Document ID: SEC-2010-0874-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-06-16T04:00Z

[Federal Register: June 16, 2010 (Volume 75, Number 115)]
[Notices]               
[Page 34194-34196]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn10-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62248; File No. SR-NYSEAmex-2010-51]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to Bid-Ask 
Parameters During Auctions

June 9, 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 May 28, 2010, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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 Rule 925NY and Rule 952NY. The text 
of the proposed rule change is available on NYSE Amex's Web site at 
http://www.nyse.com, on the Commission's Web site at http://
www.sec.gov, at the principal office of NYSE Amex, and at the 
Commission's Public Reference Room.

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 purpose of the proposed rule change is to: (i) Amend Rule 925NY 
to differentiate the bid-ask differentials for Market Maker open outcry 
quotations from the requirements for electronically submitted 
quotations, and (ii) amend Rule 952NY by establishing guidelines for 
the use of bid-ask parameters in the NYSE Amex System to be used during 
the opening auction process (``Auction'').\3\
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    \3\ An Auction is the process by which trading is initiated in a 
specified options class on NYSE Amex. Auctions are conducted 
automatically by the NYSE Amex system, NYSE Amex's electronic system 
for order handling, execution, and reporting.
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    Currently, Rule 925NY specifies the bid-ask differential 
requirements applicable to Market Maker quotations when electronically 
bidding and offering on the NYSE Amex System during an Auction and in 
open outcry. With respect to bidding and offering during an Auction, 
the bid-ask differentials \4\ vary depending on the price of the bid. 
Rule 925NY(b)(4)(A)-(E) states that the quote widths shall not be more 
than: $0.25 if the bid is less than $2; $0.40 where the bid is at least 
$2 but does not exceed $5; $0.50 where the bid is more than $5 but does 
not exceed $10; $0.80 where the bid is more than $10 but does not 
exceed $20; and $1 where the bid is more than $20. With respect to 
electronic quoting on the NYSE Amex System, after an Auction, the bid-
ask differential requirement is $5. The Exchange now proposes to 
replace the applicable bid-ask differentials for Market Maker quoting 
obligations during an Auction, with the $5 quote differential that is 
in place at all other times.
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    \4\ The Auction bid-ask differentials are known in common 
parlance as ``legal-width quotes.''
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    At the time Rule 925NY was adopted, the obligation for Specialists 
and Market Makers to provide opening quotes at the described widths was 
both a longstanding NYSE Amex requirement, and also based on the model 
of NYSE Arca, Inc., which uses the same underlying technology as the 
NYSE Amex System.

[[Page 34195]]

    The original intent of maintaining the obligation for Market Makers 
to submit narrow, traditional bid-ask requirements for NYSE Amex was to 
encourage a narrower aggregated Exchange market during the opening 
auction. Both NYSE Amex and NYSE Arca are often the first market to 
open a series, and, depending on which one opens a series first there 
is not necessarily an accurate National Best Bid/Offer (``NBBO'') 
available, and NYSE Amex does not require a ``legal width'' NBBO quote 
to open a series. The Exchange also had concern about the quality of 
markets with the NYSE Amex permit holders adapting to a new system that 
was substantially different from their previous platform, and placed 
significantly greater emphasis on Market Maker electronic quoting.
    Now, with more than a year's experience operating the NYSE Amex 
system, ATP Holder Market Makers have adapted well to the enhanced 
quoting obligations. Additionally, NYSE Amex has instituted increased 
functionality to define price parameters during the auction process. 
The system will not conduct an auction in a series until one of two 
conditions is met: (i) A market maker submits a legal width quote, or 
(ii) a legal width NBBO is received from OPRA. This is a systemic 
solution which renders the rules based quoting obligation moot.
    With the adoption of the Section 900NY Rules and the migration to 
the NYSE Amex system, the quoting obligation for all Market Makers 
other than Specialists was set at 60%, and the Specialist quoting 
obligation was set at 90%. With these levels, there is no requirement 
for a Market Maker to submit a quotation for an opening auction. The 
auction quote width requirement thus imposes limits on a non-existent 
obligation.
    In this regard, the Exchange notes that the market structure on 
NYSE Amex creates strong incentives for Specialists and competing 
Market Makers to disseminate competitive prices for the opening. To 
ensure that orders executed during an Auction are not subject to 
disadvantageous pricing, NYSE Amex proposes to establish parameters for 
the opening auction as described in Rule 952NY. Pursuant to this 
proposed rule change, the NYSE Amex System will not conduct an Auction 
in a given series unless; [sic] (i) the composite NYSE Amex bid-ask 
(``BBO'') \5\ or the composite NBBO, as disseminated by the Options 
Price Reporting Agency, is in an acceptable range. For the purposes of 
the Auction, an acceptable range will be the bid-ask parameters 
pursuant to Rule 925NY(b)(4)(A)-(E). The Exchange notes that these bid-
ask differentials are identical to the existing legal width 
differentials for Market Maker Auction quotations which this filing 
proposes to delete. The Exchange feels that by establishing price 
protection parameters within the Auction process of the NYSE Amex 
System, rather than just as a requirement for submitted quotes, 
Customers and other market participants will be afforded a higher level 
of price protection than they presently have on NYSE Amex. The Exchange 
notes that this proposed change is for trading on the Exchange's 
electronic trading platform, and does not in any way affect the bid-ask 
differentials applicable to open-outcry trading.
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    \5\ The composite BBO may be made up of an individual market 
maker quote, a combination of different market maker quotes where 
one quote represents the bid and another represents the offer, or a 
combination of market maker quotes and limited orders in the 
Consolidated Book.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \7\ in 
particular in that it is designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system by setting price parameters for the 
opening Auction rather than rely on a restriction that does not have 
obligatory performance.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
The proposal is based on a similar rule approved by the Commission for 
NYSE Arca,\10\ and raises no novel issues. Therefore, the Commission 
designates the proposal operative upon filing.\11\
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    \10\ See Securities Exchange Act Release No. 62019 (April 30, 
2010), 75 FR 25889 (May 10, 2010) (SR-NYSEArca-2010-16).
    \11\ 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-NYSEAmex-2010-51 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 34196]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2010-51. 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 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-2010-51 and should be submitted on or before July 7, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14442 Filed 6-15-10; 8:45 am]
BILLING CODE 8010-01-P