Document ID: SEC-2009-0616-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex Equities Rules 1000, 60 and 123C To Be More Consistent With the Trading Characteristics of Securities Traded on NYSE Amex
Posted Date: 2009-05-05T04:00Z

[Federal Register Volume 74, Number 85 (Tuesday, May 5, 2009)]
[Notices]
[Pages 20764-20767]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10171]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59834; File No. SR-NYSEAmex-2009-14]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rules 1000, 60 and 123C To Be More Consistent With the Trading 
Characteristics of Securities Traded on NYSE Amex

April 28, 2009.
    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 April 20, 2009, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') 
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 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 NYSE Amex Equities Rule 1000 
(``Automatic Execution of Limit Orders Against Orders Reflected in 
Exchange Published Quotation''), NYSE Amex Equities Rule 60 
(``Dissemination of Quotations'') and NYSE Amex Equities Rule 123C 
(``Market on the Close Policy and Expiration Procedures'') to be more 
consistent with the trading characteristics of securities traded on 
NYSE Amex. 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

[[Page 20765]]

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
    NYSE Amex LLC (``NYSE Amex'' or ``Exchange''), formerly the 
American Stock Exchange LLC and NYSE Alternext US LLC,\3\ proposes to 
amend NYSE Amex Equities Rule 1000 (``Automatic Execution of Limit 
Orders Against Orders Reflected in Exchange Published Quotation''), 
NYSE Amex Equities Rule 60 (``Dissemination of Quotations'') and NYSE 
Amex Equities Rule 123C (``Market on the Close Policy and Expiration 
Procedures'') to be more consistent with the trading characteristics of 
securities traded on NYSE Amex.
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    \3\ On March 3, 2009, the Exchange submitted a rule filing to 
change its name from NYSE Alternext US LLC to NYSE Amex LLC (SR-
NYSEALTR-2009-24).
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    Specifically, the Exchange proposes to amend NYSE Amex Equities 
Rule 1000 to allow securities priced at $1000 or higher (``high-priced 
securities'') to be eligible for automatic execution and make a 
conforming amendment to NYSE Amex Equities Rule 60(d)(iii)(B)(I)-(II). 
The Exchange also seeks to amend NYSE Amex Equities Rule 123C(5) to 
reduce the order imbalance size required for mandatory imbalance 
publications at 3:40 p.m. and 3:50 p.m. from 50,000 shares to 25,000 
shares.
a. Background
    As described more fully in a related rule filing,\4\ 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 NYSE Alternext US 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'').\5\ The 
effective date of the Merger was October 1, 2008.
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    \4\ 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).
    \5\ 15 U.S.C. 78f.
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    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 Amex Trading 
Systems'') are operated by the New York Stock Exchange (``NYSE'') on 
behalf of the Exchange.\6\
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    \6\ 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 Amex adopted NYSE Rules 1-
1004, subject to such changes as necessary to apply the Rules to the 
Exchange, as the NYSE Amex Equities Rules to govern trading on the NYSE 
Amex Trading Systems.\7\ The NYSE Amex 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 
Amex Equities Rules as necessary to conform with rule changes to 
corresponding NYSE Rules filed by the NYSE.
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    \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); 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) 
(implementing 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 Amex 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 
Amex Equities to track changes to corresponding NYSE Rule 62).
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    NYSE Amex Equities Rules 1000(a)(vi) and 60(d)(iii)(B)(I)-(II), as 
adopted from the NYSE, provide that high-priced securities, i.e., 
securities priced above $1,000, are ineligible for automatic 
executions. High-priced securities are traded manually by the assigned 
Designated Market-Maker (``DMM'').
    NYSE Amex Equities Rule 123C, as adopted from the NYSE, sets forth 
the procedures for the entry of market at-the-close (``MOC'') and limit 
at-the-close (``LOC'') orders.\8\ Included in these procedures is the 
requirement that at 3:40 p.m. if a security has a disparity between MOC 
and marketable LOC interest to buy and MOC and marketable LOC interest 
to sell of 50,000 shares or more, the assigned DMM is required to 
disseminate a publication informing the investing public of the 
disparity.\9\ In addition, a DMM may, with Floor Official approval, 
disseminate an imbalance publication even if the disparity is less than 
50,000 shares if the imbalance in the security is significant in 
relation to the average daily trading volume in the security. At 3:50 
p.m. the DMM is required to provide an update of the previous imbalance 
publication.
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    \8\ In the NYSE Rules and for the purposes of this discussion, 
the terms ``market-on-close'' and ``limit-on-close'' are used 
interchangeably with ``market-at-the-close'' and ``limit-at-the-
close.''
    \9\ NYSE Amex Equities Rule 123C(5).
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b. Proposed Amendments
    As previously discussed, NYSE Amex adopted NYSE Rules 1-1004, 
subject to minor changes as necessary to apply those rules as NYSE Amex 
Equities Rules on the NYSE Amex trading Floor. Since the implementation 
of these rules on December 1, 2008, the Exchange has determined that 
NYSE Amex Equities Rule 1000, NYSE Amex Equities Rule 60 and NYSE Amex 
Equities Rule 123C, as applied, are inconsistent with the trading 
characteristics of its securities. Accordingly, the Exchange seeks to 
amend these rules to provide regulatory imbalance information and 
automatic execution that is more aligned with the trading activity and 
volume on its Floor.
    The Exchange proposes to amend NYSE Amex Equities Rule 1000 to make 
high-priced securities eligible for automatic execution. Prior to the 
Exchange's relocation and implementation of Amex Equities Rules, all 
securities, including high-priced securities, traded on the Amex 
Exchange, were automatically executed.\10\ Given the specific market 
characteristics of NYSE Amex, the Exchange believes it is appropriate 
to make high-priced securities eligible for automatic execution because 
such automation benefits the NYSE Amex market participant and serves 
the public interest. Liquidity in NYSE Amex-listed securities is more 
dispersed among multiple market centers than securities traded on the 
NYSE. As such, high-priced securities on NYSE Amex must be eligible for 
immediate and automatic execution in order to effectively compete for 
order flow with protected quotes.
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    \10\ Amex Legacy Rules established the automatic execution of 
securities traded on the Amex. See Amex Rule 128A--AEMI (Automatic 
Execution), Amex Rule 123--AEMI (Manner of Bidding and Offering), 
and Amex Rule 126--AEMI (Precedence of Bids and Offers). Auto-Ex 
Eligible Securities are defined in Amex Rule 128A--AEMI as ``all 
ETFs, equities, and securities that trade like equities traded on 
the Exchange.''
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    Accordingly, the Exchange proposes to rescind section (a)(vi) from 
NYSE Amex Equities Rule 1000, thereby allowing high-priced securities 
to be

