Document ID: SEC-2014-0151-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2014-01-27T05:00Z

[Federal Register Volume 79, Number 17 (Monday, January 27, 2014)]
[Notices]
[Pages 4371-4373]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01426]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71362; File No. SR-NYSE-2014-03]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Proposing To Extend the Operation of Its Supplemental Liquidity 
Providers Pilot, Currently Scheduled To Expire on January 31, 2014, 
Until the Earlier of the Securities and Exchange Commission's Approval 
To Make Such Pilot Permanent or July 31, 2014

January 21, 2014.
    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 January 6, 2014, New York Stock Exchange LLC (``NYSE'' 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 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\ 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 Supplemental 
Liquidity Providers Pilot (``SLP Pilot'' or ``Pilot'') (See Rule 107B), 
currently scheduled to expire on January 31, 2014, until the earlier of 
the Securities and Exchange Commission's (``Commission'') approval to 
make such Pilot permanent or July 31, 2014. The text of the proposed 
rule change is available on the Exchange's Web site at www.nyse.com, at 
the principal office of the Exchange, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to extend the operation of its SLP Pilot,\3\ 
currently scheduled to expire on January 31, 2014, until the earlier of 
Commission approval to make such Pilot permanent or July 31, 2014.
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    \3\ 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 Nos. 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); 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) 
(SR-NYSE-2009-100) (extending the operation of the NMM and the SLP 
Pilots to November 30, 2009); 61075 (November 30, 2009), 74 FR 64112 
(December 7, 2009) (SR-NYSE-2009-119) (extending the operation of 
the SLP Pilot to March 30, 2010); 61840 (April 5, 2010), 75 FR 18563 
(April 12, 2010) (SR-NYSE-2010-28) (extending the operation of the 
SLP Pilot to September 30, 2010); 62813 (September 1, 2010), 75 FR 
54686 (September 8, 2010) (SR-NYSE-2010-62) (extending the operation 
of the SLP Pilot to January 31, 2011); 63616 (December 29, 2010), 76 
FR 612 (January 5, 2011) (SR-NYSE-2010-86) (extending the operation 
of the SLP Pilot to August 1, 2011); 64762 (June 28, 2011), 76 FR 
39145 (July 5, 2011) (SR-NYSE-2011-30) (extending the operation of 
the SLP Pilot to January 31, 2012); 66045 (December 23, 2011), 76 FR 
82342 (December 30, 2011) (SR-NYSE-2011-66) (extending the operation 
of the SLP Pilot to July 31, 2012); 67493 (July 25, 2012), 77 FR 
45388 (July 31, 2012) (SR-NYSE-2012-27) (extending the operation of 
the SLP Pilot to January 31, 2013); 68560 (January 2, 2013), 78 FR 
1280 (January 8, 2013) (SR-NYSE-2012-76) (extending the operation of 
the SLP Pilot to July 31, 2013); and 69819 (June 21, 2013), 78 FR 
38764 (June 27, 2013) (SR-NYSE-2013-44) (extending the operation of 
the SLP Pilot to January 31, 2014).
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Background \4\
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    \4\ The information contained herein is a summary of the NMM 
Pilot and the SLP Pilot. See supra note 3 and infra note 5 for a 
fuller description of those pilots.
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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 referred to as the ``New Market 
Model'' (``NMM Pilot'').\5\ The SLP Pilot was launched in coordination 
with the NMM Pilot (see Rule 107B).
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    \5\ See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46).
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    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.\6\ Separately, the 
NYSE established the SLP Pilot, which established SLPs as a new class 
of market participants to supplement the liquidity provided by DMMs.\7\
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    \6\ See NYSE Rule 103.
    \7\ See NYSE Rule 107B. The Exchange amended the monthly volume 
requirements to an ADV that is a specified percentage of NYSE CADV. 
See Securities Exchange Act Release No. 67759 (August 30, 2012), 77 
FR 54939 (September 6, 2012) (SR-NYSE-2012-38).
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    The SLP Pilot is scheduled to end operation on January 31, 2014 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 SLP Pilot permanent, but does not expect that 
filing to be completed and approved by the Commission before January 
31, 2014.\8\
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    \8\ The NMM Pilot was scheduled to expire on January 31, 2014. 
On January 6, 2014, the Exchange filed to extend the NMM Pilot until 
July 31, 2014. See (SR-NYSE-2013-01) [sic]. See also Securities 
Exchange Act Release Nos. 69813 (June 20, 2013), 78 FR 38753 (June 
27, 2013) (SR-NYSE-2013-43) (extending the operation of the NMM 
Pilot to January 31, 2014); 68558 (January 2, 2013), 78 FR 1288 
(January 8, 2013) (SR-NYSE-2012-75) (extending the operation of the 
NMM Pilot to July 31, 2013); 67494 (July 25, 2012), 77 FR 45408 
(July 31, 2012) (SR-NYSE-2012-26) (extending the operation of the 
NMM Pilot to January 31, 2013); 66046 (December 23, 2011), 76 FR 
82340 (December 30, 2011) (SR-NYSE-2011-65) (extending the operation 
of the NMM Pilot to July 31, 2012); 64761 (June 28, 2011) 76 FR 
39147 (July 5, 2011) (SR-NYSE-2011-29) (extending the operation of 
the NMM Pilot to January 31, 2012); 63618 (December 29, 2010) 76 FR 
617 (January 5, 2011) (SR-NYSE-2010-85) (extending the operation of 
the NMM Pilot to August 1, 2011); 62819 (September 1, 2010), 75 FR 
54937 (September 9, 2010) (SR-NYSE-2010-61) (extending the operation 
of the NMM Pilot to January 31, 2011); 61724 (March 17, 2010), 75 FR 
14221 (SR-NYSE-2010-25) (extending the operation of the NMM Pilot to 
September 30, 2010); and 61031 (November 19, 2009), 74 FR 62368 (SR-
NYSE-2009-113) (extending the operation of the NMM Pilot to March 
30, 2010).
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Proposal to Extend the Operation of the SLP Pilot
    The NYSE established the SLP Pilot to provide incentives for 
quoting, to enhance competition among the existing group of liquidity 
providers, including the DMMs, and add new competitive market 
participants. The Exchange

