Document ID: SEC-2011-2046-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-12-29T05:00Z

[Federal Register Volume 76, Number 250 (Thursday, December 29, 2011)]
[Notices]
[Pages 82009-82011]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33446]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66032; File No. SR-NYSEAmex-2011-99]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending 
Supplementary Material .26 (Pegging for d-Quotes and e-Quotes) to NYSE 
Amex Equities Rule 70

December 22, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on December 14, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') 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 Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Supplementary Material .26 (Pegging 
for d-Quotes and e-Quotes) to NYSE Amex Equities Rule 70. The text of 
the proposed rule change is available at the Exchange, at www.nyse.com, 
the Commission's Public Reference Room, and at www.sec.gov.

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
    The Exchange proposes to amend Supplementary Material .26 (Pegging 
for d-Quotes and e-Quotes) to NYSE Amex Equities Rule 70.
    Paragraph (i) of Supplementary Material .26 states that an e-Quote 
may be set to provide that it will be available for execution at the 
national best bid (``NBB'') (for an e-Quote that represents a buy 
order) or at the national best offer (``NBO'') (for an e-Quote that 
represents a sell order) as the national best bid or offer (``NBBO'') 
changes, so long as the NBBO is at or within the e-Quote's limit price. 
Paragraph (x) of Supplementary Material .26 further provides that, as 
long as the NBB or NBO is within the pegging price range selected by 
the Floor broker, the pegging e-Quote or d-Quote will join the NBB or 
NBO as it is autoquoted. As such, pegging interest may peg to a price 
that may not be displayed at the Exchange. For example, if the NBB is 
$10.05 and the Exchange best bid is $10.04, a pegging e-Quote to buy 
will display at the Exchange at $10.05, thus creating a new Exchange 
best bid.
    Because pegging interest automatically pegs to the NBBO, under 
current rules and functionality, a

[[Page 82010]]

pegging e-Quote could peg to an NBB or NBO that is locking or crossing 
an existing Exchange best bid or offer. For example, if the Exchange 
best bid is $10.04 and the NBO locks it at $10.04, a pegging e-Quote to 
sell would peg to the $10.04 NBO price and then immediately execute 
against the Exchange's best bid of $10.04. In such scenario, a pegging 
e-Quote, which is intended to be reactive, becomes taker interest. 
Similarly, if automatic executions on the buy (sell) side are suspended 
at the Exchange, for example, if a liquidity replenishment point is 
reached pursuant to NYSE Rule 1000, the NYSE would not be displaying a 
protected bid (offer) and therefore other markets could display a 
protected offer (bid) that crosses the Exchange best bid (offer). In 
such scenario, if the NBO moved to below the Exchange best bid of 
$10.04, a pegging e-Quote to sell would peg to that NBO, which would 
cross the Exchange best bid.
    The Exchange proposes to add new paragraph (x)(A) to Supplementary 
Material .26 to provide that a pegging e-Quote or d-Quote to buy (sell) 
would not peg to an NBB (NBO) that is locking or crossing the Exchange 
best offer (bid), but would instead join the next available best-priced 
non-pegging interest that does not lock or cross the Exchange best 
offer (bid).\5\ Customers have requested this change because in the 
infrequent circumstances when the NBBO is locking or crossing the 
Exchange best bid or offer,\6\ customers do not want their pegging 
interest, for which the ultimate goal is to be passive liquidity for 
purposes of execution, to become taker interest. Because the next 
available best-priced non-pegging interest may be on an away market, 
the Exchange further proposes to amend paragraph (vii) to Supplementary 
.26 to specify that the non-pegging interest against which pegging 
interest pegs may either be available on the Exchange or may be a 
protected bid or offer on an away market. The Exchange believes that 
this is already implied in Supplementary .26, particularly because 
pegging interest can peg to the NBB or NBO, which may or may not be a 
displayed price at the Exchange,\7\ and is proposing this change only 
to add greater specificity to Supplementary Material .26.
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    \5\ When an exception to the prohibition against trade-throughs 
is in effect, pursuant to Rule 611(b)(4) of Regulation NMS, 
technically, there are no available protected bids or offers against 
which an e-Quote or d-Quote can peg. In such situations, the pegging 
interest would peg to the next available best-priced non-pegging 
interest on the Exchange that is within the price range selected by 
the Floor broker.
    \6\ The Exchange would re-price pegging interest only if the 
NBBO is locking or crossing the Exchange best bid or offer and not 
if the NBBO is ``locking'' or ``crossing'' undisplayed liquidity at 
the Exchange. For example, where the Exchange best bid and offer is 
$10.02 and $10.04 and there is ``dark'' reserve buy interest at 
$10.03, if the NBO becomes $10.03, pegging sell interest will peg to 
the $10.03 NBO and will execute against the Exchange ``dark'' 
reserve interest priced at $10.03.
    \7\ See Securities Exchange Act Release No. 61081 (December 1, 
2009), 74 FR 64105 (December 7, 2009) (SR-NYSEAmex-2009-76).
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    The Exchange also proposes to add new paragraph (x)(B) to 
Supplementary Material .26 to provide that the converse of paragraph 
(x) is also true. Specifically, if the NBB (NBO) is not within the 
pegging price range selected by the Floor broker, then a pegging e-
Quote or d-Quote to buy (sell) will join the next available best-priced 
non-pegging interest that is within the price range selected by the 
Floor broker.
    Finally, the Exchange proposes to amend paragraph (xiii) to 
Supplementary Material .26 to delete the text that permits Floor 
brokers to specify a maximum size validation for e-Quotes and d-Quotes. 
Floor brokers have not availed themselves of this functionality and the 
Exchange has therefore decided to eliminate it from Supplementary 
Material .26. In addition, because pegging interest is considered when 
assessing the minimum volume size of same-side interest against which 
to peg, the Exchange proposes to delete the last sentence of paragraph 
(xiii) to Supplementary Material .26.
    Because of the related technology changes that this proposed rule 
change would require, the Exchange proposes to announce the initial 
implementation date and related roll-out schedule, if applicable, via 
Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and 
furthers the objectives of Section 6(b)(5),\9\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, 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. Specifically, 
the Exchange believes that the proposed changes to Supplementary 
Material .26 to NYSE Amex Equities Rule 70 would promote just and 
equitable principles of trade and remove impediments to, and perfect 
the mechanism of, a free and open market because they would reduce the 
potential for the Exchange best bid or offer to be locked or crossed. 
The proposed changes would also promote transparency by adding greater 
specificity with respect to the interest to which pegging e-Quotes and 
d-Quotes may peg and would remove text corresponding to a functionality 
that Floor brokers have not availed themselves of and therefore is no 
longer necessary to promote just and equitable principles of trade.
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    \8\ 15 U.S.C. 78f(b).
    \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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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. The 
Exchange has satisfied this requirement.
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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.

[[Page 82011]]

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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-99 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-2011-99. 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 
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-NYSEAmex-2011-99 and should 
be submitted on or before January 19, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-33446 Filed 12-28-11; 8:45 am]
BILLING CODE 8011-01-P