Document ID: SEC-2011-1904-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2011-12-08T05:00Z

[Federal Register Volume 76, Number 236 (Thursday, December 8, 2011)]
[Notices]
[Pages 76799-76801]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31474]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65865; File No. SR-NYSE-2011-58]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend NYSE Rule 104(a)(1)(A) To Reflect That Designated Market Maker 
Unit Quoting Requirements Are Based on Consolidated Average Daily 
Volume

 December 2, 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 November 18, 2011, New York Stock Exchange LLC (``NYSE'' or the 
``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 Exchange 
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\ 
which renders the proposal effective upon filing with the Commission. 
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.
    \3\ 17 CFR 240.19b-4(f)(6).
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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] [sic] NYSE Rule 104(a)(1)(A) to 
reflect that, when determining the specific percentage quoting 
requirement applicable to a Designated Market Maker unit (``DMM 
unit''), volume for the particular security is based on consolidated 
average daily volume (``CADV''). 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 Rule 104(a)(1)(A) \4\ to 
reflect that, when determining the specific percentage quoting 
requirement applicable to a DMM unit,\5\ volume for the particular 
security is based on CADV.\6\
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    \4\ NYSE Rule 104 is currently in effect during a pilot period 
(``New Market Model Pilot'' or ``NMM Pilot''). See Securities 
Exchange Act Release No. 58845 (October 24, 2008), 73 FR 64379 
(October 29, 2008) (SR-NYSE-2008-46) (the ``NYSE NMM Approval''). 
The Exchange has extended the operation of the NMM Pilot several 
times and it is currently set to expire on January 31, 2012. See 
Securities Exchange Act Release No. 64761 (June 28, 2011), 76 FR 
39147 (July 5, 2011) (SR-NYSE-2011-29).
    \5\ See NYSE 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 NYSE Rule 98, (ii) is eligible 
for allocations under NYSE Rule 103B as a DMM unit in a security 
listed on the Exchange, and (iii) has met all registration and 
qualification requirements for DMM units assigned to such unit.
    \6\ Given the multitude of venues where equity securities trade, 
CADV is more reflective of the trading characteristics of a security 
than the volume on any single market.
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    A DMM unit must maintain a bid or an offer at the National Best Bid 
and National Best Offer (``inside'') a minimum of either 10% or 15% of 
the trading day, depending on trading volume for the security. NYSE 
Rule 104(a)(1)(A) currently reflects for one of the calculations, but 
not the other, that, when determining the specific percentage quoting 
requirement applicable to a DMM unit, trading volume for the particular 
security is based on volume ``on the Exchange.'' The reference to ``on 
the Exchange'' was inadvertently included in the Exchange's proposal to 
implement the

[[Page 76800]]

NMM Pilot.\7\ In this regard, and as reflected in the NYSE NMM 
Approval, the Exchange intended that trading volume for a particular 
security would be based on CADV when determining the specific 
percentage quoting requirement applicable to a DMM unit.\8\
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    \7\ NYSE Amex LLC has filed a similar proposal to similarly 
change the text of NYSE Amex Equities Rule 104(a)(1)(A), which is 
based on NYSE Rule 104(a)(1)(A), from volume ``on the Exchange'' to 
``consolidated'' volume.
    \8\ See NYSE NMM Approval at 64381, which states that ``[f]or 
securities that have a consolidated average daily volume of less 
than one million shares per calendar month, a DMM Unit must maintain 
a bid or an offer at the NBBO for at least 10% of the trading day 
(calculated as an average over the course of a calendar month). For 
securities that have a consolidated average daily volume of equal to 
or greater than one million shares per calendar month, a DMM Unit 
must maintain a bid or an offer at the NBBO for at least 5% or more 
of the trading day (calculated as an average over the courts (sic) 
of a calendar month.'' See also NYSE NMM Approval at n.71. A 
subsequent NYSE rule change similarly noted that, ``with respect to 
maintaining a continuous two-sided quote with reasonable size, DMMs 
must maintain a bid or offer at the NBBO* * *at a prescribed level 
based on the average daily volume of the security. Securities that 
have a consolidated average daily volume of less than one million 
shares per calendar month are defined as Less Active Securities and 
securities that have a consolidated average daily volume of equal to 
or greater than one million shares per calendar month are defined as 
More Active Securities. For Less Active Securities, a [DMM] unit 
must maintain a bid or an offer at the NBBO for at least 10% of the 
trading day during a calendar month. For More Active Securities, a 
[DMM] unit must maintain a bid or an offer at the NBBO for at least 
5% or more of the trading day during a calendar month.'' See 
Securities Exchange Act Release No. 58971 (November 17, 2008), 73 FR 
71070 (November 24, 2008) (SR-NYSE-2008-115) at n.5. CADV is 
similarly used to differentiate between ``more active'' and ``less 
active'' securities under NYSE Rule 103B.
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    As proposed, NYSE Rule 104(a)(1)(A) would reflect that, with 
respect to maintaining a continuous two-sided quote with reasonable 
size, DMM units must maintain a bid or an offer at the inside at least 
15% of the trading day for securities in which the DMM unit is 
registered with a consolidated average daily volume of less than one 
million shares, and at least 10% for securities in which the DMM unit 
is registered with a consolidated average daily volume equal to or 
greater than one million shares.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\9\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\10\ 
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. Specifically, 
the proposed change would align the text of NYSE Rule 104(a)(1)(A) with 
the previously approved manner by which to measure trading volume of a 
particular security, as set forth in NYSE Rule 103B, and consistent 
with the NMM Approval order, which also discussed the use of CADV, and 
not just trading volume on the Exchange, for purposes of measuring the 
quoting requirement applicable to a DMM unit.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest. Such waiver will allow the Exchange's Rules to immediately 
reflect the fact that DMM unit quoting requirements are calculated 
based on CADV rather than trading volume on the Exchange. Therefore, 
the Commission designates the proposal operative upon filing.\13\
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    \13\ For purposes only of waiving the 30-day operative delay, 
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.

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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2011-58 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-2011-58. 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

[[Page 76801]]

copying at the NYSE's principal office and on its Internet Web site at 
http://www.nyse.com. 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-NYSE-2011-58 and should be submitted on or before December 29, 2011

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31474 Filed 12-7-11; 8:45 am]
BILLING CODE 8011-01-P