[[Page 4372]]

believes that the SLP Pilot, in coordination with the NMM Pilot, allows 
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 SLP Pilot (Rule 107B) 
should be made permanent. Through this filing the Exchange seeks to 
extend the current operation of the SLP Pilot until July 31, 2014, in 
order to allow the Exchange to formally submit a filing to the 
Commission to convert the Pilot rule to a permanent rule.\9\
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    \9\ The NYSE MKT SLP Pilot (NYSE MKT Rule 107B--Equities) is 
also being extended until July 31, 2014 or until the Commission 
approves it as permanent (See SR-NYSEMKT-2014-03).
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    The proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\11\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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 mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change is designed to 
facilitate transactions in securities and to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system because the SLP Pilot provides its market participants with a 
trading venue that utilizes an enhanced market structure to encourage 
the addition of liquidity and operates to reward aggressive liquidity 
providers. The Exchange also believes the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices and 
to promote just and equitable principles of trade because it seeks to 
extend an existing pilot program. Moreover, requesting an extension of 
the SLP Pilot will permit adequate time for: (i) The Exchange to 
prepare and submit a filing to make the rules governing the SLP Pilot 
permanent; (ii) public notice and comment; and (iii) completion of the 
19b-4 approval process. Finally, the Exchange believes that it is 
subject to significant competitive forces, as described below in the 
Exchange's statement regarding the burden on competition. For these 
reasons, the Exchange believes that the proposal is consistent with the 
Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange believes that extending the operation 
of the SLP Pilot will enhance competition among liquidity providers and 
thereby improve execution quality on the Exchange. The Exchange will 
continue to monitor the efficacy of the program during the proposed 
extended pilot period.
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    \12\ 15 U.S.C. 78f(b)(8).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting the services it offers and the 
requirements it imposes to remain competitive with other U.S. equity 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii)\16\ 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 period. The Commission 
believes that waiver of the 30-day operative delay period is consistent 
with the protection of investors and the public interest because waiver 
would allow the pilot program to continue uninterrupted. Accordingly, 
the Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, 
and designates the proposed rule change to be operative upon filing 
with the Commission.\17\
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    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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 summarily may temporarily suspend 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.\18\
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    \18\ 15 U.S.C. 78s(b)(3)(C).
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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

[[Page 4373]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2013-03 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-2014-03. 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 
10:00 a.m. and 3:00 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-2014-03 and should be 
submitted on or before February 18, 2014.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01426 Filed 1-24-14; 8:45 am]
BILLING CODE 8011-01-P