Document ID: SEC-2010-1350-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-09-07T04:00Z

[Federal Register: September 7, 2010 (Volume 75, Number 172)]
[Notices]               
[Page 54407-54408]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07se10-77]                         

[[Page 54407]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62792; File No. SR-NYSEAmex-2010-85]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rule 
107B--NYSE Amex Equities To Revise the Quoting Requirement

August 30, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 26, 2010, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 Rule 107B--NYSE Amex Equities 
(``Supplemental Liquidity Providers'') (``SLPs''), which is a pilot 
program, to revise the quoting requirement. The text of the proposed 
rule change is available on the Exchange's Web site at http://
www.nyse.com, at the Exchange's principal office, at the Commission's 
Public Reference Room, and on the Commission's Web site at http://
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 107B--NYSE Amex Equities, which 
is a pilot program, to eliminate the ability for an SLP to earn a 
rebate if it maintains a quote at the National Best Bid (``NBB'') or 
National Best Offer (``NBO'') an average of 3% in an assigned SLP 
security. Instead, an SLP would be eligible to earn a rebate only if it 
meets the 5% quoting requirement currently set forth in the rule. The 
Exchange also proposes to clarify which mnemonics that a member 
organization may use for the SLP trading activity to enable a member 
organization to use the same mnemonic for non-SLP trading activity.
    Rule 107B provides for a class of market participants referred to 
as Supplemental Liquidity Providers or ``SLPs.'' \3\ Approved Exchange 
member organizations are eligible to be an SLP. SLPs supplement the 
liquidity provided by Designated Market Makers (``DMMs''). SLPs have 
monthly quoting requirements that may qualify them to receive SLP 
rebates, which are larger than the general rebate available to non-SLP 
market participants.
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    \3\ The pilot is currently scheduled to end on September 30, 
2010.
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    The goal of the SLP program is to encourage participants to quote 
more often and to add displayed liquidity to the market. Thus, Rule 
107B(a) requires that an SLP maintain a bid and/or an offer at the NBB 
or NBO averaging at least 5% of the trading day for each assigned 
security. Notwithstanding the 5% quoting requirement, an SLP can earn a 
financial rebate if it maintains a quote an average of 3% in an 
assigned SLP security.
    If an SLP fails to meet a 3% average quoting requirement in its 
assigned securities, the SLP is not eligible for SLP rebates on 
executions for that month. Further, if an SLP fails to meet its 5% 
average quoting requirement in its assigned securities for three (3) 
consecutive months (not including the first month of SLP operation), 
the SLP Liaison Committee may, in its discretion, impose the following 
non-regulatory penalties: (1) Revocation of the affected security(ies); 
(2) each time a security(ies) is revoked for failure to meet the 
quoting requirement for a particular security, revocation of an 
additional unaffected security; and/or (3) disqualification from the 
SLP program.
    The Exchange proposes to eliminate the ability of an SLP to earn a 
rebate if it maintains a quote in assigned SLP securities at the NBB or 
NBO at least 3%, up to, but not including 5% of the time. Instead, to 
align the rebate with the 5% quoting requirement set forth in Rule 
107B(a), as proposed, an SLP would not be able to earn a rebate unless 
it maintained a quote at the NBB or NBO an average of 5% of the trading 
day. The Exchange proposes to make conforming amendments to Rule 
107B(i)(1)(A) and (B) by deleting the last sentence of each paragraph 
as no longer necessary. The Exchange believes that this proposed change 
strengthens the SLP program by ensuring that rebates are paid only if 
the SLP meets the minimum quoting requirement of an SLP.
    The Exchange also proposes to amend the operational pre-
qualifications for an SLP. Among other things, the Exchange requires 
pursuant to Rule 107B(c)(1) that an SLP use a unique mnemonic for its 
SLP business, which enables the Exchange to identify SLP transactions 
for billing and regulatory purposes. The Exchange proposes to revise 
this requirement to clarify that the member organization must identify 
to the Exchange mnemonics that identify the SLP trading activity in 
assigned SLP securities. As proposed, because all order flow in an 
assigned SLP security using that mnemonic will be treated as SLP 
volume, a member organization may not use such identified mnemonics for 
trading activity at the Exchange in assigned SLP securities that is not 
SLP trading activity. However, to enable the member organization to use 
the same mnemonic for both SLP and non-SLP trading activity in 
different securities, an SLP may use mnemonics used for SLP trading for 
trading activity in securities not assigned to the SLP. As further 
proposed, the rule would specify that if the member organization does 
not identify such mnemonics to the Exchange, the member organization 
will not receive credit for such SLP trading. The Exchange proposes to 
make a conforming amendment to Rule 107B(f)(2).
    In addition to the above proposed changes, the Exchange proposes to 
make clarifying amendments to Rule 107B. First, because FINRA now 
conducts all market regulation functions on behalf of the Exchange, the 
Exchange proposes to delete references to the ``Division of Market 
Surveillance,'' and replace it with a reference to FINRA (see Section 
(e) of the Rule). Second, the Exchange proposes to revise section 
(g)(2)(A) of the rule, to provide that a DMM unit shall not also act as 
an SLP in the same

[[Page 54408]]

securities in which it is registered as a DMM. The Exchange does not 
need to spell out the term ``designated market maker'' as it, and the 
term DMM unit, are defined terms in Rule 2.
    The Exchange proposes to implement these changes on October 1, 
2010.\4\
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    \4\ As noted above, the SLP program is a pilot program currently 
set to expire on September 30, 2010. The Exchange intends to file to 
make the program permanent or extend the pilot program so that it 
can continue past September 30, 2010.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\5\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\6\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, 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 the 
proposed Rule is consistent with these principles in that it seeks to 
increase the trading performance of SLPs, which will benefit all market 
participants.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
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 prior to 
30 days from the date on which it was filed, 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 \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6)(iii). 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 the 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 the pre-filing 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.

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-2010-85 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-2010-85. 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 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-2010-85 and should be submitted on or before September 28, 
2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22206 Filed 9-3-10; 8:45 am]
BILLING CODE 8010-01-P