Document ID: SEC-2009-1419-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC Extending the Operation of Its New Market Model Pilot and Supplemental Liquidity Providers Pilot, Until the Earlier of Securities and Exchange Commission Approval to Make Such Pilots Permanent or November 30, 2009
Posted Date: 2009-10-07T04:00Z

[Federal Register: October 7, 2009 (Volume 74, Number 193)]
[Notices]               
[Page 51628-51630]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc09-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60756; File No. SR-NYSE-2009-100]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Extending the Operation of Its New Market Model Pilot and Supplemental 
Liquidity Providers Pilot, Until the Earlier of Securities and Exchange 
Commission Approval to Make Such Pilots Permanent or November 30, 2009

October 1, 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 September 30, 2009, New York Stock Exchange LLC 
(``NYSE'' or the ``Exchange'') 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\ 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 extend the operation of its New Market 
Model Pilot and Supplemental Liquidity Providers Pilot, until the 
earlier of Securities and Exchange Commission approval to make such 
pilots permanent or November 30, 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.

[[Page 51629]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the operation of its New Market 
Model Pilot \4\ (``NMM Pilot'') and Supplemental Liquidity Providers 
Pilot \5\ (``SLP Pilot'') approved by the Securities and Exchange 
Commission (``SEC'' or ``Commission'') to operate until October 1, 
2009, until the earlier of Securities and Exchange Commission approval 
to make such pilots permanent or November 30, 2009.
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    \4\ See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46).
    \5\ See Securities Exchange Act Release No. 58877 (October 29, 
2008), 73 FR 65904 (November 5, 2008) (SR-NYSE-2008-108) 
(establishing the SLP Pilot). See also Securities Exchange Act 
Release No. 59869 (May 6, 2009), 74 FR 22796 (May 14, 2009) (SR-
NYSE-2009-46) (extending the operation of the SLP Pilot to October 
1, 2009).
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    The Exchange notes that parallel changes are proposed to be made to 
the rules of the NYSE Amex LLC.\6\
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    \6\ See SR-NYSE Amex-2009-65.
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Background \7\
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    \7\ The information contained herein is a summary of the NMM 
Pilot and the SLP Pilot, for a fuller description of those pilots 
see supra notes 4 and 5.
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    In October 2008, the NYSE implemented significant changes to its 
market rules, execution technology and the rights and obligations of 
its market participants all of which were designed to improve execution 
quality on the Exchange. These changes are all elements of the 
Exchange's enhanced market model. These changes were implemented 
through pilots.
    As part of the NMM Pilot, NYSE eliminated the function of 
specialists on the Exchange creating a new category of market 
participant, the Designated Market Maker or DMM.\8\ The DMMs, like 
specialists, have affirmative obligations to make an orderly market, 
including continuous quoting requirements and obligations to re-enter 
the market when reaching across to execute against trading interest. 
Unlike specialists, DMMs have a minimum quoting requirement \9\ in 
their assigned securities and no longer have a negative obligation. 
DMMs are also no longer agents for public customer orders.\10\
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    \8\ See NYSE Rule 103.
    \9\ See NYSE Rules 104.
    \10\ See NYSE Rule 60; see also NYSE Rules 104 and 1000.
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    In addition, the Exchange implemented a system change that allowed 
DMMs to create a schedule of additional non-displayed liquidity at 
various price points where the DMM is willing to interact with interest 
and provide price improvement to orders in the Exchange's system. This 
schedule is known as the DMM Capital Commitment Schedule (``CCS'').\11\ 
CCS provides the Display Book [supreg] \12\ with the amount of shares 
that the DMM is willing to trade at price points outside, at and inside 
the Exchange BBO. CCS interest is separate and distinct from other DMM 
interest in that it serves as the interest of last resort.
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    \11\ See NYSE Rule 1000.
    \12\ The Display Book[supreg] system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the DMMs, contains the order information, and provides a 
mechanism to execute and report transactions and publish the results 
to the Consolidated Tape. The Display Book system is connected to a 
number of other Exchange systems for the purposes of comparison, 
surveillance, and reporting information to customers and other 
market data and national market systems.
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    The NMM Pilot further modified the logic for allocating executed 
