Document ID: SEC-2010-1446-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC and NYSE Amex LLC
Posted Date: 2010-09-21T04:00Z

[Federal Register: September 21, 2010 (Volume 75, Number 182)]
[Notices]               
[Page 57541-57542]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se10-132]                         

[[Page 57541]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62923; File Nos. SR-NYSE-2010-20 and SR-NYSEAmex-2010-
25]

 
Self-Regulatory Organizations; New York Stock Exchange LLC and 
NYSE Amex LLC; Order Approving Proposed Rule Changes Amending Rule 123C 
To Allow Exchange Systems To Provide Order Imbalance Information With 
Respect to Market At-The-Close and Marketable Limit At-The-Close 
Interest to Floor Brokers Beginning Two Hours and Until Fifteen Minutes 
Prior to the Scheduled Close of Trading on Every Trading Day

September 15, 2010.

I. Introduction

    On June 9, 2010, New York Stock Exchange LLC (``NYSE'') and NYSE 
Amex LLC (``NYSE Amex'' and, with NYSE, each an ``Exchange'' and 
collectively, the ``Exchanges'') each filed with the Securities and 
Exchange Commission (the ``Commission''), pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to modify the manner in which the 
systems of each Exchange provide order imbalance information to Floor 
brokers. The proposed rule changes were published for comment in the 
Federal Register on June 24, 2010.\3\ The Commission received one 
comment letter opposing NYSE's proposal and received a letter from NYSE 
responding to the comment letter.\4\ This order approves the proposed 
rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release Nos. 62312 (June 17, 
2010), 75 FR 36138; and 62311 (June 17, 2010), 75 FR 36140 (each a 
``Notice'' and collectively, the ``Notices'').
    \4\ See Anonymous Letter dated July 14, 2010 (``Comment 
Letter'') and NYSE Response Letter from Janet M. Kissane, Senior 
Vice President--Legal & Corporate Secretary, NYSE Euronext, dated 
August 10, 2010 (``NYSE Response Letter'').
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II. Description of the Proposals

    The Exchanges each propose to amend their Rule 123C(6) \5\ to 
specify that, beginning at 2 p.m. on every trading day,\6\ Floor 
brokers will receive an electronic communication from the Exchanges' 
systems that provides the amount of, and any imbalance between, Market 
``At-The-Close'' (``MOC'') interest and marketable Limit ``At-The-
Close'' (``LOC'') interest to buy and sell in certain securities 
(``Order Imbalance Information''). MOC/LOC interest is executable only 
on the close and is subject to cancellation at any time before 3:45 
p.m.\7\
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    \5\ References to the rules herein refer to both the relevant 
NYSE and NYSE Amex Equities rules unless otherwise noted. The rule 
texts of NYSE Rule 123C(6) and NYSE Amex Rule 123C(6) are identical 
and the proposed additions to Rule 124C(6)(b) are identical.
    \6\ On any day that the scheduled close of trading on the 
Exchange is earlier than 4 p.m., the information will be 
disseminated beginning two hours prior to the scheduled close of 
trading.
    \7\ See Rule 123C(3) and (9).
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    The Exchanges' current rules do not allow for Exchange systems to 
send Order Imbalance Information to Floor brokers electronically. 
However, under Rule 115, Designated Market Makers (``DMMs''), while 
acting in a market making capacity, may provide information about 
buying or selling interest in the market ``in response to an inquiry 
from a member conducting a market probe in the normal course of 
business'' (``market probe'').\8\ Thus, for Floor brokers to obtain the 
Order Imbalance Information, they must manually request the information 
from DMMs, who are permitted to provide such information in response to 
a Floor broker's ``market probe.''
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    \8\ See Rule 115.
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    The Exchanges propose to amend Rule 123C(6) to state that, between 
2 p.m. and 3:45 p.m. on any trading day (or two hours prior to the 
closing transaction until 15 minutes prior to the closing transaction 
on any day that the scheduled close of trading on the Exchange is 
earlier than 4 p.m.), the Exchanges' systems would automatically 
provide the Order Imbalance Information to Floor brokers, approximately 
every 15 seconds, for any security in which the Floor broker is 
representing an order and in any security that the Floor broker 
specifically requests.\9\ Thus, for Order Imbalance Information, Floor 
brokers would no longer need to request such information from DMMs as 
part of a Rule 115 ``market probe.'' The Exchanges' electronic 
dissemination of this information would be limited to Floor brokers' 
hand-held devices, which cannot automatically forward or re-transmit 
the electronic datafeed to any other location, although Floor brokers 
are permitted to provide their customers with specific data points from 
the feed. In addition, specific requests for information by Floor 
brokers would not carry over to the next trading day and would need to 
be re-entered on each trade date.
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    \9\ See Notices for a description of the history of the 
dissemination of the MOC/LOC imbalance information to Floor brokers.
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    Beginning at 3:45 p.m., Floor brokers may receive the Exchanges' 
proprietary Order Imbalance Information datafeed pursuant to Rule 
123C(6)(a)(iv), under which the Exchanges provide the datafeed to 
subscribers for a fee.
    The Exchanges also propose to amend the time period in Rule 
123C(6)(a)(v) when the dissemination of Order Imbalance Information 
would commence when the scheduled closing is earlier than 4 p.m. 
Currently, the Exchanges' rules state that the dissemination will 
commence approximately 10 minutes before the scheduled closing time 
when the scheduled closing is earlier than 4 p.m. The Exchanges state 
that, when they moved to a single imbalance publication at 3:45 p.m., 
the rule text was not modified at that time to reflect that 
dissemination of the Order Imbalance Information on any day that the 
scheduled close was prior to 4 p.m. would commence approximately 15 
minutes before the scheduled closing time consistent with the single 
imbalance publication.