[[Page 20766]]

automatically executed on the Exchange. In addition, the Exchange seeks 
to make conforming changes to NYSE Amex Equities Rule 60. The Exchange 
proposes to amend section (d)(iii)(B)(I) and (II) in order to have all 
high-priced securities autoquoted like all other securities pursuant to 
the provision of NYSE Amex Equities Rule 60.
    The Exchange further proposes to amend NYSE Amex Equities Rule 123C 
to reduce the share volume required to disseminate mandatory imbalance 
publications at 3:40 p.m. and 3:50 p.m. from 50,000 shares to 25,000 
shares. Prior to the adoption of NYSE Amex Equities Rule 123C, Amex 
Rule 131A governed entry and execution of MOC and LOC orders as part of 
the closing transaction. Pursuant to Amex Rule 131A, a specialist was 
required to disseminate an imbalance publication if there was a buy or 
a sell disparity in the amount of 25,000 shares.
    Exchange-listed securities are significantly different from those 
securities listed on the NYSE which overall have a much higher Average 
Daily Volume (``ADV'') and therefore are more likely to have MOC/LOC 
orders that result in imbalances of 50,000 shares or more. Conversely, 
a MOC/LOC imbalance of 25,000-50,000 shares in an NYSE Amex listed 
security is generally significant given the typically lower ADV of such 
securities; thus, publication of an imbalance is appropriate. The 
Exchange reviewed trading statistics of MOC/LOC orders submitted to 
NYSE Amex and found that from January 2, 2009-January 20, 2009, NYSE 
Amex only had six out of 248 securities that had received MOC/LOC 
orders for shares totaling more than 50,000 shares. This represented 
2.4% of NYSE Amex MOC/LOC orders that met this 50,000 share threshold. 
Additionally, none of the trading imbalances in the 247 Amex securities 
ever totaled 50,000 shares.
    Given this information, NYSE Amex proposes to amend NYSE Amex 
Equities Rule 123C to reduce the order imbalance size required for 
mandatory imbalance publication from 50,000 to 25,000 shares. 
Currently, an imbalance of 25,000 shares would not be subject to the 
mandatory publication requirement. The DMM on the Exchange would not be 
required to publish an imbalance of 25,000 shares unless the DMM 
determined, with Floor Official approval, that such imbalance was 
significantly greater than the average daily volume in the security. 
The Exchange believes that reducing the share volume from 50,000 to 
25,000 shares will result in more transparency for NYSE Amex market 
participants and promotes the principles of a free and open market 
which benefits the public interest.
    The Exchange believes that the reduction of the size parameter for 
mandatory publishing of imbalances is appropriate for the Exchange's 
listed securities because it provides mandatory imbalance publications 
consistent with trading volume on the Exchange, thus providing 
investors with more accurate information about disparities in MOC/LOC 
orders consistent with the trading volume on the Exchange.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\11\ which requires that an exchange 
have rules that are designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and 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. The Exchange believes that 
the proposed amendments are consistent with these objectives. Currently 
DMMs manually trade NYSE Amex high-priced securities. This proposed 
rule change would allow for these high-priced securities to be eligible 
for automatic execution and auto-quoting which would allow NYSE Amex to 
protect its quote and remain competitive with the other market centers. 
Furthermore, reducing the mandatory publication of imbalances to 25,000 
shares provides more transparency to the NYSE Amex market participants. 
NYSE Amex submits that these proposed rule changes remove impediments 
to and perfect the mechanism of a free and open market.
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    \11\ 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: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) 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 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 \12\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ 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 and designate the proposed 
rule change operative upon filing. The Exchange stated that the waiver 
of this period will allow orders in high-priced securities to 
effectively compete as protected quotations. In addition, the Exchange 
stated that waiver of the operative delay will allow the Exchange to 
conform the mandatory publication requirements to the market 
characteristics of the Exchange, benefitting NYSE Amex market 
participants and the public interest. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission designates 
the proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6). 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.
    \15\ Id.
    \16\ For purposes only of waiving the 30-day operative delay of 
this 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,

[[Page 20767]]

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 No. SR-NYSEAmex-2009-14 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2009-14. 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-NYSEAmex-2009-14 and should be submitted on or before 
May 26, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-10171 Filed 5-4-09; 8:45 am]
BILLING CODE 8010-01-P