dealings on the Exchange. The 
Exchange, however, recognizes that any additional settlement periods it 
proposes to add will be subject to the rule filing process under 
Section 19(b) of the Securities Exchange Act of 1934 (the ``Act'') 
[sic].\12\
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    \12\ 15 U.S.C. 78s(b).
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    The Exchange will commence implementation of the proposed 
elimination of the settlement instructions discussed herein on March 
13, 2009. The Exchange intends to progressively implement this 
elimination on a security by security basis as it gains experience with 
the implementation until it is operative in all securities traded on 
the Floor. During the implementation, the Exchange will identify on its 
website which securities will no longer be eligible for these 
settlement instructions.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
[sic] for this proposed rule change is the requirement under Section 
6(b)(5) \13\ 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 instant filing accomplishes these goals by rescinding legacy 
settlement instructions that place customers at risk of missing the 
market and possibly receiving inferior priced executions.
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    \13\ 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 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 after the date of the filing, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, it has become effective pursuant to 
Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative until 30 days after the date of filing.\16\ 
However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay so that the proposed rule 
change may become operative on March 13, 2009. Specifically, the 
Exchange states that the proposal will rescind legacy settlement 
instructions that are not compatible with the Exchange's electronic 
market. The Commission believes that allowing the proposed rule change 
to become operative on March 13, 2009 is consistent with the protection 
of investors and the public interest, because it will enable the 
Exchange to implement pending technological enhancements that require 
the rescission of these legacy settlement instructions. The Exchange 
expects these enhancements to make its order processing operations more 
efficient and thereby strengthen and advance the quality of the 
Exchange's market. Accordingly, the Commission designates the proposed 
rule change to be operative on March 13, 2009.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to give the 
Commission written notice of its intent to file 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. The Exchange has satisfied this requirement.
    \18\ For purposes only of waiving the 30-day operative delay of 
the proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 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 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-NYSEALTR-2009-25 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-2009-25. 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 the 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-2009-25 and

[[Page 11396]]

should be submitted on or before April 7, 2009.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5719 Filed 3-16-09; 8:45 am]

BILLING CODE 8011-01-P