Document ID: SEC-2011-2055-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-12-30T05:00Z

[Federal Register Volume 76, Number 251 (Friday, December 30, 2011)]
[Notices]
[Pages 82329-82331]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33581]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66043; File No. SR-NYSEAmex-2011-101]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change Amending NYSE Amex Equities Rules 504 and 509 To 
Modify the Quoting Requirements Applicable to Designated Market Maker 
Units Registered in Nasdaq Stock Market Securities Traded on the 
Exchange Pursuant to a Grant of Unlisted Trading Privileges

December 23, 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 15, 2011, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit

[[Page 82330]]

comments on the proposed rule 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 Rules 504 and 509 
to modify the quoting requirements applicable to Designated Market 
Maker units (``DMM units'') registered in Nasdaq Stock Market 
(``Nasdaq'') securities traded on the Exchange pursuant to a grant of 
unlisted trading privileges (``UTP''). 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.

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 NYSE Amex Equities Rules 504 and 509 
to modify the quoting requirements applicable to DMM units \3\ 
registered in Nasdaq-listed securities traded on the Exchange pursuant 
to UTP.
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    \3\ See NYSE Amex Equities Rule 98(b)(2). ``DMM unit'' means any 
member organization, aggregation unit within a member organization, 
or division or department within an integrated proprietary 
aggregation unit of a member organization that (i) has been approved 
by NYSE Regulation pursuant to section (c) of this Rule, (ii) is 
eligible for allocations under Rule 103B--NYSE Amex Equities as a 
DMM unit in a security listed or traded on the Exchange, and (iii) 
has met all registration and qualification requirements for DMM 
units assigned to such unit.
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    NYSE Amex Equities Rules 500-525, as a pilot program, govern the 
trading of Nasdaq-listed securities on the Exchange pursuant to UTP 
(``UTP Pilot Program'').\4\ The UTP Pilot Program includes any security 
listed on Nasdaq that (i) is designated as an ``eligible security'' 
under the Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis, as amended (``UTP 
Plan''),\5\ and (ii) has been admitted to dealings on the Exchange 
pursuant to a grant of unlisted trading privileges in accordance with 
Section 12(f) of the Securities Exchange Act of 1934, as amended (the 
``Act'') \6\ (collectively, ``Nasdaq Securities'').\7\
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    \4\ The UTP Pilot Program is currently scheduled to expire on 
the earlier of Commission approval to make such pilot permanent or 
January 31, 2012. See Securities Exchange Act Release No. 64746 
(June 24, 2011), 76 FR 38446 (June 30, 2011) (SR-NYSEAmex-2011-45). 
See also Securities Exchange Act Release No. 62479 (July 9, 2010), 
75 FR 41264 (July 15, 2010) (SR-NYSEAmex-2010-31) (``UTP Pilot 
Program Approval Order''). The Exchange anticipates proposing an 
extension of the UTP Pilot Program beyond the current January 31, 
2012 expiration date.
    \5\ See Securities Exchange Act Release No. 58863 (October 27, 
2008), 73 FR 65417 (November 3, 2008) (Notice of Filing and 
Immediate Effectiveness of Amendment No. 20 to the UTP Plan). The 
Exchange's predecessor, the American Stock Exchange LLC, joined the 
UTP Plan in 2001. See Securities Exchange Act Release No. 55647 
(April 19, 2007), 72 FR 2091 (April 27, 2007) (S7-24-89). In March 
2009, the Exchange changed its name to NYSE Amex LLC. See Securities 
Exchange Act Release No. 59575 (March 13, 2009), 74 FR 11803 (March 
19, 2009) (SR-NYSEALTR-2009-24).
    \6\ 15 U.S.C. 78l.
    \7\ ``Nasdaq Securities'' is included within the definition of 
``security'' as that term is used in the NYSE Amex Equities Rules. 
See NYSE Amex Equities Rule 3. In accordance with this definition, 
Nasdaq Securities are admitted to dealings on the Exchange on an 
``issued,'' ``when issued,'' or ``when distributed'' basis. See NYSE 
Amex Equities Rule 501.
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    DMM units registered in one or more Nasdaq Securities must comply 
with all ``DMM rules,'' as defined in NYSE Amex Equities Rule 98,\8\ 
subject to the modifications enumerated in NYSE Amex Equities Rule 509. 
In this regard, NYSE Amex Equities Rule 509(a)(1) states that, in lieu 
of NYSE Amex Equities Rule 104(a)(1)(A), with respect to maintaining a 
continuous two-sided quote with reasonable size, a DMM unit must 
maintain a quote at the National Best Bid or Offer (``NBBO'') in each 
assigned Nasdaq Security an average of at least 10% of the time during 
the regular business hours of the Exchange for each calendar month.\9\ 
In contrast, NYSE Amex Equities Rule 104(a)(1)(A) requires that DMM 
units maintain a bid or offer at the NBBO at least 10% of the trading 
day cumulatively for all less active securities in which the DMM unit 
is registered and at least 5% of the trading day cumulatively for all 
more active securities in which the DMM unit is registered.
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    \8\ ``DMM rules'' means any rules that govern DMM conduct or 
trading.
    \9\ These obligations are also included within current NYSE Amex 
Equities Rule 504.
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    The Exchange proposes to amend the text of NYSE Amex Equities Rule 
509(a)(1) to reflect that DMM units registered in Nasdaq Securities 
would be obligated to maintain a quote at the NBBO in each assigned 
Nasdaq Security an average of at least 5% of the time during the 
regular business hours of the Exchange for each calendar month for 
Nasdaq Securities with a consolidated average daily volume equal to or 
greater than one million shares per calendar month, i.e., securities 
that would qualify as ``more active'' securities under NYSE Amex 
Equities Rule 103B(II)(C).\10\ This proposed change would result in DMM 
units being obligated to maintain a bid or offer at the NBBO for a 
specified percentage of the trading day (either 10% or 5%, depending 
upon volume) that is more consistent with the percentages applicable 
under NYSE Amex Equities Rule 104(a)(1)(A) for Exchange-listed 
securities. However, as opposed to the percentage requirements under 
NYSE Amex Equities Rule 104(a)(1)(A), which apply cumulatively across 
all Exchange-listed securities in which a DMM unit is registered, NYSE 
Amex Equities Rule 509(a)(1) would continue to apply the percentage 
requirements therein for each individual Nasdaq Security in which the 
DMM unit is assigned.\11\
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    \10\ The Exchange proposes to make conforming changes to NYSE 
Amex Equities Rules 504(b)(1)(A). DMM units would remain obligated 
to maintain a quote at the NBBO an average of at least 10% of the 
time during the regular business hours of the Exchange for each 
calendar month in each assigned Nasdaq Security with a consolidated 
average daily volume less than one million shares per calendar 
month, i.e., securities that would qualify as ``less active'' 
securities under NYSE Amex Equities Rule 103B(II)(B).
    \11\ The Exchange notes that it is proposing this change to DMM 
unit quoting obligations in Nasdaq Securities based on the current 
trading characteristics of Nasdaq Securities at the Exchange. The 
Exchange would continue to review and monitor the trading of Nasdaq 
Securities and the associated DMM unit obligations and would seek to 
modify those obligations as may be appropriate.
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    The Exchange also proposes to delete from NYSE Amex Equities Rule 
504(b)(1)(A) text referencing NYSE Amex Equities Rule 103B(II), which 
provides for security allocation eligibility. This reference is not 
necessary within NYSE Amex Equities Rule 504(b)(1)(A), which, as 
discussed above, provides for DMM unit quoting obligations. The 
Exchange notes that, despite the proposed deletion, DMM units would 
remain subject to NYSE Amex Equities Rule 103B(II) with respect to 
security allocation eligibility.
    The Exchange proposes to announce the implementation date, if 
approved by the Commission, via Trader Update.

