Document ID: SEC-2012-1081-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2012-07-06T04:00Z

[Federal Register Volume 77, Number 130 (Friday, July 6, 2012)]
[Notices]
[Pages 40139-40140]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16518]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67314; File No. SR-NYSEAmex- 2012-23]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval of a Proposed 
Rule Change, as Modified by Amendment No. 1, Amending NYSE Amex Options 
Rule 928NY Specifying That the Potential Range for the Settings 
Applicable to the Market Maker Risk Limitation Mechanism Will Be 
Between One and 100 Executions Per Second, To Eliminate the Current 
Reference to the Default Setting and, in the Future, To Specify the 
Applicable Minimum, Maximum and Default Settings via Regulatory 
Bulletin

June 29, 2012.

I. Introduction

    On April 12, 2012, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to: (i) Specify the potential range for the 
settings applicable to the Market Maker Risk Limitation Mechanism 
(``Mechanism'') will be between one and 100 executions per second; (ii) 
eliminate the current reference to the default setting; and (iii) 
specify that the Exchange may set the applicable minimum, maximum, and 
default settings via Regulatory Bulletin. The proposed rule change was 
published for comment in the Federal Register on May 1, 2012.\3\ The 
Commission received no comment letters on the proposal. On June 26, 
2012, the Exchange filed Amendment No. 1 to the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 66857 (April 25, 2012), 
77 FR 25770 (``Notice'').
---------------------------------------------------------------------------

    The Commission is publishing this notice to solicit comments on 
Amendment No. 1 from interested persons and is approving the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.

II. Description of the Proposal

    The Exchange adopted the Mechanism as a way to protect Market 
Makers from the risk associated with an excessive number of nearly 
simultaneous executions in a single option class.\4\ It functions as 
follows: If ``n'' executions occur within one second against the Market 
Maker's quotes in an appointed class, the NYSE Amex System 
automatically cancels all quotes posted by the Market Maker in that 
class. The Mechanism currently defaults the ``n'' number of executions 
to 50 executions per second.\5\ However, a Market Maker may instead set 
the ``n'' number of executions between five and 100 executions per 
second.\6\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 59472 (February 27, 
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14).
    \5\ See NYSE Amex Options Rule 928NY(b)(1).
    \6\ See NYSE Amex Options Rule 928NY(b)(2).
---------------------------------------------------------------------------

    The Exchange now proposes to decrease the low end of this range 
from five to one, while the high end of the range would remain 
unchanged at 100 executions per second. The Exchange also proposes to 
eliminate the reference to the default setting that is applicable to 
the Mechanism. In addition, the Exchange proposes that, in the future, 
it will specify the applicable minimum, maximum and default settings 
for the Mechanism via Regulatory Bulletin, all of which would be within 
the proposed range of one to 100 executions per second.\7\
---------------------------------------------------------------------------

    \7\ See proposed NYSE Amex Options Rule 928NY(b)(1). The 
Exchange proposes to designate NYSE Amex Options Rule 928NY(b)(2) as 
``reserved.''
---------------------------------------------------------------------------

    The Exchange has noted that it anticipates announcing via 
Regulatory Bulletin that the applicable minimum, maximum and default 
settings for the Mechanism will be decreased to 2, 50, and 5 executions 
per second, respectively.\8\
---------------------------------------------------------------------------

    \8\ See Notice, supra note 3, at 25771.
---------------------------------------------------------------------------

    In addition, on June 26, 2012, the Exchange submitted Amendment No. 
1 to the proposed rule change, which added additional information about 
the Regulatory Bulletin that the Exchange would provide to Market 
Makers in the event the Exchange makes any changes to the Mechanism's 
minimum, maximum, or default settings. The Exchange specified that, 
when announcing changes to the Mechanism via Regulatory Bulletin, the 
Exchange will issue the bulletin at least one trading day in advance of 
the effective date of the change. The Exchange also specified that such 
bulletins will include: (1) Information regarding the changes to the 
risk settings in the Mechanism; (2) the effective date of the changes; 
and (3) contact information of Exchange staff who can provide 
additional information.

[[Page 40140]]

III. Discussion

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\9\ Specifically, the Commission finds that the proposal, as 
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the 
Act,\10\ in that it is designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transaction in securities, to remove 
impediments and perfect the mechanisms of a free and open market, and, 
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange noted its belief that decreasing the minimum settings 
in the Mechanism would provide Market Makers with greater control and 
flexibility with respect to managing their risk and the manner in which 
they enter quotes on the Exchange. The Exchange also notes that the 
proposed rule change allowing the Exchange to modify Mechanism settings 
by Regulatory Bulletin is consistent with the Act because it would 
permit the Exchange to increase or decrease the Mechanism settings to 
accommodate system capacity concerns. The Exchange has also represented 
that it believes providing at least one day of advance notice via 
Regulatory Bulletin prior to making adjustments to the Mechanism would 
afford Market Makers sufficient time to review their settings and make 
any necessary operational or technological changes to accommodate such 
adjustments. Finally, the Commission notes that the proposal would not 
relieve Market Makers of their quoting obligations on the Exchange 
under the Exchange's rules.\11\ For these reasons, the Commission 
believes that the proposed rule change, as modified by Amendment No. 1, 
is consistent with the Act.
---------------------------------------------------------------------------

    \11\ See NYSE Amex Options Rule 925NY.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2012-23 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-2012-23. This 
file number should be included on the subject line if email 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 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 
10:00 a.m. and 3:00 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-2012-23 and should 
be submitted on or before July 27, 2012.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    As discussed above, Amendment No. 1 revised the proposed rule 
change to specify that, when announcing changes to the Mechanism via 
Regulatory Bulletin, the Exchange will issue the bulletin at least one 
trading day in advance of the effective date of the change. The 
Exchange also specified that such bulletins will include: (1) 
Information regarding the changes to the risk settings in the 
Mechanism; (2) the effective date of the changes; and (3) contact 
information of Exchange staff who can provide additional information. 
The Exchange also stated its belief that providing at least one day of 
advance notice prior to making adjustments would afford Market Makers 
sufficient time to review their settings and make any necessary 
operational or technological changes to accommodate such adjustments to 
their own settings in the Mechanism or to their own proprietary 
systems. The Commission believes that the amendment addresses potential 
concerns about when the Exchange would provide notice of changes to the 
Mechanism settings, the form of such notice, and whether such notice 
would afford Market Makers sufficient time to adjust their settings in 
the Mechanism or their proprietary systems. Accordingly, the Commission 
also finds good cause, pursuant to Section 19(b)(2) of the Act,\12\ for 
approving the proposed rule change, as modified by Amendment No. 1, 
prior to the 30th day after the date of publication of notice in the 
Federal Register.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-NYSEAmex-2012-23), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).

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

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16518 Filed 7-5-12; 8:45 am]
BILLING CODE 8011-01-P