III. Summary of Comment and NYSE's Response

    One commenter opposes NYSE's proposal. The commenter notes that the 
Order Imbalance Information is material, that investors should receive 
the information at the same time as Floor brokers, and that NYSE has an 
obligation to ensure all participants (DMMs, Floor brokers, and the 
public) have the opportunity to receive the same data at the same time. 
The commenter also disputes NYSE's rationale that Floor brokers need 
the data feed to offset the decrease in Floor broker personnel. The 
commenter instead suggests that Floor brokers should hire additional 
staff or NYSE should extend the 15 minute time-period prior to the 
close of trading if Floor brokers require more time to analyze the 
Order Imbalance Information. Finally, the commenter states that the 
proposal is similar to flash orders, in which select market 
participants receive material public information prior to other market 
participants.
    NYSE responds that the Order Imbalance Information does not 
represent overall supply or demand for a security, and is a small 
subset of buying and selling interest, subject to change or 
cancellation before the close. In addition, NYSE notes that MOC and LOC 
orders represent only a small fraction of NYSE's activity.\10\ NYSE

[[Page 57542]]

believes that the Order Imbalance Information that all participants 
receive beginning at 3:45 p.m. is more accurate, timely, and complete, 
and is more material to investors. Finally, NYSE disagrees that the 
proposal is similar to flash orders. NYSE notes that the Order 
Imbalance Information is not actionable prior to 15 minutes before the 
close of trading and is subject to change or cancellation and, 
therefore, MOC/LOC orders cannot be executed before the public receives 
the information.\11\
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    \10\ NYSE noted that ``[g]enerally, MOC and LOC orders account 
for less than 1% of total NYSE orders on any given trading day, both 
in terms of actual number of orders and the number of shares 
represented by those orders. With respect to the total number of 
shares executed on NYSE on any given trading day, MOC and LOC orders 
generally account for less than 10%.'' See NYSE's Response Letter at 
2.
    \11\ See NYSE Response Letter at 3-4.
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IV. Discussion and Commission Findings

    After careful consideration, the Commission finds that the proposed 
rule changes are consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the proposed rule changes are consistent 
with Section 6(b)(5) of the Act,\13\ which requires, among other 
things, that the rules of a national securities exchange be 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, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Commission also finds that 
the proposed rule changes are consistent with the provisions of Section 
6(b)(8) of the Act,\14\ which require that the rules of an exchange not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
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    \12\ In approving these proposed rule changes, the Commission 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(8).
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    The proposals would allow Exchange systems to disseminate the Order 
Imbalance Information directly to Floor brokers' handheld devices \15\ 
beginning two hours prior to the scheduled close. The Exchanges' rules 
currently only permit Floor brokers to obtain this and other market 
information on a one-off basis from DMMs as ``market probes'' under 
Rule 115. The proposal would automate the process and allow Floor 
brokers to receive Order Imbalance Information more frequently and 
quickly. Thus, the proposal would permit information Floor brokers to 
obtain certain market information (i.e., Order Imbalance Information) 
that they are already permitted to obtain under the Exchanges' current 
rules as part of ``market probes'' under Rule 115, albeit in a more 
technologically advanced and more efficient format. The Commission 
notes that the Exchanges have represented that the dissemination of 
this information would be limited to the Floor broker's handheld 
devices, and that the electronic datafeed cannot be automatically 
forwarded or retransmitted.\16\ The Commission finds that the proposal 
is consistent with the requirements of the Act.
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    \15\ See Notices, supra note 3.
    \16\ See also SR-NYSE-2010-53 and SR-NYSEAmex-2010-71.
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    Finally, the Commission notes that this order does not approve any 
prior dissemination of Order Imbalance Information by the Exchanges 
that may have been inconsistent with the approved rules of the 
Exchanges then in effect.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule changes (SR-NYSE-2010-20 and SR-
NYSEAmex-2010-25) be, and they hereby are, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23489 Filed 9-20-10; 8:45 am]
BILLING CODE 8011-01-P