[[Page 82331]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange. In particular, 
the Exchange believes that its proposal is consistent with (i) Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ in particular, because 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; (ii) 
Section 11A(a)(1) of the Act,\14\ because it seeks to ensure the 
economically efficient execution of securities transactions and fair 
competition among brokers and dealers and among exchange markets; and 
(iii) Section 12(f) of the Act,\15\ which governs the trading of 
securities pursuant to UTP consistent with the maintenance of fair and 
orderly markets, the protection of investors and the public interest, 
and the impact of extending the existing markets for such securities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78k-1(a)(1).
    \15\ 15 U.S.C. 78l(f).
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    The Exchange's decision to establish DMM unit quoting obligations 
was initially based on commercial considerations at the time, including 
the desire to encourage quoting activity on the Exchange in Nasdaq 
Securities, and an estimate of the volume in Nasdaq Securities that 
might trade at the Exchange.\16\ However, based on the nearly 17 months 
of experience with the UTP Pilot Program thus far, the Exchange 
believes that it is appropriate to modify the DMM unit quoting 
obligations for more active Nasdaq Securities, as described above.\17\ 
In particular, the Exchange believes that it is appropriate to more 
closely align DMM unit quoting requirements for Nasdaq Securities with 
those applicable for Exchange-listed securities. In this regard, the 
Exchange believes that the current DMM unit quoting obligation for more 
active Nasdaq Securities may outweigh the benefit that such higher 
quoting provides to the marketplace. The Exchange therefore proposes to 
reflect the distinction between more active and less active securities 
for the DMM unit quoting requirements for Nasdaq Securities, while 
still requiring that these quoting requirements be calculated on a 
stock-by-stock basis rather than a portfolio basis across all of the 
DMM unit's assigned securities.
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    \16\ In the UTP Pilot Program Approval Order, the Commission 
took into account the specific obligations that DMMs in Nasdaq 
Securities would be subject to, including the increased quoting 
obligation for Nasdaq Securities as compared to the quoting 
obligation for Exchange-listed securities. See UTP Pilot Program 
Approval Order at Section III.A. The Commission noted that the 
obligations proposed for DMMs in Nasdaq Securities would closely 
track, but would be slightly different from, those applicable to 
DMMs in Exchange-listed securities.
    \17\ In particular, before the UTP Pilot Program began, the 
Exchange did not have any data on the volume in Nasdaq Securities 
that would trade at the Exchange. Accordingly, the Exchange 
identified in its original filing a set of obligations that were 
largely based on the trading characteristics of Exchange-listed 
securities.
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2011-101 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-2011-101. 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 will also 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-2011-101 and should 
be submitted on or before January 20, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-33581 Filed 12-29-11; 8:45 am]
BILLING CODE 8011-01-P