shares among market participants having trading interest at a price 
point upon execution of incoming orders. The modified logic rewards 
displayed orders that establish the Exchange's best bid or Exchange's 
best offer. During the operation of the NMM Pilot orders or portions 
thereof that establish priority \13\ retain that priority until the 
portion of the order that established priority is exhausted. Where no 
one order has established priority, shares are distributed among all 
market participants on parity.
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    \13\ See NYSE Rule 72(a)(ii).
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    Separately, the NYSE established a pilot of SLPs. Through the 
operation of the SLP Pilot, NYSE also established SLPs as a new class 
of market participants to supplement the liquidity provided by 
DMMs.\14\ Unlike DMMs, SLPs do not have affirmative obligations; may 
only enter orders electronically from off the Floor of the Exchange, 
and may only enter such orders directly into Exchange systems and 
facilities designated for this purpose. Similar to DMMs, SLPs have 
quoting requirements,\15\ may only enter orders for their proprietary 
account of the SLP member organization and may not handle orders from 
public customers or otherwise act on an agency basis in their capacity 
as an SLP.
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    \14\ See NYSE Rule 107B.
    \15\ See NYSE Rule 107B Section (f) and NYSE Rule 107B Section 
(i)(1)(C)(iii).
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    A member organization that acts as an SLP is not permitted to act 
as a DMM on the Floor of the Exchange in the same security. Thus, a 
member organization that acts as a DMM on the Floor may not also act as 
an SLP in those securities registered to the DMM unit.
    The NMM Pilot and the SLP Pilot are scheduled to end operation on 
October 1, 2009 or such earlier time as the Commission may determine to 
make the rules permanent. The Exchange is currently preparing a rule 
filing seeking permission to make the above described changes permanent 
but does not expect that filing to be completed and approved by the 
Commission before October 1, 2009.
Proposal To Extend the Operation of the NMM Pilot and SLP Pilot
    The NYSE established both the NMM Pilot and the SLP Pilot to 
provide incentives for quoting, to enhance competition among the 
existing group of liquidity providers and add new competitive market 
participants. The Exchange believes that both the NMM Pilot and the SLP 
Pilot allow the Exchange to provide its market participants with a 
trading venue that utilizes an enhanced market structure to encourage 
the addition of liquidity, facilitate the trading of larger orders more 
efficiently and operates to reward aggressive liquidity providers. As 
such, the Exchange believes that the rules governing the NMM Pilot and 
the SLP Pilot should be made permanent. Through this filing the 
Exchange seeks to extend the current operation of the NMM Pilot and the 
SLP Pilot until November 30, 2009, in order to allow the Exchange to 
formally submit a filing to the Commission to convert the pilot rules 
to permanent rules.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
for this proposed rule change is the requirement under Section 6(b)(5) 
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 
because the NMM Pilot and the SLP Pilot provide its market participants 
with a trading venue that utilizes an enhanced market structure to 
encourage the addition of liquidity, facilitate the trading of larger 
orders more efficiently and operates to reward aggressive liquidity 
providers. Moreover, the instant filing requesting an extension of each 
individual Pilot will permit adequate time for: (i) The Exchange to 
prepare and submit a filing to make the rules governing the NMM Pilot 
and the SLP Pilot permanent; (ii) public notice and comment; and (iii)

[[Page 51630]]

completion of the 19b-4 approval process.

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 \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written 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. The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that because the pilot programs will expire on 
October 1, 2009, waiver of the operative delay is necessary so that no 
interruption of the pilot programs will occur. In addition, the 
Commission notes that the Exchange has requested extensions of the 
pilots to allow the Exchange time to formally request permanent 
approval for the pilots. Therefore, the Commission designates the 
proposal operative upon filing.\21\
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    \21\ 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).
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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-NYSE-2009-100 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-NYSE-2009-100. 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 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-
NYSE-2009-100 and should be submitted on or before October 28, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-24083 Filed 10-6-09; 8:45 am]

BILLING CODE 8011-01-P